Value for members assessment

The Trustee assesses, at least annually, whether the DC elements of the UKRF deliver value for members. In the Trustee’s view, charges and transaction costs are likely to represent good value for members where the combination of member-borne costs and what is provided for the costs is appropriate for the membership as a whole, and when compared to other options available in the market.

The Trustee has engaged Barnett Waddingham, a specialist DC consultant, to advise the Trustee on DC governance matters and in particular to carry out an independent value for members assessment in line with the General Code and guidance issued by The Pensions Regulator (TPR).

The Trustee is required to assess annually the extent to which the charges, performance based fees and transaction costs borne by members represent good value. In December 2024 the Trustee received the independent value for members assessment covering the year to 30 September 2024 and was pleased to confirm again that the UKRF continues to offer excellent value for its members, given the range, quality and nature of the services provided. The key reasons for this conclusion include the robust governance processes and that members only pay the investment costs of the funds in which they are invested, which are very competitive when compared to other schemes of this nature. All other running costs are paid for by the UKRF.

Recognising that low cost does not necessarily mean good value, the assessment also considered the value for members delivered by the UKRF’s DC investment arrangements, i.e. those services for which the costs and charges detailed in this statement are deducted from members’ funds. All relevant aspects of the UKRF’s investments were reviewed, including the governance structure, design and monitoring arrangements. Consideration was also made of the member-borne costs relative to other options in the market. The assessment reported no areas in which the DC investment arrangements detracted value.

In addition, the Trustee believes that the transaction costs detailed in this statement provide good value for members, as the ability for the investment managers to transact forms an integral part of the investment process, and gives potential for greater investment returns net of charges over time. The Trustee continues to monitor the levels of transaction costs.

Additional Voluntary Contribution (AVC) policies

Protection of assets

The Defined Contribution default investment funds

Members who did not make an active investment decision on joining the UKRF had their contributions invested in the UKRF Lifestyle Fund ranges, which are series of funds that offer members flexibility to target the year in which they expect to access their retirement savings, which for most members will be age 60. These were the “default investment funds” for the UKRF over the reporting period. The Trustee has also made available a range of other DC investment options that members can choose to invest in (known as the self-select range).

The Trustee is responsible for the UKRF’s investment governance. This includes setting the investment objective for the default investment funds, which considers the needs of the membership in conjunction with the Trustee’s investment objectives. The Trustee concluded the last triennial review of the UKRF Lifestyle Fund ranges in 2023 which covered:

• A review of both the strategy and the performance of the default investment funds, and the extent to which the return on the investments (after deduction of investment charges) was consistent with the Trustee’s aims and objectives for the default funds;
• An assessment of the appropriateness of the lifestyle glide path, and its target endpoint portfolio, utilised in the default investment funds. This assessment included consideration of the ways members are choosing to access their benefits at retirement;
• An assessment of the performance of each investment option available through the self-select range; and
• A review of the membership profile including consideration of the number and risk profile of investment funds offered to members as an alternative to the default investment funds.

The review confirmed that the default investment funds remain appropriate as they are likely to provide good member outcomes at retirement. The next triennial review is scheduled to commence in 2025.

There are two UKRF Lifestyle Fund ranges in place, both of which are classed as default investment funds.

• The UKRF Lifestyle Fund range – This default investment fund was launched in February 2017 and is open to all members. Members many years from retirement are invested in a diversified mixture of assets, with the aim of generating capital growth ahead of inflation over the long term. