Royal London Group Pension Scheme
Annual Report and Financial Statements
for the year ended 31 December 2023
Schem
e Registration Number: 100154281
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
Contents
Page
Trustee and advisers
1
Trustee’s report
2
Independent Auditors’ report
17
Fund account
20
Statement of net assets available for benefits
21
Notes to the financial statements
22
Independent Auditors’ statement about contributions
46
Summary of contributions
47
Actuarial certificate
48
Implementation statement
49
Further information
56
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
1
Trustee and advisers
Corporate Trustee
RLGPS Trustee Limited
Directors of the Corporate
Trustee (“Trustee Directors”)
Employer appointed
Andrew Evans (Chair) (Independent Trustee)
Ewan Smith (Deferred member)
Jane Perkins (Appointed 1 January 2023)
The Law Debenture Pension Trust Corporation P.L.C represented by
Edward Levy (Independent Trustee)
Member nominated
Ian Forder (Pensioner member)
Janet Murray (Pensioner member – Appointed 1 January 2023)
Scheme/Trustee secretary
Royal London Management Services Limited (represented by Charlotte
Dalton)
Scheme actuary
Andrew Long FIA of Towers Watson Limited
Administrators
Towers Watson Limited
Independent Auditors
PricewaterhouseCoopers LLP
Legal advisers
CMS Cameron McKenna Nabarro Olswang LLP
DLA Piper UK LLP
Pinsent Masons LLP
Slaughter and May LLP
Covenant advisor
Penfida Limited
Investment consultant
Lane Clark & Peacock LLP
Risk Transfer Consultant
Hymans Robertson LLP
Investment manager
Royal London Asset Management Limited
Investment custodian
HSBC UK Bank plc (HSBC Securities Services)
Annuity provider
Aviva Annuity UK Limited
Additional Voluntary
Contribution (AVC) providers
The Royal London Mutual Insurance Society Limited
Scottish Widows Limited
Utmost Life and Pensions Limited
Bankers
HSBC UK Bank plc
National Westminster Bank plc
Principal employer
The Royal London Mutual Insurance Society Limited (“the Company”)
Contact for enquiries
Provided on “Further information” page 57
The Royal Lo
ndon Mutual Insurance Society Limited is the parent company of Royal London Asset Management
Limited and RLGPS Trustee Limited. Throughout this report the term “Royal London Group” refers to The Royal
London Mutual Insurance Society Limited.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
2
Trustee’s report
Introduction
The Trustee Directors of RLGPS Trustee Limited (“the Trustee”) present their annual report and financial statements of
the Royal London Group Pension Scheme (“the Scheme”) for the year ended 31 December 2023.
Scheme constitution and management
The Scheme is an occupational pension scheme established under trust to provide retirement benefits to all eligible
employees and ex-employees of Royal London Group. The Scheme is a final salary pension scheme whereby benefits are
payable to members in accordance with the Scheme Rules based on their length of service, accrual rate and their
pensionable earnings as defined by the Scheme Rules prior to leaving the service of Royal London Group.
The Scheme is governed by a definitive Trust Deed and Scheme Rules. The provisions governing the Scheme reflect
historical transfers in and the “harmonisation” of benefits in 2001. The Trustee completed a project to review and
consolidate the Rules of the Scheme in 2021.
The Scheme is overseen by a Corporate Trustee whose Trustee Directors are responsible for setting the strategy and for
managing the Scheme. The Trustee Directors are required to act in accordance with the Trust Deed, the Scheme Rules
and the Memorandum and Articles of Association of the Trustee within the framework of pension and trust law.
The Trustee Directors are appointed and removed in accordance with the Trust Deed, the Articles of Association of the
Corporate Trustee and the overriding provisions in the Pensions Act 2004. The Company has power under the Trust Deed
to appoint or remove the Corporate Trustee. The Trustee ordinarily has six Trustee Directors, four of whom are appointed
by the Company and two by the Scheme’s members. The member nominated trustee arrangements are determined by the
Trustee. The persons who acted as Trustee Directors are listed on page 1.
The full Trustee Board normally meets at three monthly intervals. The full Trustee Board also met for five additional ad
hoc strategy and project meetings during the year.
The Trustee Board operates two Sub Committees; the Investment Committee and the Administration and Risk Committee.
These Sub Committees typically meet quarterly and undertake work delegated by the Trustee Board. The Trustee Board
receives updates from the Sub Committees at each quarterly meeting.
Investment Committee members during the year to 31 December 2023 were Edward Levy (Chair), Ewan Smith, Ian
Forder and Jane Perkins. The Committee met six times in 2023 for quarterly meetings and two ad hoc meetings – one
meeting to discuss climate change and one meeting combined with Trustee members of the Joint Steering Group (JSG –
see below) to discuss investment strategy in relation to a project.
Administration and Risk Committee members during the year to 31 December 2023 were Andrew Evans (Chair), Janet
Murray and Edward Levy. The Committee met five times in 2023 for quarterly meetings and for one ad hoc meeting in
relation to GMP Equalisation.
Working groups are also established on an ad hoc basis; such working groups meet when necessary and report to the
Trustee at the subsequent Trustee Board meeting. In December 2022, the Trustee Board formed a Joint Steering Group
(JSG) with RLMIS Limited (the “Company”) to consider the long-term journey plan for the Scheme and potential risk
transfer options. The Trustee representatives of the JSG during the year to 31 December 2023 were Andrew Evans (Chair),
Ewan Smith and Ian Forder. The JSG met eight times during the year.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
3
Trustee’s report (continued)
Financial developments and financial statements
The financial statements included in this annual report are the accounts required by the Pensions Act 1995. They have
been prepared and audited in compliance with the regulations made under sections 41(1) and 41(6) of the Act.
The financial statements are provided on pages 20 to 45.
Membership
Details of membership of the Scheme as at 31 December 2023 are given below:
Membership movements
Deferred members
Pensioner members
Beneficiaries
Total
At 1 January 2023
8,463
9,012
2,017
19,492
Adjustments to prior year figures
(43)
(9)
(17)
(69)
At 1 January 2023 revised
8,420
9,003
2,000
19,423
New entrants
3
-
183
186
Transfers out
(25)
-
-
(25)
Retirements
(316)
316
-
-
Deaths
(17)
(330)
(129)
(476)
Trivial commutations
(36)
(1)
(41)
(78)
Ceased dependant’s pension
-
-
(2)
(2)
At 31 December 2023
8,029
8,988
2,011
19,028
Included i
n the above is 1 (2022: 1) pensioner whose benefits are partially provided by annuities. This member transferred
into the Scheme as part of the Police Mutual transfer, which took place in 2020.
Adjustments were made to the prior year figures to reflect an up-to-date position of the membership of the Scheme as at
1 January 2023 and largely arose due to late notifications.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
4
Trustee’s report (continued)
Pension increases
The Trust Deed and Rules makes provision for increases in pensions in payment and deferred pensions. Entitlement to
pension increases depends on the legacy scheme and the period in which the pension is earned.
(a).
Pensions accrued before 1 April 2011
Pension increases in respect of pensions accrued before 1 April 2011 in excess of the guaranteed minimum pension were
awarded as provided in the table below by the legacy schemes:
Legacy scheme
5
Pension in excess of
Guaranteed Minimum
Pension accrued before
6 April 1997
Pension accrued after
5 April 1997 and
before 30 November
2001
Pension accrued
after 29
November 2001
and before 1
April 2011
Pension
increase date
2023
2022
2023
2022
2023
2022
RLGPS (standard benefits members)
n/a
n/a
n/a
n/a
7.5%
4.9%
1-Jul
RASF Scheme II (members joining before 1
August 2001)
7.5%
1
7.5%
1
7.5%
1
7.5%
1
7.5%
1
7.5%
1
1-Jul
RASF Scheme II (members joining from 1
August 2001)
n/a
n/a 7.5
%
4.9%
7.5
%
4.9
%
1-Jul
RLSPF
2.5%
6
2.5%
6
5.0%
3.1%
7.5%
4.9%
1-Apr
UFGPS (contracted-in before 17 September
2002 leavers)
2.5%
6
2.5%
6
5.0%
3
3.1%
3
7.5%
7.5
%
1-Apr
UFGPS (contracted-out before 17 September
2002 leavers)
3.0%
3.0%
5.0%
2
5.0%
2
7.5%
7.5
%
1-Apr
SLORBS
3.0%
4
3.0%
4
3.0%
4
3.0%
4
7.5%
4.9%
1-Jan
SLIORBS
5.0%
5.0%
5.0%
5.0%
7.5%
7.5%
1-Jul
SLDRBS
3.0%
4
3.0%
4
3.0%
4
3.0%
4
7.5%
4.9%
1-Jan
1
Special arrangements in first year following retirement apply. No increase was applied at 1 July in the calendar year of retirement.
2
Increase of higher of (a) 3.0% (2022: 3.0%) on RPI cumulative pension from retirement date or (b) 5.0% (2022: 3.1%) on pension in payment
on the pension benefits for members contracted out before 17 September 2002.
3
Increase of 5.0% (2022: 5.0%) for those contracted in after 17 September 2002.
4
Increase of between 3.0% (2022: 3.0%) and 14% (2022: 7.1%). Leavers before 1 April 1975 received a discretionary increase of 2.5% (2022:
2.5%)
5
There are some other small categories of members within the legacy schemes whose increases differ slightly to those shown in the table above.
Those affected have been communicated to separately. The full names of the legacy schemes can be obtained from the contact details provided
on page 57.
6
Discretionary increase.
(b). Pensio
ns accrued from 1 April 2011
Pension benefits accrued from 1 April 2011 were increased at a rate equal to the Consumer Prices Index (“CPI”) subject
to a maximum of 2.5%. The increases were applied from the effective dates indicated in the table above.
New pensions commencing after the pensions increase date were increased on a proportional basis. The increases were
applied to both guaranteed and discretionary elements as appropriate.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
5
Trustee’s report (continued)
Pension increases (continued)
During 2023, the Company granted a discretionary increase at the rate of 2.5% (2022: 2.5%) to pensions in payment with
no guaranteed increases (in excess of guaranteed minimum pensions). As the Scheme was in surplus at 30 September
2022, no contribution was made by the Royal London Group to cover the cost of the discretionary increase. All other
pensions in payment increased in line with either the Scheme’s Rules and/or pensions legislation.
(c). Pensions in deferment
Pensions in deferment accrued prior to 6 April 2009 are revalued in accordance with the Pension Schemes Act 1993, at a
rate equal to the increase in the CPI except for RLSPF members (whose increase remains linked to the RPI in accordance
with the Scheme’s Rules) or to the increase produced by the application of 5% per annum, whichever is the lower.
Pensions in deferment accrued after 5 April 2009 are revalued in accordance with the Pension Schemes Act 2008, at a
rate equal to the increase in the CPI or to the increase produced by the application of 2.5% per annum, whichever is the
lower.
Transfer values
Cash equivalents paid during the Scheme year with respect to transfers have been calculated and verified in the manner
prescribed by the Pension Schemes Act 1993 and do not include discretionary benefits.
Guaranteed Minimum Pensions (GMP) equalisation
In October 2018, the High Court determined that certain benefits provided to members who contracted out of the State
Pension between May 1990 and April 1997 must be equalised between men and women, and a further ruling in November
2020 determined that past transfers must also be equalised. The Trustee is reviewing the implication of the ruling on
members’ benefits from the Scheme. As soon as this review is finalised then affected members will be communicated
with.
Expression of wish forms
The Trustee wishes to emphasise to members the importance of indicating to the Trustee the person(s) to whom they wish
benefits to be paid in the event of death. The Trustee would normally take members’ wishes into account, although they
are not obliged to do so.
Members are urged to review their nomination of beneficiary form should their circumstances change. A change can be
made on-line or through a form available from the Scheme’s Administrator whose address is on page 57.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
6
Trustee’s report (continued)
Report on Actuarial liabilities
The Financial Reporting Standard 102, “The Financial Reporting Standard applicable in the United Kingdom and the
Republic of Ireland” (FRS 102), does not require the financial statements to include liabilities in respect of promised
retirement benefits.
The Scheme is subject to a Statutory Funding Objective as required under section 222 of the Pensions Act 2004, which
requires a scheme to have sufficient and appropriate assets to cover its technical provisions. The technical provisions are
calculated by projecting the benefits expected to be paid in each year after the valuation date and discounting the cash
flows to obtain the present value. This assessment is carried out every 3 years using the method and assumptions agreed
between the Trustee and the Company. The method and assumptions are documented in the Statement of Funding
Principles dated 20 June 2023 a copy of which is available to members on request from the address set out on page 57.
The most recent completed triennial actuarial valuation was performed as at 31 December 2022. The next triennial
actuarial valuation is due to be performed as at 31 December 2025. A funding update was carried out as at 31 December
2023. The results of this funding update and the full actuarial valuation as at 31 December 2022 are provided in the table
below:
Actuarial report date: 31 December
2023
2022
Funding Update
Full valuation
£'000
£'000
Value of technical provisions
1,901,400
1,917,000
Value of assets available to meet technical provisions (excluding AVCs)
1,981,628
1,965,700
Funding surplus
80,228
48,700
Funding level as a percentage of technical provisions
104.2%
102.5%
The value of liabilities (technical provisions) in the above table exclude those in respect of Additional Voluntary
Contributions which are fully met by matching assets and exclude any allowance for advance funding of non-guaranteed
discretionary pension increases.
The value of liabilities is based on pensionable service to the valuation date and assumptions about various factors that
will influence the Scheme in the future, such as the levels of investment returns, when members will retire and how long
members will live.
The 2023 funding update figures are based on the assumption methodology agreed as part of the 2022 full valuation.
The funding level increased during 2023 due to a rise in the value of the Scheme’s assets, in particular on the Scheme’s
investments in equity. This has been coupled with a fall in the value of the Scheme’s liabilities, largely as a result of
reductions in both long-term inflation expectations and future life expectancy over the year.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
7
Trustee’s report (continued)
Report on Actuarial liabilities (continued)
Recovery plan
As the full actuarial valuation as at 31 December 2022 showed a funding surplus, no recovery plan was required to be
agreed by the Trustee and the Company and the Trustee agreed that no regular contributions will be paid to the Scheme
by the Company.
The method and significant assumptions used in the calculations are as follows:
Method
The actuarial method used in the calculation of the liabilities is the Projected Unit Method.
Significant actuarial assumptions
The assumptions used to calculate the Scheme’s technical provisions set out in the triennial actuarial valuation report as
at 31 December 2022 are summarised in the following main categories. All percentage rates are per annum:
x Discount interest rate: term dependent discount rate based on WTW Zero Coupon Gilt Nominal Yield Curve with an
additional margin of 1.25% per annum to the end of 2034 and a 0.5% addition thereafter. This was equivalent to a
single discount rate of 4.85% per annum.
x Retail Price Inflation (RPI): based on the WTW Zero Coupon Gilt-Impaired Breakeven Inflation Curve. This was
equivalent to adopting a single RPI assumption of 3.51% per annum.
x Consumer Price Inflation (CPI): based on RPI inflation assumption, deducting an appropriate margin to reflect the
differences between RPI and CPI. At 31 December 2022, the Trustee adopted a margin of 1.0% per annum until 2030
and no margin after 2030. This was the equivalent to adopting a single CPI assumption of 3.04% per annum.
x Pension increases linked to RPI but subject to:
o a minimum of 0% and a maximum of 7.5% at 3.45% per annum
o a minimum of 0% and a maximum of 5.0% at 3.46% per annum
o a minimum of 0% and a maximum of 3.0% at 2.75% per annum
x Pension increases linked to CPI but subject to:
o a minimum of 0% and a maximum of 5.0% at 3.14% per annum
o a minimum of 0% and a maximum of 3.0% at 2.58% per annum
o a minimum of 0% and a maximum of 2.5% at 2.29% per annum
x Mortality for the period in retirement applying the SAPS “S3” series tables with a relevant multiplier factor.
x Mortality future improvements in longevity applying the CMI core 2021 projection model with long-term trend
improvements of 1.50% per annum, an initial addition of 0.5% per annum, weighting of 5% to mortality experience
in 2020 and 2021 and the core smoothing parameter of 7.0.
It is a legal requirement for the Trustee to agree a schedule of contributions for the Scheme following a triennial actuarial
valuation even if no regular contributions will be payable. A schedule of contributions showing zero regular contributions
was therefore certified by the Scheme Actuary on 20 June 2023. A copy of the Scheme actuary’s certification of the
schedule of contributions is included on page 48 of this annual report and financial statements.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
8
Trustee’s report (continued)
Investment report
Investment principles and strategy
The ultimate responsibility for deciding investment policy lies with the Trustee.
The investment objective is to maintain a portfolio of suitable assets of appropriate liquidity which will generate
investment returns to meet, together with any future contributions, the benefits payable under the trust deed and rules as
they fall due.
The Trustee sets the investment strategy taking into account considerations such as the strength of the employer covenant,
the long term liabilities and the funding plan agreed with the employer. The investment strategy is set out in the Scheme’s
Statement of Investment Principles (“SIP”).
The target investment strategy is to hold:
x 35.0% (2022: 35.0%) in return seeking investments comprising equities, UK property and multi-asset credit.
x 65.0% (2022: 65.0%) in liability driven investments (LDI) that are expected to move in line with the long term
liabilities of the Scheme. This is referred to as matching assets and comprises UK government and corporate bonds,
derivatives and repurchase agreements, the purpose of which is to hedge against the impact of interest rate and
inflation movements of the long term liabilities.
The LDI strategy targets a hedge ratio of 90% of the interest rate and
inflation sensitivity of the liability cashflows within an agreed tolerance range.
As at the year end, the Scheme’s return seeking assets had a total value of £642.2 million (2022: £568.9 million)
representing 32.6% (2022: 29.3%) of the total investment portfolio.
As at the year end, the LDI portfolio had a total value of £1,328.3 million (2022: £1,372.0 million) representing 67.4%
(2022: 70.7%) of the total investment portfolio.
In November 2023, the Trustee agreed to reduce the Scheme’s strategic equity (return seeking) allocation by 5% in favour
of investment grade corporate bonds (LDI allocation), reflecting an improved funding position relative to the long-term
journey plan. Implementation of this change in strategy commenced in 2023 and has been reflected in an updated
investment management agreement and SIP in March 2024.
The Trustee maintains a SIP as required by section 35 of the Pensions Act 1995 and meets the requirements of the
Occupational Pension Schemes (Investment) Regulations 2005. The Trustee reviews the SIP for appropriateness from
time to time and last updated it in December 2022. The Scheme’s Implementation Statement for 2023 can be found on
pages 49 to 55 and forms an integral part of this Trustee’s report.
A copy of the SIP is available on request from the contact address set out on page 57 of this annual report and financial
statements under ‘Further information’.
Details of the Scheme's investments are given in note 12 to the financial statements.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
9
Trustee’s report (continued)
Investment report (continued)
Management of investments
The Trustee has appointed Royal London Asset Management Limited (“RLAM”) to manage the Scheme's investments
on a day-to-day basis. RLAM have full discretion to invest world-wide subject to the restrictions set out in the investment
management agreement which is designed to ensure that the objectives and investment policies set out in the SIP are
followed.
RLAM are authorised and regulated by the Financial Conduct Authority in the United Kingdom under the Financial
Services and Markets Act 2000.
Custodial arrangements
The Trustee has appointed HSBC UK Bank plc (HSBC Securities Services) as custodian of the Scheme’s investments
other than pooled investment vehicles, insurance policies and AVCs. The Scheme's direct investment assets are held in
the names of the nominees by the Scheme's custodian. The custodian operates a system of internal controls to ensure the
security of the Scheme's assets.
The custody of underlying assets in pooled investment vehicles and AVCs is arranged by the manager of those
investments.
Trustee’s policy on voting rights, environmental, social and governance (ESG) and ethical factors
The Trustee has examined how rights, including voting rights, attached to investments should be exercised by considering
and supporting the UK Stewardship Code (“the Code”) issued by the Financial Reporting Council (“FRC”). The Trustee
has decided that investment rights should be exercised by investment managers on its behalf in line with the investment
manager’s general policies on corporate governance.
The Trustee considers that it is necessary in all circumstances to act in the best financial interests of beneficiaries and,
where this primary consideration is not prejudiced, the investment managers can take Environmental, Social and
Governance (ESG) factors into account.
The Trustee has less influence over the underlying investments within the pooled investment vehicles held by the Scheme
but reviews the manager’s policies and statements of compliance in respect of these investments.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
10
Trustee’s report (continued)
Investment report (continued)
Financially material considerations and non-financial matters
The Trustee has considered how ESG and ethical factors should be taken into account in the selection, retention and
realisation of investments given the time horizon of the Scheme and its members.
The Trustee recognises that it has an important influence on the Scheme’s approach to ESG (including climate change)
and other financially material considerations through its investment strategy and manager selection decisions.
The Trustee expects its investment manager to take account of financially material considerations, including climate
change and other ESG considerations. The Trustee seeks to appoint managers that have appropriate skills and processes
to do this, and regularly reviews how its manager is taking account of these issues in practice.
The Trustee has limited influence over its manager’s investment practices where assets are held in pooled funds, but it
encourages its manager to improve its practices where appropriate.
In particular, the Trustee expects its current (and any future) investment manager to be a signatory to the United Nations
Principles for Responsible Investment.
The Trustee does not take into account any non-financial matters (i.e. matters relating to the ethical and other views of
members and beneficiaries, rather than considerations of financial risk and return) in the selection, retention and realisation
of investments.
Voting and engagement
The Trustee recognises its responsibilities as an owner of capital, and believes that good stewardship practices, including
monitoring and engaging with investee companies, and exercising voting rights attaching to investments, protect and
enhance the long-term value of investments. The Trustee has delegated to its investment manager the exercise of rights
attaching to investments, including voting rights, and engagement with issuers of debt and equity and other relevant
persons about relevant matters such as performance, strategy, capital structure, management of actual or potential conflicts
of interest, risks and ESG considerations.
The Trustee does not monitor or engage directly with issuers or other holders of debt or equity. It expects its investment
manager to exercise ownership rights and undertake monitoring and engagement in line with its general policies on
stewardship, as provided to the Trustee from time to time, considering the long-term financial interests of the beneficiaries.
The Trustee seeks to appoint managers that have strong stewardship policies and processes, reflecting where relevant the
recommendations of the Code issued by the FRC, and from time to time the Trustee reviews how these are implemented
in practice.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
11
Trustee’s report (continued)
Investment report (continued)
Matters relating to the Trustee’s arrangement with any asset manager
The Trustee can influence the manager’s investment practices to some extent where assets are invested in segregated
mandates. However, it has limited influence over the manager’s investment practices where assets are held in pooled
funds. In both cases it encourages the manager to improve its practices where appropriate.
The Trustee’s view is that the fees paid to the investment manager, and the possibility of its mandate being terminated,
ensure it is incentivised to provide a high-quality service that meets the stated objectives, guidelines and restrictions of
each investment mandate. However, in practice, the manager cannot fully align its investment philosophy, strategy and
decisions to the (potentially conflicting) policies of all its investors in relation to strategy, long-term performance of
debt/equity issuers, engagement and portfolio turnover.
It is the Trustee’s responsibility to ensure that the manager’s investment approach is consistent with its policies before
any new mandate appointment, and to monitor and to consider terminating any existing arrangements that appear to be
investing contrary to those policies. The Trustee expects its investment manager, where appropriate, to make decisions
based on assessments of the longer term financial and non-financial performance of debt/equity issuers, and to engage
with issuers to improve their performance. It assesses this when monitoring the manager. In relation to monitoring, the
Trustee receives an annual update from the investment manager in relation to its engagement with issuers.
The Trustee evaluates investment manager performance by considering performance over both shorter and longer-term
periods compared to the relevant benchmark. The appropriateness of the relevant performance benchmark is reviewed on
a regular basis. The duration of the manager’s appointment will depend on strategic considerations and the outlook for
future performance. Generally, the Trustee would be unlikely to terminate a mandate on short-term performance grounds
alone.
The Trustee’s policy is to evaluate its investment manager by reference to the manager’s individual performance as well
as the role it plays in helping the Scheme meet its overall long-term objectives, taking account of risk, the need for
diversification and liquidity. The manager’s remuneration, and the value for money it provides, is assessed in light of
these considerations.
The Trustee recognises that portfolio turnover and associated transaction costs are a necessary part of investment
management and that the impact of portfolio turnover costs is reflected in performance figures provided by the investment
manager. In addition, the Trustee expects its manager to ensure portfolio turnover remains within any limits set out in
portfolio guidelines, and to monitor portfolio turnover costs over time, seeking efficiencies where appropriate. The Trustee
expects its investment consultant to incorporate portfolio turnover and resulting transaction costs as appropriate in its
advice on the Scheme’s investment mandates.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
12
Trustee’s report (continued)
Investment report (continued)
Review of investment performance
The table below shows the performance of the Scheme’s investment assets over various periods relative to the appropriate
benchmarks. All returns are gross of fees.
Annualised return by asset class over
1 year
3 years (p.a)
5 years (p.a)
Sterling corporate bonds
10.6%
-7.1%
0.1%
Benchmark
9.7%
-8.2%
-0.4%
Global Index linked
0.7%
-12.7%
-4.2%
Benchmark
0.3%
-13.0%
-4.7%
Global high yield bonds
0.0%
-0.9%
3.2%
Benchmark
0.0%
-1.8%
2.2%
Multi asset credit
10.6%
2.0%
3.8%
Benchmark
11.8%
2.6%
3.4%
UK equities
-0.9%
6.6%
6.0%
Benchmark
3.9%
8.8%
6.6%
Overseas equities
19.5%
11.7%
14.5%
Benchmark
15.9%
8.8%
12.5%
Global equities
20.6%
12.9%
N/A
Benchmark
16.8%
9.8%
N/A
Emerging market equities
0.2%
-4.7%
3.1%
Benchmark
0.2%
-4.9%
2.0%
Property
-5.8%
2.2%
1.0%
Benchmark
-2.0%
1.8%
1.2%
Money market*
0.0%
0.0%
-0.6%
Benchmark
4.6%
2.0%
1.4%
Sch
eme
7.2%
-3.8%
1.4%
Benchmark
7.1%
-4.5%
1.0%
*The Money market asset class includes gains and losses on currency and foreign exchange contracts.
The Scheme returns shown in the table above excludes the LDI hedging portfolio and takes account of the tactical asset
allocation decisions taken by the Scheme’s investment manager during the year, in accordance with the investment
mandate agreed by the Trustee, and the returns achieved on certain other financial instruments such as derivatives which
are not reflected in the individual asset classes listed in the table above.
The performance of the LDI hedging portfolio (which is an overlay to hedge the Scheme’s liability at certain hedge ratios)
is calculated differently (by reference to the LDI liability benchmark market value) and was -1.9% for the year ended 31
December 2023 (-10.4% per annum for the 3 years ended 31 December 2023). These two returns are calculated on
different bases and the Trustee manages the portfolio in a disaggregated manner; hence an overall Scheme return has not
been provided.
The Trustee has considered the nature, disposition, marketability, security and valuation of the Scheme’s investments and
considers them to be appropriate to justify the holding of each class of the investments.
The Trustee considers that the spread of investments both geographically and by investment category enables the Scheme
to benefit from potentially higher rates of investment growth in different markets whilst also decreasing the effect that
price fluctuations within a particular market may have on the Scheme. The proportion of the Scheme's assets invested in
a particular market is determined by reference to the relative rate of return and the relative level of risk associated with
that market.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
13
Trustee’s report (continued)
Investment report (continued)
Review of investment performance (continued)
The Trustee considers that all the Scheme's investments are readily marketable, with the exception of pooled investment
vehicles in property (6.7% Scheme assets, 2022: 7.9%) and multi-asset credit (14.2% Scheme assets, 2022: 15.1%), which
are deemed to be less readily marketable. If there was a material disposal of units in the Royal London Property Fund
and/or the Royal London UK Real Estate Fund, the Funds’ Prospectuses provide for deferred redemption (on a normal
basis, redemption requests must be received three months in advance, but this may be deferred for one further month) as
the underlying assets would have to be sold in the marketplace. Whilst the Royal London Multi-Asset Credit fund has no
such restriction it is acknowledged that the fund is comprised of asset classes which might be more difficult to sell quickly
at a fair price in difficult market conditions, but the vehicle can otherwise be traded.
Departures from the Statement of Investment Principles (“SIP”)
Over the year to 31 December 2023, there were two instances where the Trustee’s investment arrangements departed from
the SIP.
In order to provide additional collateral to the LDI portfolio during gilt market volatility in October 2022, the Trustee
agreed to deviate from the target asset allocation set out in the investment manager agreement and reduce the target equity
weighting from 15% to 10%, in favour of investment grade corporate bonds. This underweight to equities persisted into
2023, but the Trustee agreed at the March Trustee meeting to move back towards the strategic allocation and increase the
equity allocation to 13%.
In November 2023, the Trustee agreed to reduce the Scheme’s strategic equity (return seeking) allocation by 5% in favour
of investment grade corporate bonds (LDI allocation), reflecting an improved funding position relative to the long-term
journey plan. Implementation of this change in strategy commenced in 2023 and has been reflected in an updated
investment management agreement and SIP in March 2024.
Employer related investments
There were no employer related investments held directly or indirectly by the Scheme at the year end (2022: None).
Risks and mitigations
The key risks facing the Scheme are set out below. There are some additional risks associated with financial instruments
and these are set out in note 22 to the financial statements.
Interest rate risk
The Scheme has interest bearing assets including fixed interest securities and cash balances, which earn interest at variable
rates. The value of the Scheme’s liabilities is directly affected by interest rates. The asset allocation strategy is developed
in consideration of these risks and a liability driven investment portfolio, including repurchase agreements, is held to
reduce the effect of variations in interest rates.
Inflation risk
The Scheme has exposure to the impact of inflation because the majority of the benefits payable from the Scheme are
inflation linked. The Trustee’s investment strategy is developed in consideration of this risk and a liability driven
investment portfolio is held to reduce the effect of variations in inflation.
Longevity risk
The Scheme has exposure to the impact of longevity of each member (i.e. the risk of members living longer than expected).
The risk is monitored by regular actuarial input about trends in longevity. The Trustee monitors the opportunities available
in the market to reduce this risk.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
14
Trustee’s report (continued)
Investment report (continued)
Covenant risk
As the sponsor of the Scheme, the Company is responsible for supporting it and ensuring that there are sufficient funds to
pay members’ benefits. Therefore the Scheme is exposed to the risk of the Company not being able to do this. The Trustee
regularly monitors the covenant of the Company.
Liquidity risk
The investment manager has discretion to maintain a positive cash position as part of the benchmark set by the Trustee
and is forewarned by the Trustee if there is likely to be a need for a cash withdrawal from the Scheme assets. For the day
to day needs, the Administrator monitors cash requirements and may initiate the withdrawal of monies from the investment
manager to the extent required to meet immediate benefits and expenses.
Task Force on Climate-related Financial Disclosures (TCFD)
The Scheme’s TCFD statement relating to the period ended 31 December 2023 is available on the
Royal London Group website: https://www.royallondon.com/about-us/corporate-information/key-financial-
information/group-pension-schemes/
Buy-In In
surance Policy
In January 2024, the Scheme utilised £348m of the Scheme’s assets to purchase a buy-in insurance policy with Royal
London Mutual Insurance Society Limited to insure some of the pensions payable under the Scheme. The policy covers
approximately 18% of the Scheme's liabilities at that date. Under a buy-in policy, the insurer makes payments to the
pension scheme that are intended to exactly match the insured benefits payable from the pension scheme to certain of its
members. The policy is held as an asset of the Scheme for the benefit of all scheme members.
The buy-in policy was purchased as a natural step on the Scheme’s de-risking journey. The policy reduces the level of
risk in the Scheme and protects the long-term security of members’ benefits. The decision to purchase the policy was
made following a thorough due diligence process and on the advice of the Trustee’s advisors.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
15
Trustee’s report (continued)
Statement of trustee’s responsibilities
The trustee’s responsibilities in respect of the financial statements
The financial statements, which are prepared in accordance with United Kingdom Generally Accepted Accounting
Practice, including the Financial Reporting Standard applicable in the UK and Republic of Ireland (“FRS 102”), are the
responsibility of the trustee. Pension scheme regulations require, and the trustee is responsible for ensuring, that those
financial statements:
x show a true and fair view of the financial transactions of the scheme during the scheme year and of the amount and
disposition at the end of the scheme year of its assets and liabilities, other than liabilities to pay pensions and benefits
after the end of the scheme year; and
x contain the information specified in Regulation 3A of the Occupational Pension Schemes (Requirement to obtain
Audited Accounts and a Statement from the Auditor) Regulations 1996, including making a statement whether the
financial statements have been prepared in accordance with the relevant financial reporting framework applicable to
occupational pension schemes.
In discharging these responsibilities, the trustee is responsible for selecting suitable accounting policies, to be applied
consistently, making any estimates and judgements on a prudent and reasonable basis, and for ensuring that the financial
statements are prepared on a going concern basis unless it is inappropriate to presume that the scheme will continue as a
going concern.
The trustee is also responsible for making available certain other information about the scheme in the form of an annual
report.
The trustee has a general responsibility for ensuring that accounting records are kept and for taking such steps as are
reasonably open to it to safeguard the assets of the scheme and to prevent and detect fraud and other irregularities,
including the maintenance of an appropriate system of internal control.
The trustee is also responsible for the maintenance and integrity of the annual report and financial statements on the Royal
London Group's website. Legislation in the United Kingdom governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
The trustee’s responsibilities in respect of contributions
The trustee is responsible under pensions legislation for preparing, and from time to time reviewing and if necessary
revising, a schedule of contributions showing the rates of contributions payable to the scheme by or on behalf of employers
and the active members of the scheme and the dates on or before which such contributions are to be paid.
The trustee is also responsible for keeping records in respect of contributions received in respect of any active member of
the scheme and for adopting risk-based processes to monitor whether contributions that fall due to be paid are paid into
the scheme in accordance with the schedule of contributions.
Where breaches of the schedule occur, the trustee is required by the Pensions Acts 1995 and 2004 to consider making
reports to the Pensions Regulator and to members.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
16
Trustee’s report (continued)
Statement of Trustee’s responsibilities (continued)
Further information
Any enquiries about the Scheme can be made by contacting the Colleague Pensions Team at the address provided in the
‘Further information’ on page 57. A copy of this annual report and financial statements is available on the
Royal London Group website: https://www.royallondon.com/about-us/corporate-information/key-financial-
information/group-pension-schemes/.
Approval
The Trustee’s report on pages 2 to 16 was approved by the Trustee Directors.
Signed for and on behalf of RLGPS Trustee Limited by:
Trustee Director
Date:
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
17
Independent auditors’ report to the trustee of Royal London Group Pension Scheme
Report on the audit of the financial statements
Opinion
In our opinion, Royal London Group Pension Scheme’s financial statements:
x show a true and fair view of the financial transactions of the scheme during the year ended 31 December 2023, and of
the amount and disposition at that date of its assets and liabilities, other than liabilities to pay pensions and benefits
after the end of the year;
x have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards comprising FRS 102 “The Financial Reporting Standard applicable in the UK and
Republic of Ireland”, and applicable law); and
x contain the information specified in Regulation 3A of the Occupational Pension Schemes (Requirement to obtain
Audited Accounts and a Statement from the Auditor) Regulations 1996.
We have audited the financial statements, included in the Annual Report and Financial Statements, which comprise: the
Statement of net assets available for benefits as at 31 December 2023; the Fund account for the year then ended; and the
notes to the financial statements, which include a description of the significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the scheme in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to other entities of public interest,
and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard
were not provided to, or in respect of, the scheme.
We have provided no non-audit services to the scheme in the period under audit.
Conclusions relating to going concern
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the scheme’s ability to continue as a going concern for a
period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the trustee’s use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the scheme’s
ability to continue as a going concern.
Our responsibilities and the responsibilities of the trustee with respect to going concern are described in the relevant
sections of this report.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
18
Independent Auditors' report to the trustee of Royal London Group Pension Scheme
Report on the audit of the financial statements (continued)
Reporting on other information
The other information comprises all the information in the Annual Report and Financial Statements other than the financial
statements, our auditors’ report thereon and our auditors’ statement about contributions. The trustee is responsible for the
other information. Our opinion on the financial statements does not cover the other information and, accordingly, we do
not express an audit opinion or any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or
material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the
financial statements or a material misstatement of the other information. If, based on the work we have performed, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
Responsibilities for the financial statements and the audit
Responsibilities of the trustee for the financial statements
As explained more fully in the statement of trustee’s responsibilities, the trustee is responsible for ensuring that the
financial statements are prepared in accordance with the applicable framework and for being satisfied that they show a
true and fair view. The trustee is also responsible for such internal control as it determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In the preparation of the financial statements, the trustee is responsible for assessing the scheme’s ability to continue as a
going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting
unless the trustee either intends to wind up the scheme, or has no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line
with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The
extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
20
Fund account for the year ended 31 December 2023
Note
2023
2022
£’000
£’000
Contributions and other income
Employer contributions
4
-
-
-
-
Benefits and other payments
Benefits paid or payable
5
93,941
89,729
Transfer out to other schemes
6
3,422
25,140
Administrative expenses
7
4,333
3,452
101,696
118,321
Net withdrawals from dealings with members
(101,696)
(118,321)
Returns on investments
Investment income
8
20,318
53,593
Change in market value of investments
12
99,277
(1,047,410)
Investment management expenses
9
(3,070)
(3,130)
Investment management fee rebates
10
1,044
1,490
Taxes on investment income
11
35
(149)
Net returns on investments
117,604
(995,606)
Net increase / (decrease) in the fund during the year
15,908
(1,113,927)
Opening net assets
1,967,189
3,081,116
Closing net assets
1,983,097
1,967,189
The notes to the financial statements on pages 22 to 45 form part of these financial statements.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
21
Statement of net assets available for benefits as at 31 December 2023
Note
2023
2022
£’000
£’000
Investment assets
Equities
12
172,625
108,191
Bonds
12
2,190,524
2,187,206
Pooled investment vehicles
17
469,495
460,668
Derivatives
14
17,700
23,802
Insurance policies
15
1,238
1,256
Cash
18
24,807
27,156
Other investment balances
19
32,362
41,313
AVC investments
20
1,469
1,452
Reverse repurchase agreements receivable
12
280,976
997,960
3,191,196
3,849,004
Investment liabilities
Bonds sold short
12
(271,415)
(359,524)
Derivatives
14
(28,273)
(35,205)
Other investment balances
19
(7,226)
(3,395)
Repurchase agreements payable
12
(908,349)
(1,491,266)
(1,215,263)
(1,889,390)
Total net investments
1,975,933
1,959,614
Current assets
25
10,080
9,697
Current liabilities
26
(2,916)
(2,122)
Total net assets available for benefits
1,983,097
1,967,189
The financial statements summarise the transactions of the Scheme and deal with the net assets at the disposal of the
Trustee. They do not take account of obligations to pay pensions and benefits which fall due after the end of the Scheme
year. The actuarial position of the Scheme, which takes into account such obligations, is dealt with in the Report on
Actuarial liabilities on pages 6 and 7 of the annual report, and these financial statements should be read in conjunction
with this report.
The notes to the financial statements on pages 22 to 45 form part of these financial statements.
The financial statements on pages 20 to 45 were approved by the Trustee Directors.
Signed for and on behalf of RLGPS Trustee Limited by:
Trustee Director
Date:
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
22
Notes to the financial statements
1. General information
T
he Royal London Group Pension Scheme (the “Scheme”) is an occupational pension scheme established by the Trust
Deed dated 5 October 1988 under English law. The Scheme is a defined benefit (“DB”) scheme which was established to
provide retirement benefits for its members. The beneficial members of the Scheme are eligible employees of the Royal
London Group who commenced service on or before 1 September 2005. The benefits are payable to members in
accordance with the Scheme Rules based on their length of service, accrual rate and their pensionable earnings as defined
by the Scheme Rules prior to leaving the service of Royal London Group.
The Trustee’s registered office address is at 80 Fenchurch Street, London, EC3M 4BY.
The Scheme is a registered pension scheme under the Chapter 2, Part 4 of the Finance Act 2004. This means that
contributions by employers and employees are normally eligible for tax relief and income and capital gains earned by the
Scheme receive preferential tax treatment.
2. Statement of compliance
The individual financial statements of Royal London Group Pension Scheme have been prepared in accordance with the
Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations
1996, Financial Reporting Standard (FRS) 102 - The Financial Reporting Standard applicable in the UK and Republic of
Ireland issued by the Financial Reporting Council (“FRS 102”) and the guidance set out in the Statement of Recommended
Practice “Financial Reports of Pension Schemes” (revised June 2018) (“the SORP”).
3. Summary of significant accounting policies
The principal accounting policies set out below have been consistently applied in the preparation of the financial
statements.
a.
Currency
The functional c
urrency and presentation currency of the Scheme is the Great British Pound Sterling (GBP (£)).
b. Foreign currency conversio
n
Assets and liabilities in
foreign currencies are expressed in GBP at the rates of exchange ruling at the year end.
Foreign currency transactions are translated into GBP at the spot rate at the date of the tran
saction.
G
ains and losses arising on conversion are dealt with as part of change in market value of investments.
c. Contributions
Contributions are accounted for in accordance with the agreement under which they are paid or, in the absence of
such an agreement, when received.
d. Other income
Other income is accounted for on a receipt basis.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
23
Notes to the financial statements (continued)
3. Summary of significant accounting policies (continued)
e. Benefit payments
Where a member can choose whether to take their benefits as a full pension or as a lump sum with reduced pension,
retirement benefits are accounted for on an accruals basis in the period in which the member notifies the Trustee of
their decision on the type or amount of benefit to be taken or if there is no member choice, on the date of retirem
ent
or leavin
g.
Tax liability
arising on a member’s excess annual or lifetime allowance settled by the Scheme is recovered from th
e
me
mber.
Pensions in payment are accounted for in the period to which they relate.
f.
Transfers to other schemes
T
ransfer values represent the amounts payable during the year for members who have left the Scheme. All values
are based on methods and assumptions determined by the Scheme Actuary advising the Trustee. The values ar
e
accounted for up
on liability being accepted by the receiving scheme. In the case of individual transfers, th
is is
norm
ally when the payment of the transfer value is made.
g. Administrative and other expenses
Administrative expenses are accounted for on an accruals basis by reference to the period to which they r
elate.
h. Inv
estment income and expenses
Dividends from equities and any income from pooled investment vehicles which distribute income is accounted for
on an accruals basis on the date when stock is quoted ex-dividend and in the case of unquoted instruments, when the
income is declared.
Interest on bonds, including income bought and sold on purchases and sales of bonds, is accounted for on an accruals
basis.
Interest on cash
and short term deposits is accounted for on an accruals basis.
The change in market value of investments during the year comprises all increases and decreases in the market value
of investments held at any time during the year, including profits and losses realised on sales of investments and
unrealised changes in market value. The change in market value also includes realised profits and losses on closed
derivative contracts and unrealised profits and losses on open derivative contracts.
Income generated by pooled investment vehicles which are accumulation funds is retained within the funds without
issue of further units and is reflected in the change in market value of the units. The tax element on the income from
property pooled investment vehicles is reclaimed and reinvested through the purchase of additional units and is
reflected in the pu
rchases.
Receipts or
payments under swap contracts representing the difference between the swapped cash flows are
recognised in investment income when received or
paid.
Interest paid and interest received on repurchase arrangements and reverse repurchase arrangements is
acco
unted for on an accruals basis.
Investment in
come includes any reclaimable tax credits. Withholding tax is accrued on the same basis as investment
income. Where withholding tax is not recoverable, this is shown as a separate expense within investment returns.
Investment management expenses and fees rebated are accounted for on an accruals basis by reference to the period
to which th
ey relate.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
24
Notes to the financial statements (continued)
3. Summary of significant accounting policies (continued)
i. Valuation and classification of investments
Investment assets and liabilities are included in the financial statements at fair value. Where separate bid and offer
prices are available, the bid price is used for investment assets and the offer price for investment liabilities. Otherwise,
the closing single price, single dealing price or most recent transaction price is used. Where quoted or other unit
prices are not available, the Trustee adopts valuation techniques appropriate to the class of investment. Details of the
valuation techniques and principal assumptions are given in the notes to the financial statements where used.
The methods of determining fair value for the principal classes of investments are:
x Equities, bonds and certain pooled investment vehicles which are traded on an active market are included at the
quoted price, which is normally the bid price.
x Unitised pooled investment vehicles which are not traded on an active market but where the manager is able to
demonstrate that they are priced daily, weekly or at each month end, and are actually traded on substantially all
pricing days are included at the last price provided by the manager at or before the year end.
x The value of other equities, bonds and pooled investment vehicles which are unquoted or not actively traded on a
quoted market is estimated by the Trustee. Where the value of a pooled investment vehicle is primarily driven by the
fair value of its underlying assets, the net asset value advised by the fund manager is normally considered a suitable
approximation to fair value unless there are restrictions or other factors which prevent realisation at that value, in
which case adjustment is made.
x Swaps are valued at the net present value of future cash flows arising therefrom.
x Futures contracts are traded on an active exchange market and are valued at the difference between exchange
settlement prices and inception prices.
x Forward exchange contracts are valued at the gain or loss that would arise from closing out the contract at the
reporting date by entering into an equal and opposite contract at that date.
x Annuity (insurance) policies are valued by the Scheme Actuary at the amount of the related obligation, determined
using the most recent Scheme funding valuation assumptions updated for market conditions at the reporting date.
x The value of AVCs and other investment balances which are unquoted or not actively traded on a quoted market is
driven by the fair value of its underlying assets as advised by the asset managers. Where there are restrictions or other
factors which prevent realisation at the fair value an adjustment is made to value of the asset.
x Accrued interest on bonds and bonds sold short is excluded from the reported market value and is included within
other investments.
x The Scheme recognises assets delivered under repurchase agreements to reflect its ongoing interest in those securities.
Cash received from repurchase agreements is recognised as an investment asset and an investment liability is
recognised for the value of the repurchase obligation including accrued interest.
The Scheme does not recognise assets received under reverse repurchase agreements. Cash delivered under such
agreements is recognised as an investment receivable.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
25
Notes to the financial statements (continued)
3. Summary of significant accounting policies (continued)
j. O
ther investment arrangements
The Scheme recognises assets delivered out under stock-lending arrangements and as collateral under derivative
contracts to reflect its ongoing interest in th
ose securities.
Collateral securities received in
respect of stock-lending arrangements and derivative contracts are disclosed but not
recognised as Scheme assets.
The value of collateral received in respect of derivative contracts reflects the exposure value of the derivatives at the
middle of bid and offer prices including interest accrual.
k. Critical accounting judgements and estimation uncertainty
Estimates and judgements are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circum
stances.
Ther
e were no critical judgements in applying the accounting policies.
Key accounting estimates and assumptions - the Trustee makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the related actual results. For the Scheme, the Trustee
believes the only estimates and assumptions that have a significant risk of causing a material adjustment to the
carrying amount of assets and liabilities within the next financial year are related to the valuation of the Scheme
investments and, in particular, those classified in Level 2 and 3 of the fair-value hierar
chy.
4. Emplo
yer Co
ntributions
Additio
nal Employer contributions were not required to fund discretionary pension increases this year, as per the
Schedules of Contributions certified on 19 March 2021 and 20 June 2023.
5. Benefits paid or paya
ble
2023
2022
£’000
£’000
Pensions
81,968
79,224
Commutations and retirement lump sums
11,855
10,135
Lump sum death benefits
118
370
93,941
89,729
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
26
Notes to the financial statements (continued)
6. Transfer ou
t to other schemes
2023
2022
£’000
£’000
Individual transfers to other schemes
3,422
25,140
3,422
25,140
7. Administrative expenses
2023
2022
£’000
£’000
Administration fees
2,626
2,043
Actuarial fees
566
477
Levies paid to the Pensions Regulator
123
219
Trusteeship fees and expenses
176
167
Audit fees
104
100
Legal fees
459
160
Consultancy
251
170
Members advisory fees
24
112
Sundry expenses
4
4
4,333
3,452
Some of the administration of the Scheme is provided by the Company. The direct costs of the Company employees
involved in the administration are recharged to the Scheme. Indirect costs incurred by the Company are recharged to the
Scheme on an allocation methodology agreed by the Trustee. These costs are included in the administration fees and are
provided in note 27 (Related party transactions).
Trusteeship fees comprise fees paid directly to the Trustee Directors as disclosed in note 27 (Related party transactions).
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
27
Notes to the financial statements (continued)
8. Investment inco
me
2023
2022
£’000
£’000
Dividends from equities
3,306
4,886
Interest from bonds
41,144
59,744
Interest paid on bonds sold short
(1,803)
(6,086)
Receipts on swaps
7,532
1,636
Payments on swaps
(8,919)
(1,604)
Income from pooled investment vehicles
5,791
5,408
Interest on cash deposits
2,249
530
Other investment income
902
164
Income from reverse repurchase agreements
17,656
8,836
Interest paid/payable on repurchase agreements
(47,811)
(20,137)
Net income from stock lending
166
123
Annuity income
105
93
20,318
53,593
9. Investment management expenses
2023
2022
£’000
£’000
Administration and management fees
2,029
2,475
Custodian charges
134
192
Investment advisory fees
769
399
Bank interest charges
105
19
Other investment charges
15
-
Commission on futures
18
45
3,070
3,130
10. Investment management fee rebates
2023
2022
£’000
£’000
Investment management fee rebates
1,044
1,490
The fee rebates represent amounts received from the Scheme’s investment manager as reimbursement representing a
proportion of investment management charges on pooled investment vehicles.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
28
Notes to the financial statements (continued)
11. Taxes on investment income
The taxation char
ge within investment returns represents irrecoverable withholding tax arising on certain classes of
investment income.
12. Reconciliation of net investments
Value as at
1 January
2023
Purchases at cost
and derivative
payments
Sale proceeds
and derivative
receipts
Change in
market
value
Value as at
31
December
2023
£’000
£’000
£’000
£’000
£’000
Equities
108,191
92,924
(54,098)
25,608
172,625
Bonds - Net
1,827,682
2,880,722
(2,834,882)
45,587
1,919,109
Derivatives - Net
(11,403)
12,469
(16,348)
4,709
(10,573)
Pooled investment vehicles
460,668
360,831
(375,234)
23,230
469,495
Insurance policies
1,256
-
-
(18)
1,238
AVC investments
1,452
-
(105)
122
1,469
2,387,846
3,346,946
(3,280,667)
99,238
2,553,363
Cash
27,156
39
24,807
Other investment balances
37,918
25,136
Reverse repurchase
agreements receivable
997,960
280,976
Repurchase agreements payable
(1,491,266)
(908,349)
(428,232)
39
(577,430)
1,959,614
99,277
1,975,933
Bonds with a market value as at 31 December 2023 of £294.1 million (2022: £1,002.2 million) were received under the
reverse repurchase agreements. These bonds are not recognised as assets of the Scheme.
In the table above, Bonds reflects a net position comprising £2,190.5 million (2022: £2,187.2 million) of bond assets and
£271.4 million (2022: £359.5 million) of bond liabilities due to short selling of bonds.
Bonds with a market value as at 31 December 2023 of £949.5 million (2022: £1,457.9 million) were delivered under the
repurchase agreements. These bonds are recognised as assets of the Scheme and are included in the bonds.
Details of collateral arrangements in relation to repurchase agreements are set out in note 16.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
29
Notes to the financial statements (continued)
13. Investment transaction costs
Transaction costs relating to purchases of investments are added to the cost of investments and those relating to sales of
investments are netted against proceeds of investments. These costs include fees, commissions, stamp duty and other fees.
Direct transaction costs incurred during the year are analysed as follows:
2023
2022
£’000
£’000
Fees
12
9
Commissions
25
41
Taxes
29
23
66
73
The above transaction fees relate to equities.
In addition to these transaction costs, indirect costs are incurred through the bid-offer spread on investments within the
pooled investment vehicles and charges within those vehicles. It has not been possible for the Scheme to quantify such
indirect transaction costs.
14. Derivatives
2023
2022
Assets
Liabilities
Total
Assets
Liabilities
Total
£’000
£’000
£’000
£’000
£’000
£’000
Over
the counter
contracts
Forward foreign currency
contracts
747
(
1,103)
(356)
781
(
501)
280
747
(1,103)
(356)
781
(501)
280
Exchange
traded
contracts
Swaps
16,091
(26,770)
(10,679)
22,226
(34,213)
(11,987)
Futures
862
(400)
462
795
(
491)
304
16,953
(27,170)
(10,217)
23,021
(34,704)
(11,683)
17,700
(28,273)
(10,573)
23,802
(35,205)
(11,403)
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
30
Notes to the financial statements (continued)
14. Derivatives (continued)
O
bjectives and policies for holding derivatives
The Trustee allows RLAM the discretion to use derivatives to support the investment strategy. These are financial
instruments whose value is dependent on the value of an underlying index, currency, commodity or other asset.
The Trustee authorised the use of derivatives for hedging purposes and to enhance the efficient management of the
investment portfolios where they provide the opportunities to achieve the overall portfolio objective more efficiently than
would be the case through direct dealing in the underlying securities.
Derivatives are not used for speculative purposes. Furthermore, restrictions are in place with RLAM to limit the overall
extent of derivatives usage and exposure to certain types of derivatives.
Derivative contracts are included in the financial statements at fair value. During the year the Scheme used swaps, futures
and forward foreign currency contracts. Details of collateral arrangements held in relation to these instruments are set out
in note 16.
Swaps
The Scheme used exchange traded swaps and fair value is the current value of future expected net cash flows arising from
the swap, taking into account the time value of money. Fair value is normally calculated using discounted cash flow
models and using market data at the reporting date. The Scheme participated in two types of swaps during the year, which
were inflation swaps and interest rate swaps as follows:
(a). Inflation swap
An inflation swap is a contract under which inflation-indexed payments are exchanged for fixed payments based on an
agreed principal amount. Only the net interest payments are exchanged. No exchange of principal takes place
(b). Interest rate swap
An interest rate swap is a contract under which interest payments at a fixed rate are exchanged for interest payments at a
variable interest rate (or vice versa) based on an agreed principal amount. Only the net interest payments are exchanged.
No exchange of principal takes place.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
31
Notes to the financial statements (continued)
14. Derivativ
es (continued)
Outstandi
ng swap contracts at the year end are detailed as follows:
Number of
Notional
principal
Assets
Liabilities
2023
Net
Nature of Swap
Expires
Contracts
£’000
£’000
£’000
£’000
Interest rate swaps
Pay fixed interest for variable (SONIA)
1 – 5 years
1
90,000
-
(1,927)
(1,927)
Pay variable (SONIA) for fixed interest
0 – 1 years
1
30,000
-
(779)
(779)
Pay variable (SONIA) for fixed interest
1 – 5 years
2
60,000
-
(5,421)
(5,421)
-
(8,127)
(8,127)
Inflation swaps
Pay fixed interest for variable (RPI)
0 – 1 years
1
25,000
872
-
872
Pay fixed interest for variable (RPI)
1 – 5 years
3
180,000
11,578
(2,011)
9,567
Pay fixed interest for variable (RPI)
10 – 20 years
1
30,000
1,595
-
1,595
Pay fixed interest for variable (RPI)
20 years +
5
117,000
999
(4,159)
(3,160)
Pay variable (RPI) for fixed interest
1 – 5 years
3
85,000
-
(7,574)
(7,574)
Pay variable (RPI) for fixed interest
10 – 20 years
1
30,000
-
(1,041)
(1,041)
Pay variable (RPI) for fixed interest
20 years +
3
65,000
1,047
(3,858)
(2,811)
16,091
(18,643)
(2,552)
16,091
(26,770)
(10,679)
T
he notional principal of a swap is the amount used to determine the swapped receipts and payments.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
32
Notes to the financial statements (continued)
14. Derivativ
es (continued)
Forward foreign currency con
tracts
A forward foreign currency contract is an agreement to exchange an agreed amount of currency (contract or notional
amount) at a specified exchange rate and on a specified date. The contract is used to reduce exposure to movements in
exchange rates.
Outstanding forward foreign currency contracts at the year end are detailed as follows:
Settlement date
Number
of
contracts
Currency
bought
Currency
So
ld
Contract
/notional
amount
Assets
Liabilities
2023
Net
W
ithin
£’000
£’000
£’000
£’000
1 Month
4
GBP
AUD
12,045
-
(258)
(258)
1 Month
1
GBP
CAD
2,705
-
(69)
(69)
1 Month
1
GBP
CHF
1,185
-
(41)
(41)
1 Month
4
GBP
EUR
6,552
27
(2)
25
1 Month
1
GBP
JPY
2,927
-
(110)
(110)
1 Month
1
GBP
NOK
413
-
(17)
(17)
1 Month
1
GBP
SEK
634
-
(13)
(13)
1 Month
1
GBP
SGD
300
-
(1)
(1)
1 Month
6
GBP
USD
25,034
534
-
534
1 Month
4
AUD
GBP
8,853
186
-
186
1 Month
5
EUR
GBP
13,105
-
(51)
(51)
1 Month
8
USD
GBP
23,593
-
(541)
(541)
747
(1,103)
(356)
The contract or notional amount represents the sterling value of the foreign currency amount of the contract translated at
the year end spot rate.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
33
Notes to the financial statements (continued)
14. Derivativ
es (continued)
Futures contract
s
Futures are derivative financial contracts that obligate the parties to transact an asset at a predetermined future date and
price. The contracts outline details of the quantity of the underlying asset and are standardised to facilitate trading on a
futures exchange.
Outstanding futures contracts at the year end are detailed as shown below:
Nature of futures
Currency
Expires
within
Economic
exposure
Assets
Liabilities
2023
Total
£’000
£’000
£’000
£’000
Equity futures bought
HKG HANG SENG IDX FUT Jan24
HKD
1 year
602
14
-
14
KFE KOSPI2 INX FUT Mar24
KRW
1 year
663
44
-
44
SFE SPI 200 FUTURES Mar24
AUD
1 year
913
8
-
8
EUX EURO STOXX 50 Mar24
EUR
1 year
4,763
-
(36)
(36)
NYF MSCI EmgMkt Mar24
USD
1 year
6,000
272
-
272
OSE TOPIX INDX FUTR Mar24
JPY
1 year
11,585
96
-
96
CME S&P500 EMINI FUT Mar24
USD
1 year
14,368
428
-
428
862
(36)
826
Equity futures sold
ICF FTSE 100 IDX FUT Mar24
JPY
1 year
(2,094)
-
(40)
(40)
-
(40)
(40)
Interest Rate futures sold
EUX EURO-SCHATZ FUT Mar24
EUR
1 year
(20,404)
-
(104)
(104)
CBT US 2YR NOTE (CBT) Mar24
USD
1 year
(20,191)
-
(149)
(149)
ICF LONG GILT FUTURE Mar24
GBP
1 year
(35,106)
-
(71)
(71)
-
(324)
(324)
862
(400)
462
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
34
Notes to the financial statements (continued)
15. Insurance Policies
The Trustee holds an annuity policy with Aviva Annuity UK Limited. The annuity policy is valued by the Scheme Actuary
as the amount of the related obligation, determined using the most recent Funding valuation updated for market conditions
at the reporting date. The actuarial assumptions used are in line with those agreed between the Trustee and Royal London
for the purpose of the 31 December 2022 actuarial valuation, updated for market conditions as at 31 December 2023. A
summary of the main assumptions adopted for this valuation are shown in the table below.
Financial Assumptions
31 December 2023
Discount Rate
Gilt curve + 0.95% pa for 11 years and 0.5% pa thereafter
Pension increases (in line with RPI floored at 0% pa)
Set using the RPI inflation curve, considering the effect of
inflation volatility set at 1% pa, and the pension increase floor
of 0% pa
Demographic Assumptions
31 December 2023
Mortality base tables
110% and 101% of the SAPS “S3” all pensioner tables for the
member and spouse respectively, projected to 202
3
in line with
CMI 2022 model
Future improvements in longevity
CMI 2022 projection model with long-term trend
improvements of 1.50% pa, with an initial addition of 0.50%
pa, a smoothing parameter of 7.0, 0% weighting on 2020 and
2021 experience, and 25% weighting on 2022 experience
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
35
16. Collateral and stock lending arrangements
Cash collateral of £10.8m was settled by the Scheme in respect of derivative contracts outstanding as at 31 December
2023 (2022: £12.0m). The cash collateral is included in receivables within other investment balances.
Stock collateral was pledged by the Scheme in respect of derivative contracts outstanding at the year-end in the form of
bonds with a market value as at 31 December 2023 of £12.6m (2022: £nil). The pledged assets are included in the net
investment assets.
Bonds with a market value as at 31 December 2023 of £nil (2022: £40.3m) were delivered as collateral under the
repurchase and reverse repurchase agreements.
Bonds with a market value as at 31 December 2023 of £28.6m (2022: £0.1m) were received as collateral under the
repurchase and repurchase agreements.
Cash collateral of £4.3m (2022: £nil) was delivered by the Scheme under the repurchase and reverse repurchase
agreements.
The Scheme has undertaken stock loan transactions during the year, which transfer the legal title to an asset to a third
party but not the right to the income and change in market value of the asset. The Scheme retains the risks and rewards of
ownership of assets under stock loan arrangements. The market value of the assets under such arrangements as at 31
December 2023 amounted to £86.3m (2022: £48.5m) and is included in the net investment assets within Bonds £63.9m
(2022: £32.8m) and Equities £22.4m (2022: £15.7m).
The assets transferred under stock loan arrangements are secured by the receipt of collateral from the third party in the
form of government bonds, corporate bonds and quoted equities, which may be re-pledged or sold if there is default. The
market value of collateral held by the Scheme as at 31 December 2023 was £90.9m (2022: £51.9m) and is not included
in the net investment assets.
17. Pooled investment vehicles
2023
2022
£’000
£’000
Equities
8,757
8,741
Multi Asset Credit
281,705
296,668
Money Market
45,946
-
Property
133,087
155,259
469,495
460,668
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
36
Notes to the financial statements (continued)
18. Ca
sh
2023
2022
£’000
£’000
UK GBP Sterling
23,387
26,789
Foreign currency
1,420
367
24,807
27,156
19. Other investment balances
2023
2022
£’000
£’000
Accrued interest receivable
14,484
16,030
Dividends and investment income receivable
2,179
460
Trade settlements due from brokers
236
5,100
Futures margin receivable
4,439
7,291
Cash collateral receivable
10,752
12,023
Tax reclaims
272
409
32,362
41,313
Accrued interest payable
(326)
(590)
Trade settlements due to brokers
-
(1,896)
Futures margin payable
(2,577)
(902)
Cash collateral payable
(4,320)
-
Tax payable
(3)
(7)
(7,226)
(3,395)
25,136
37,918
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
37
Notes to the financial statements (continued)
20. AVC investments
The Trustee holds assets invested separately from the main fund in the form of insurance policies, which secure additional
benefits on a money purchase basis for those members electing to pay additional voluntary contributions. Members
participating in this arrangement each receive an annual statement confirming the amounts held on their behalf and the
movements in the year. The aggregate amounts of AVC investments are shown below:
2023
2022
£’000
£’000
£’000
£’000
Unit Linked
With Profits
Total
Total
Scottish Widows Limited
691
172
863
894
The Royal London Mutual Insurance Society Limited
386
-
386
358
Utmost Life and Pensions Limited
220
-
220
200
1,297
172
1,469
1,452
21. Fair v
alue of investments
The fair value of investments in the statement of net assets available for benefits has been determined using an analysis
of the level in the following hierarchy:
Valuation methodology
Level
Unadjusted quoted price in an active market for identical instruments that the entity can access at the
measurement date
1
Inputs (other than quoted prices) that are observable for the instrument, either directly or indirectly
2
Inputs are unobservable, i.e. for which market data is unavailable.
3
Pooled investment vehicles which are traded regularly are included in level 2. Where the absence of regular trading or the
unsuitability of recent transaction prices as a proxy for fair value applies, valuation techniques are adopted and the vehicles
are included in level 3.
The value of other pooled investment vehicles which are unquoted or not actively traded on a quoted market is estimated
by the Trustee. Where the value of the pooled investment vehicle is primarily driven by fair value of its underlying assets,
the net asset value advised by the fund manager is normally considered a suitable approximation to fair value unless there
are restrictions or other factors which prevent realisation at that value, in which case adjustments are made. No such
adjustments have been made to the valuations as at 31 December 2023 or 31 December 2022.
Property funds are fair valued based on values estimated by underlying fund managers using accepted valuation
methodologies and use market information in the absence of observable market data and are included in Level 3.
The Scheme’s investment assets and liabilities have been included at fair value within the hierarchical levels as shown on
the following page:
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
38
Notes to the financial statements (continued)
21. Fair value of investments (continued)
Asset category
Hierarchy level
2023
1
2
3
Total
Investment assets
£000
£000
£000
£000
Equities
172,625
-
-
172,625
Bonds – Net
1,115,973
778,509
24,627
1,919,109
Derivatives
862
16,838
-
17,700
Pooled investment vehicles
-
336,408
133,087
469,495
Insurance policies
-
-
1,238
1,238
Cash
24,807
-
-
24,807
Other investment balances
32,362
-
-
32,362
AVC investments
-
1,297
172
1,469
Reverse repurchase agreements receivable
-
280,976
-
280,976
1,346,629
1,414,028
159,124
2,919,781
Investment liabilities
Derivatives
(400)
(27,873)
-
(28,273)
Other investment balances
(7,226)
-
-
(7,226)
Repurchase agreements payable
-
(908,349)
-
(908,349)
(7,626)
(936,222)
-
(943,848)
Total investments
1,339,003
477,806
159,124
1,975,933
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
39
Notes to the financial statements (continued)
21. Fair value of investments (continued)
An analysis for the prior year-end is as follows:
Asset category
Hierarchy level
2022
1
2
3
Total
£000
£000
£000
£000
Investment assets
Equities
108,191
-
-
108,191
Bonds – Net
1,072,287
744,362
11,033
1,827,682
Derivatives
795
23,007
-
23,802
Pooled investment vehicles
-
305,409
155,259
460,668
Insurance policies
-
-
1,256
1,256
Cash
27,156
-
-
27,156
Other investment balances
41,313
-
-
41,313
AVC investments
-
1,255
197
1,452
Reverse repurchase agreements receivable
-
997,960
-
997,960
1,249,742
2,071,993
167,745
3,489,480
Investment liabilities
Derivatives
(491)
(34,714)
-
(35,205)
Other investment balances
(3,395)
-
-
(3,395)
Repurchase agreements payable
-
(1,491,266)
-
(1,491,266)
(3,886)
(1,525,980)
-
(1,529,866)
Total investments
1,245,856
546,013
167,745
1,959,614
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
40
Notes to the financial statements (continued)
22. Investment risks
Types of risk relating to investments
FRS 102 requires the disclosure of information in relation to certain investment risks.
Credit risk: this is the risk that one party to a financial instrument will cause a financial loss for the other party by failing
to discharge an obligation.
Market risk: this comprises currency risk, interest rate risk and other price risk.
x Currency risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of
changes in foreign exchange rates.
x Interest rate risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of
changes in market interest rates.
x Other price risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of
changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are
caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial
instruments traded in the market.
The SORP recommends these risk disclosures are made for all investments.
Investment strategy
The Trustee determines its investment strategy after taking advice from a professional investment consultant. The Scheme
has exposure to these risks because of the investments it makes in following the investment strategy. The Trustee manages
investment risks, including credit risk and market risk, within agreed risk limits which are set taking into account the
Scheme’s strategic investment objectives. These investment objectives and risk limits are implemented through the
investment management agreement in place with the Scheme’s investment manager and monitored by the Trustee by
regular reviews of the investment portfolio. As at 31 December 2023, the investment strategy for the Scheme, as set out
in the SIP in place at the time, was to invest:
x 35.0% (2022: 35.0%) in return seeking investments comprising equities, UK property and multi-asset credit.
x 65.0% (2022: 65.0%) in liability driven investments (LDI) that are expected to move in line with the long term
liabilities of the Scheme. This is referred to as matching assets and comprises UK government and corporate bonds,
derivatives and repurchase agreements, the purpose of which is to hedge against the impact of interest rate and
inflation movements of the long term liabilities.
The LDI strategy targets a hedge ratio of 90% of the interest rate and
inflation sensitivity of the liability cashflows within an agreed tolerance range.
As at the year end, the Scheme’s return seeking assets had a total value of £642.2 million (2022: £568.9 million)
representing 32.6% (2022: 29.3%) of the total investment portfolio.
As at the year end, the LDI portfolio had a total value of £1,328.3 million (2022: £1,372.0 million) representing 67.4%
(2022: 70.7%) of the total investment portfolio.
In November 2023, the Trustee agreed to reduce the Scheme’s strategic equity (return seeking) allocation by 5% in favour
of investment grade corporate bonds (LDI allocation), reflecting an improved funding position relative to the long-term
journey plan. Implementation of this change in strategy commenced in 2023 and has been reflected in an updated
investment management agreement and SIP in March 2024.
Further information on the Trustee’s approach to risk management, credit and market risk is set out below. This does not
include the AVC investments or legacy insurance policies as these are not considered significant in relation to the overall
investments of the Scheme.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
41
Notes to the financial statements (continued)
22. Investment risks (continued)
Credit risk
Where the Scheme invests in pooled funds it is directly exposed to credit risk in relation to the solvency of the investment
manager and the custodian of the funds. Direct credit risk arising from pooled investment vehicles is mitigated by the
underlying assets of the pooled arrangements being “ring-fenced” from the pooled fund manager, the regulatory
environments in which the manager operates and diversification of investments amongst pooled arrangements. The
Trustee also carries out due diligence checks before investing in new pooled investment vehicles and on an ongoing basis
monitors any changes to the operating environment of the pooled fund manager.
The Scheme held investments in the following pooled investment vehicles by their legal form as at 31 December 2023.
Legal form
2023
2022
£’000
£’000
Open-ended Investment Company (OEIC)
54,703
8,741
Irish Collective Asset-management Vehicle (ICAV)
281,705
296,668
Property Authorised Investment Fund (PAIF)
133,087
155,259
469,495
460,668
The Scheme is also subject to direct credit risk arising from investments in bonds, over-the-counter (“OTC”) derivatives,
repurchase agreements, reverse repurchase agreements, equity futures and cash balances. Credit risk arising on bonds held
directly (see note 12) is mitigated by investing in government bonds of £1,249.5 million (2022: £1,101.3 million) where
the credit risk is minimal or holding corporate bonds & fixed interest securities of £639.7 million (2022: £695.2 million)
with an investment-grade credit rating, across a diversified exposure of different credit issuers. There is a further £29.9
million (2022: £31.2 million) holding in below investment grade corporate bonds & fixed interest securities.
The Trustee considers financial instruments or counterparties to be of investment grade if they are rated at BBB- or higher
by Standard & Poor’s or Fitch, or rated at Baa3 or higher by Moody’s.
The Scheme’s OTC derivative contracts are not guaranteed by any regulated exchange and therefore the Scheme is subject
to the risk of failure of the counterparty. The credit risk for OTC derivatives is reduced by limits on the exposure to any
single counterparty and a minimum credit rating that all counterparties must meet. In addition, the derivative positions are
collateralised daily to ensure that the extent of the credit risk is limited to one day’s market movements. Collateral in
relation to the Scheme’s OTC derivative contracts and manager stock lending activities is typically posted in the form of
government bonds or cash held with investment banks that are at least investment grade credit rated.
In addition, the investment manager trades all new swap contracts on a centrally cleared basis (rather than OTC), which
uses a clearing house to remove the direct relationship between the Trustee and the counterparty, further reducing credit
risk (See note 14).
Where the Scheme’s investment manager engages in stock lending activities, the Trustee manages the credit risk arising
from such activities by restricting the amount of overall stock that may be lent, only lending to approved borrowers who
are rated investment grade, limiting the amount that can be lent to any one borrower and putting in place collateral
arrangements. Details of collateral arrangements held are set out in note 16.
Cash is held within financial institutions which are at least investment grade credit rated.
The Scheme is also indirectly exposed to credit risks arising on some of the financial instruments held by the pooled
investment vehicles. Indirect credit risk arises in relation to underlying investments held in the bond pooled investment
vehicles (see note 17). This risk is mitigated by mainly investing in funds which hold at least investment grade credit rated
investments across and / or maintain a diversified exposure of different credit issuers.
The information about exposures to and mitigation of credit risk above applied at both the current and previous year end.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
42
Notes to the financial statements (continued)
22. Investment risks (continued)
Currency risk
The Scheme is subject to currency risk because some of the Scheme’s investments are held in overseas markets, either as
segregated investments (direct exposure) or via pooled investment vehicles (indirect exposure). The Trustee has set a
benchmark limit to overseas currency exposure of 10.0% (2022: 10.5%) of the total portfolio value which is achieved
through a currency hedging policy utilising forward foreign currency contracts (see note 14). The net currency exposure
at the current and previous year ends was:
2023
2022
Direct
exposure
Indirect
exposure
Hedging
Net exposure
after hedging
Net exposure
after hedging
Currency name
Code
£000
£000
£000
£000
£000
Euros
EUR
12,551
12,176
6,577
31,304
9,450
Japanese Yen
JPY
12,561
2,159
(3,037)
11,683
11,844
US dollars
USD
115,767
-
(907)
114,860
70,214
Other currencies
26,210
36,324
(8,828)
53,706
16,949
167,089
50,659
(6,195)
211,553
108,457
Interest rate risk
The Scheme is subject to interest rate risk as some of the Scheme’s investments are held in bonds (either as segregated
investments or through pooled investment vehicles), interest rate swaps, repurchase arrangements and cash. The Scheme’s
liabilities are also subject to interest rate movement. The Trustee seeks to reduce the Scheme’s exposure to this risk by
investing some of the Scheme’s assets in bonds and derivatives (such as interest rate swaps) and repurchase arrangements,
whose values move in a similar way to the value of the liabilities. The net effect is to reduce the volatility of the funding
level. As at the year end, the LDI portfolio had a total value of £1,328.3 million (2022: £1,372.0 million) representing
67.4% (2022: 70.7%) of the total investment portfolio.
Other price risk
Other price risk arises principally in relation to the Scheme’s equity, property and multi-asset credit investments. This
risk will vary depending on the particular market invested in.
The Trustee seeks to reduce the Scheme’s exposure to overall price risk by investing in a diversified range of investments
across various markets. The Scheme’s exposure to other price risk will vary over time depending on any “active” asset
allocation decisions taken by the investment manager to reflect its market views, or any changes to the Scheme’s overall
target investment strategy. As at the year end, the Scheme’s return seeking assets had a total value of £642.2 million
(2022: £568.9 million) representing 32.6% (2022: 29.3%) of the total investment portfolio.
Other matters
During 2023/2024, geopolitical issues (such as Russia’s war in Ukraine) and economic issues (such as increases in the
rates of inflation and interest rates and movements in foreign currencies) have had a profound effect on domestic and
global economies, with disruption and volatility in the financial markets. The Trustee, in conjunction with its advisers,
monitors the situation closely and determines any actions that are considered to be necessary. This includes monitoring
the Scheme’s investment portfolio, the operational impact on the Scheme and the covenant of the Principal Employer.
The extent of the impact on the Scheme’s investment portfolio, including financial performance, will depend on future
developments in financial markets and the overall economy, all of which are uncertain and cannot be predicted. Since the
year end, the value of the Scheme’s investment assets and investment liabilities will have fluctuated.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
43
Notes to the financial statements (continued)
22.
In
vestment risks (continued)
Other matters (continued)
Whilst the Trustee monitors the overall position, it has not, at this time, quantified the change (being an increase or
decrease) in market value of the investment assets and investment liabilities as markets remain fluid and unpredictable
and therefore such an estimate cannot be made.
23. Concentration of investments
The following investments are held which represent over 5% of the net assets of the Scheme (excluding UK government
securities):
The Scheme has taken advantage of the exemption allowed by the Audited Accounts Regulations to exclude UK
government securities that exceed 5% of the Scheme’s net assets.
24. Employer related inve
stments
Ther
e were no employer related investments held directly or indirectly by the Scheme at the year-end (2022: None).
25. Current assets
2023
2022
£’000
£’000
Cash balances
9,503
9,662
Prepayments
29
35
Other debtors
548
-
10,080
9,697
Other debtors includes £528,000 due from the Investment custodian to be recovered in 2024.
26. Current liabilities
2023
2022
£’000
£’000
Unpaid benefits
198
233
Amounts due to employer
95
87
Amounts due to investment manager
433
45
Accrued expenses
914
664
Tax deducted from pensions due to HMRC
1,276
1,093
2,916
2,122
2023
2022
£’000
%
£’000
%
Royal London Multi-Asset Credit Fund
281,705
14.2
296,668
15.1
281,705
296,668
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
44
Notes to the financial statements (continued)
27. Related pa
rty transactio
ns
a. Transa
ctions with key management personnel
Trustee Directors
The following fees were paid in respect of Trustee services.
2023
2022
£’000
£’000
Chair
60
60
Other Trustee Directors
114
106
174
166
In addition, two (2022: two) Trustee Directors claimed expenses amounting to £1,408 (2022: £1,891) for attendance at
the Trustee meetings. The fees and expenses are included in note 7. Included in note 26 are fees amounting to £14,000
(2022: £12,000) payable by the Scheme as at the year end to The Law Debenture Pension Trust Corporation P.L.C.
During the year two (2022: one) Trustee Directors were in receipt of a pension from the Scheme.
b. Transactions with other related parties
i. The Employer
The Company provides certain administration and accountancy services to the Scheme. Costs incurred for these services
are recharged to the Scheme. During the year the Scheme was recharged £316,588 (2022: £290,260) in respect of these
services which are included in note 7, of which £72,324 was payable (2022: £86,665) at the year end and are included in
note 26. Further to this, £22,500 was payable to the Employer at the year end in respect of Trustee Director fees settled
via Royal London Group.
A certain section of AVC investments is managed by The Royal London Mutual Insurance Society Limited. As at 31
December 2023, these investments which are held on behalf of the members had a market value of £385,877 (2022:
£358,008) and are included in note 20.
ii. The Investment manager
Royal London Asset Management Limited (RLAM) is a subsidiary of The Royal London Mutual Insurance Society
Limited. RLAM manages the investments of the Scheme on an arm’s length basis and is remunerated in accordance with
the terms of a normal commercial contract. This covers all investment transactions for the Scheme, including purchases,
sales, investment income, investment management expenses, cash and receivables. Investment management expenses
totalling £1,908,223 (2022: £2,475,481) are in respect of this remuneration for the year ended 31 December 2023 which
is included in note 9, of which £610,912 (2022: £350,186) was payable at the year end and are included in note 26.
The Scheme received investment management fee rebates of £1,043,140 (2022: £1,490,270) from RLAM and Royal
London Unit Trust Managers Limited (RLUTM), a subsidiary of RLAM, for the year ended 31 December 2023. The
rebates are in respect of the Scheme’s holdings in the Royal London Property Authorised Investment Fund and Royal
London UK Real Estate Feeder Fund which are pooled funds managed by RLUTM and are included in note 10. An amount
of £177,965 (2022: £304,024) was receivable at the year end and is included in note 26 as an offset of amounts due to
investment manager.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
45
Notes to the financial statements (continued)
27. Related party transactions (continued)
The Scheme holds units in the following funds managed by RLUTM in proportion to the total Scheme assets as shown:
Fund
2023
2022
£‘000
%
£‘000
%
Royal London Multi-Asset Credit Fund
281,705
14.2
296,668
15.1
Royal London Property Authorised Investment Fund
77,820
3.9
98,139
5.0
Royal London UK Real Estate Feeder Fund
55,267
2.8
57,120
2.9
Royal London Sterling Liquidity Money Market Fund
45,946
2.3
-
-
Royal London Emerging Markets ESG Leaders Tracker Fund
8,757
0.4
8,741
0.4
469,495
460,668
28. Contingent liabilities and contractual commitments
In the opinion of the Trustee, the Scheme had no contingent liabilities as at 31 December 2023 other than GMP benefits
equalisation below (2022: nil other than GMP benefits equalisation).
In October 2018, the High Court determined that certain benefits provided to members who contracted out of the State
Pension between May 1990 and April 1997 must be equalised between men and women. The Scheme Actuary has
included an estimated allowance of £15.0m in the actuarial valuation as at 31 December 2022 for the possible changes to
the benefits that may be required to ensure that the Scheme provisions in respect of Guaranteed Minimum Pensions do
not discriminate between male and female members. This amount represents the total actuarial value of varying benefits
which are already in payment and benefits which have not yet been settled. The amount of back payments and interest
potentially payable have not yet been estimated, although work is underway to calculate this amount, and so no accrual
has been made in these financial statements.
A further judgement in November 2020 extended this requirement to former members who transferred out of the scheme
after 1990. The allowance referred to above that has been included in the actuarial valuation excludes the potential cost
of any transfers out paid prior to October 2018. No detailed calculations or estimates have been performed. However,
based on a high level estimate, the Trustee is of the opinion that the amount is not material to these financial statements.
The Trustee is reviewing the implications of these rulings on members’ benefits from the Scheme. As soon as this review
is finalised affected members will be communicated with. No accrual has been made in these financial statements for any
back payments potentially payable.
As at 31 December 2023 the Scheme had contractual commitments in the form of stock collateral arrangements which
are disclosed in note 16.
29. Subsequent events
In January 2024, the Scheme utilised £348m of the Scheme’s assets to purchase a buy-in insurance policy with Royal
London Mutual Insurance Society Limited to insure some of the pensions payable under the Scheme. The policy covers
approximately 18% of the Scheme's liabilities at that date. Under a buy-in policy, the insurer makes payments to the
pension scheme that are intended to exactly match the insured benefits payable from the pension scheme to certain of its
members. The policy is held as an asset of the Scheme for the benefit of all scheme members.
The buy-in policy was purchased as a natural step on the Scheme’s de-risking journey. The policy reduces the level of
risk in the Scheme and protects the long-term security of members’ benefits. The decision to purchase the policy was
made following a thorough due diligence process and on the advice of the Trustee’s advisors.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
47
Summary of Contributions
£000
Contributions required under the schedule of contributions
-
Per the Fund account
-
Approval
The Summary of Contributions was approved by the Trustee Directors.
Signed for and on behalf of RLGPS Trustee Limited by:
Trustee Director
Date:
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
48
Actuarial certificate
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
49
Implementation Statement, covering the Scheme Year from 1 January 2023 to 31 December 2023
The Trustee of the Royal London Group Pensions Scheme (the “Scheme”) is required to produce a yearly statement to set
out how, and the extent to which, the Trustee has followed the voting and engagement policies in its Statement of
Investment Principles (“SIP”) during the Scheme Year. This is provided in Section 1 below.
The Statement is also required to include a description of the voting behaviour during the Scheme Year by, and on behalf
of, the Trustee (including the most significant votes cast by the Trustee or on its behalf) and state any use of the services
of a proxy voter during that year. This is provided in Section 3 below.
The Statement has been produced in accordance with The Pension Protection Fund (Pensionable Service) and
Occupational Pension Plans (Investment and Disclosure) (Amendment and Modification) Regulations 2018 (as amended)
and the guidance published by the Pensions Regulator.
In preparing the Statement, the Trustee has had regard to the guidance on Reporting on Stewardship and Other Topics
through the Statement of Investment Principles and the Implementation Statement, issued by the Department for Work
and Pensions (“DWP’s guidance”) in June 2022.
1.
Introduction
No changes
were made to the voting and engagement policies in the SIP during the Scheme Year.
The Trustee has, in its opinion, followed the Scheme’s voting and engagement policies during the Scheme Year, by
continuing to delegate to its investment manager (Royal London Asset Management, “RLAM”) the exercise of rights and
engagement activities in relation to investments, as well as seeking to appoint managers that have strong stewardship
policies and processes.
2. Voting and engage
ment
As par
t of its advice on the ongoing review of Royal London Asset Management (“RLAM”), the Scheme's investment
consultant, Lane, Clark & Peacock LLP (LCP), incorporated its assessment of the nature and effectiveness of RLAM’s
approach to voting and engagement. In particular:
x The Trustee received an annual report from LCP in February 2023, which provided an update on RLAM’s
investment capabilities alongside an assessment of how Responsible Investment matters are incorporated into
its processes.
x The Trustee received quarterly Environmental, Social and Governance (ESG) monitoring dashboards from LCP,
which score each of the Scheme’s equity and credit mandates relative to the wider market. The Trustee used
these dashboards to question RLAM on areas where scores were lower than the benchmark and encourage
improvement.
The Trustee also met with RLAM and LCP on several occasions over the Scheme Year, with a focus on voting and
engagement as well as the management of climate change risk. In particular:
x Dedicated session focussed on managing climate risk and opportunities in the investment grade credit mandate
(which represented the Scheme’s largest asset allocation).
x Training on a global equity strategy with a greater focus on aligning the assets with a net zero transition (the
Trustee plans to decide whether to allocate to this strategy in 2024).
x Reviewing the Trustee’s key “engagement themes”, which f
eature a strong focus on climate change. The Trustee
remains comfortable that these are well aligned with RLAM’s key engagement themes.
x Receiving an update on RLAM’s progress on increasing the proportion of companies that it engages with on
the topic of climate change, with reference to portfolio carbon emissions.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
50
Implementation Statement, covering the Scheme Year from 1 January 2023 to 31 December 2023
(continued)
2. Voting and engagement (continued)
x Planning a roadmap for Responsible Investment in 2024, with a particular focus on climate-related objectives
and a focussed session on RLAM’s approach to stewardship.
Following the introduction of DWP’s guidance, the Trustee has set stewardship priorities to focus engagement with
RLAM on specific ESG factors. The Trustee’s current stewardship priorities for the Scheme are: Climate change,
Biodiversity, and Governance and corporate culture.
These priorities were selected because the Trustee views these issues as market-wide areas of risk that are financially
material for the investments and can be addressed by good stewardship. Therefore, the Trustee believes it is in the
members’ best interests that RLAM adopts strong practices in these areas.
The Trustee has communicated these stewardship priorities to RLAM, and RLAM has confirmed these priorities are very
well aligned with its own approach.
The Trustee is conscious that responsible investment, including voting and engagement, is rapidly evolving and therefore
expects managers will have areas where they could improve. Therefore, the Trustee aims to have an ongoing dialogue
with RLAM to clarify expectations and encourage improvements.
3. Description of voting behaviour during the year
The Trustee did not direct how votes were exercised by RLAM and the Trustee itself has not used proxy voting services
over the Scheme Year. However, the Trustee monitors RLAM’s voting and engagement behaviour and challenges RLAM
where activity has not been in line with the Trustee‘s expectations.
In this section we have sought to include voting data in line with the Pensions and Lifetime Savings Association (PLSA)
guidance, PLSA Vote Reporting template and DWP’s guidance, on the Scheme’s portfolios that hold equities as follows:
x Royal London Global Equity Diversified Mandate
x Royal London Emerging Market Equities Mandate
In addition to the above, the Trustee asked RLAM for information on whether any of the other assets held by the
Scheme had voting opportunities over the Scheme Year. We have therefore also included engagement data on the
Scheme’s investment grade corporate bond mandate. RLAM confirmed that none of the other mandates held by the
Scheme held any assets with voting opportunities over the Scheme Year
3.1. Description of voting processes
For assets with voting rights, the Trustee relies on the following voting policy which RLAM has in place. The
Trustee reviews these policies, focusing on the elements which relate to its stewardship priorities, and is
comfortable that the policies are aligned with the Trustee’s views.
“RLAM regards voting in a responsible, informed, and consistent manner to be a fiduciary duty of institutional
investors, as such proxy voting at RLAM is a highly active and integrated process led by dedicated staff within
the Responsible Investment (RI) Team. The RI Team sits alongside fund managers who are involved in decision
making and policy setting. RLAM reviews its voting policies on an annual basis to ensure that we integrate best
practice and market developments; this process is in conjunction with fund managers to ensure that we arrive
at a strong, consistent approach. RLAM’s voting policies can be found here:
https://www.rlam.co.uk/intermediaries/our-capabilities/responsible-investment/governance-and-voting/
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
51
Implementation Statement, covering the Scheme Year from 1 January 2023 to 31 December 2023
(continued)
3. Description of voting behaviour during the year (continued)
3.1. Description of voting processes (continued)
All votes are assessed and fully researched in-house by the RI Team, many of which are also discussed at length
with the relevant fund management teams. To aid in this, RLAM purchases governance and voting research from
IVIS (the voting service of the UK Investment Association) and Glass Lewis. This provides information around
company meetings, and highlights items of particular interest or where there could potentially be an exception
to generally agreed principles affecting RLAM’s shareholder rights.
This external research is used in conjunction with internal research, information gathered from meetings with
the company and any other relevant sources. RLAM does have a custom voting template implemented by Glass
Lewis, but RLAM does not follow proxy recommendations and does not operate any standing instructions or
auto-vote procedures. The voting recommendations are used rather as a method of flagging potential concerns.
All votes are reviewed at a minimum by one member of the RI team before submission, and two if they are
controversial or differ from our policy position. Fund managers receive automated notifications of all votes
submitted for their funds, where they can raise any additional questions or concerns.
All votes are publicly disclosed one month in arrears on the RLAM website, and voting records can be found at
the following link: http://www.rlam-voting.co.uk/voting/. RLAM also write to any company held in our actively
managed funds should we vote against or abstain, providing our vote decisions and our rationale for opposing
management. This often leads to further dialogue and meetings with management.”
3.2. Summary of voting behaviour over the year
A summary of voting behaviour over the Scheme Year is provided in the table below (% figures may not sum
due to rounding).
Royal London Global
Equity Diversified Mandate
Royal London Emerging
Market Equities Mandate
Value of Scheme assets invested at end of the
Scheme Year
£173m
(8.8%)
£9m
(0.4%)
Number of equity holdings
188
416
Number of meetings eligible to vote
206
565
Number of resolutions eligible to vote
3,119
5,233
% of resolutions voted
97%
100%
Of the resolutions on which voted, % voted with
management
79%
75%
Of the resolutions on which voted, % voted against
management
20% 18%
Of the resolutions on which voted, % abstained from
voting
1% 2%
Of the meetings in which the manager voted, % with
at least one vote against management
80%
64%
Of the resolutions on which the manager voted, %
voted contrary to recommendation of proxy adviser
14% 8%
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
52
Implementation Statement, covering the Scheme Year from 1 January 2023 to 31 December 2023
(continued)
3. Description of voting behaviour during the year (continued)
3.3. Most significant votes over the year
Commentary on the most significant votes over the Scheme Year, from RLAM who hold listed equities, is set
out below.
Given the large number of votes which are cast by managers during every Annual General Meeting season, the
timescales over which voting takes place as well as the resource requirements necessary to allow this, the Trustee
did not identify significant voting ahead of the reporting period. Instead, the Trustee has retrospectively created
a shortlist of most significant votes by requesting RLAM provides a shortlist of votes, and suggested RLAM
could use the PLSA’s criteria for creating this shortlist.
By informing RLAM of its stewardship priorities and through regular interactions with RLAM, the Trustee
believes that RLAM will understand how it expects them to vote on issues for the companies they invest in on
the Trustee’s behalf.
The Trustee has reported on the most significant votes for each mandate. If members wish to obtain more
investment manager voting information, this is available upon request from the Trustee.
Royal London Global Equity Diversified Mandate
x Visa, January 2023.
Vote: Against Management Recommendation: For Outcome of Vote: Passed
Summary of resolution: Advisory vote on executive compensation
Trustee engagement priority category: Governance and Corporate Culture
Rationale: RLAM continued to voice concerns over the large area of discretion applied to bonus outcomes on
grounds of the committee's holistic approach to goal setting. On this occasion, RLAM noted that outcomes are
not commensurate to the company's performance during the year and would welcome further engagement on the
matter.
Next Steps: Following a letter to the company, RLAM is seeking further engagement to discuss pay outcomes.
x Apple, March 2023.
Vote: Against Management Recommendation: For Outcome of Vote: Not Passed
Summary of resolution: Shareholder Proposal Regarding Civil Rights Audit
Trustee engagement priority category: Governance and Corporate Culture
Rationale: RLAM had some concerns over the ultimate aims and political motivations of the proponent (The
National Center for Public Policy Research) and recognise that Apple is currently undertaking a Civil Rights
Audit review with third parties. As such RLAM did not warrant support for this proposal.
Next Steps: Following a letter to the company, RLAM is seeking further engagement to discuss the outcome of
the Audit review.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
53
Implementation Statement, covering the Scheme Year from 1 January 2023 to 31 December 2023
(continued)
3. Description of voting behaviour during the year (continued)
3.3. Most significant votes over the year (continued)
Royal London Global Equity Diversified Mandate (continued)
x Sumitomo Mitsui Financial Group, June 2023.
Vote: For Management Recommendation: Against Outcome of Vote: Passed
Summary of resolution: Shareholder proposal regarding aligning investments with the Paris Agreement
Trustee engagement priority category: Climate Change
Rationale: RLAM notes the company's current efforts and disclosures in this area and were supportive of the
proponent's request given its alignment with investor expectations.
Next Steps: Following a letter to the company, RLAM is seeking further engagement to discuss board concerns.
x Tyson Foods, February 2023.
Vote: For Management Recommendation: Against Outcome of Vote: Not Passed
Summary of resolution: Shareholder Proposal Regarding Policy on Use of Antibiotics in the Supply Chain
Trustee engagement priority category: Biodiversity
Rationale: RLAM acknowledge the Company's current progress and disclosures to address this issue but would
welcome further assessment of strategies related to the use of antibiotics.
Next Steps: Following a letter to the company, RLAM is seeking further engagement.
Royal London Emerging Market Equities Mandate
x Sasol Ltd, November 2023.
Vote: Against Management Recommendation: Against Outcome of Vote: Not Available
Summary of resolution: Approval of decarbonisation pathway and climate change report consistency with
TCFD
Trustee engagement priority category: Climate Change
Rationale: RLAM acknowledged the progress that has been made towards climate targets, including improved
disclosures on just transition and policy advocacy. However, RLAM could not fully support the climate approach
given the lack of alignment of short- and medium-term targets with the Paris goals and further uncertainties to
the transition away from coal.
Next Steps: RLAM will continue to monitor climate issues at the company.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
54
Implementation Statement, covering the Scheme Year from 1 January 2023 to 31 December 2023
(continued)
3. Description of voting behaviour during the year (continued)
3.3. Most significant votes over the year (continued)
Commentary on the most significant engagement opportunities on the Trustee’s behalf within the
investment grade corporate bond portfolio is set out below.
x Barclays, Quarter 3 2023.
Summary of engagement activity: To encourage companies to integrate social considerations in their climate
transition plans
Trustee engagement priority category: Climate Change
For a number of years, RLAM has been advocating for a ‘just transition’ which asks companies and governments
to consider the social implications of moving to a low-carbon economy. It is an inclusive approach which helps
avoid exacerbating existing injustices or creating new ones. RLAM believe that capital providers play an
important enabling role in transitioning customers to sustainable low-carbon economies. By developing and
having in place a just transition policy, banks can better assist the wide range of sectors, regions, and
communities that they finance.
Following on from RLAM’s request to integrate just transition into their climate transition plan at their 2022
AGM, they have met with Barclays on several occasions to discuss their progress and suggest improvements.
Although Barclays had limited mention of just transition prior to RLAM’s engagement, in 2023 the bank
provided a definition of just transition and implemented an assessment of just transition in their climate transition
framework for reviewing their corporate clients. RLAM will continue engaging with the bank to improve their
integration of just transition into their plans.
x Electricite de France (EDF), Quarter 4 2023.
Summary of engagement activity: To improve carbon emissions targets.
Trustee engagement priority category: Climate Change
As part of the CA100+ collaborative engagement, RLAM met with the company's Chief Sustainability Officer
and her team to discuss engagement priorities. These included:
1. improving EDF's scope 3 emissions targets and reduction levers
2. improving scope 1 emissions including expanding its renewable and nuclear plans
3. improving offsetting, residual emissions, just transition, and CAPEX disclosures
EDF set new targets to reduce its scope 1 emissions from electricity generation by 60%, 70%, and 80% by 2025,
2030, and 2035, respectively, from a 2017 baseline. The company has already halved its scope 1 emissions
between 2017 and 2022. EDF also clarified its Net Zero by 2050 target, confirming that it includes scope 3
emissions (almost 80% of its current emissions) and entails reducing emissions by at least 90%, with the
remaining 10% abated through quality carbon removal projects after 2030.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
55
Implementation Statement, covering the Scheme Year from 1 January 2023 to 31 December 2023
(continued)
3. Description of voting behaviour during the year (continued)
3.3. Most significant votes over the year (continued)
Commentary on the most significant engagement opportunities on the Trustee’s behalf within the
investment grade corporate bond portfolio is set out below. (continued)
x British Land, Quarter 3 2023.
Summary of engagement activity: Engagement for information and later change with developers and
housebuilders affected by England’s incoming Biodiversity Net Gain regulation (BNG).
Trustee engagement priority category: Biodiversity
The aim is to identify best practice and to understand how companies aim to meet and, where possible, go beyond
their regulatory requirements.
RLAM met with the Head of Environmental Sustainability at British Land and engaged around the topic of
Biodiversity Net Gain (BNG). Through the discussion, RLAM gained a better understanding of their governance
and overall integration of biodiversity at company level; approach to BNG; interactions between nature, climate,
and people; and BNG auditing and risk mitigation.
Given they primarily operate in London, the regulatory requirements are not as difficult to achieve as they would
be for house builders and developers in greenfield areas and as such RLAM expect a higher standard of
implementation.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
56
Further information
The Registrar, MoneyHelper, The Pensions Ombudsman and The Pensions Regulator
In accordance with The Occupational and Personal Pensions Schemes (Disclosure of Information) Regulations 2013,
members are advised that:
x information regarding the Scheme has been given to the Registrar of Occupational Pension Schemes;
x MoneyHelper, sponsored by the Department for Work and Pensions provides impartial money and pensions guidance
and information (https://
www.moneyhelper.org.uk/en). MoneyHelper joins up money and pensions guidance to
make it quicker and easier to find the right help. MoneyHelper brings together the support and services of three
government-backed financial guidance providers: the Money Advice Service, the Pensions Advisory Service and
Pension Wise.
x The Pensions Ombudsman of 10 South Colonnade, Canary Wharf, London, E14 4PU may investigate and determine
any complaint or dispute of fact or law which they have failed to resolve with the Trustee or the Scheme administrator,
in relation to pensions (https://www.pensions-ombudsman.org.uk/).
In addition to the above, The Pensions Regulator regulates company pension schemes and enforces the law as it relates to
them. It has wide ranging powers which include the power to:
x suspend, disqualify and remove a trustee, or a director of a trustee company, for consistently not carrying out their
duties;
x wind up schemes where necessary;
x apply for injunctions to prevent the misuse and misappropriation of scheme assets and apply for restitution where
necessary.
The Auditors and Actuary have a statutory duty to make an immediate written report to The Pensions Regulator if they
believe that legal duties concerned with the running of the Scheme which are likely to be of material significance to The
Pensions Regulator are not being carried out.
Internal disputes resolution procedure
A disputes resolution procedure has been agreed by the Trustee to try to resolve any queries raised by beneficiaries or
potential beneficiaries of the Scheme and details of this can be obtained by writing to the contact below.
The Pension Tracing Service
The Pension Tracing Service has been set up to provide a tracing service for members and other prospective beneficiaries,
of previous employers’ schemes, who have lost touch with earlier employers and trustees. This Scheme is registered, and
its registration number is 100154281. To trace a benefit entitlement under a former employer’s scheme, enquiries should
be addressed to the Pension Tracing Service at The Pension Service, Post Handling Site A, Wolverhampton, WV98 1AF
www.gov.uk/find-pension-contact-details.
Royal London Group Pension Scheme
Annual report and financial statements
for the year ended 31 December 2023
57
Further information (continued)
Contact for further information
Any queries or complaints about the Scheme, including requests from individuals for information about their benefits, or
for a copy of Scheme documentation, should be sent to the Trustee of Royal London Group Pension Scheme at the
following addresses.
Queries from deferred and pensioner
members abou
t their benefit entitlements:
Queries from
current employee
members about their benefit
entitlements:
All other queries, including
complaints or requests for Scheme
documentation:
Royal London Group Pension Scheme
c/o
Company Secretary - Pensions
Willis Towers Watson
Royal London Group
Royal London Group
PO Box 545
Royal London House
Royal London House
Redhill
Alderley Park
Alderley Park
RH1 1YX
Congleton Road
Congleton Road
Nether Alderley
Nether Alderley
Macclesfield
Macclesfield
SK10 4EL
SK10 4EL
Email:
royallondongroup@willistowerswatson.com
Email:
colleaguepensions@royallondon.com
Email:
charlotte.dalton@royallondon.com
Phone: 0113 394 9307
Phone: 01625 717 939
Phone: 01625 717 188
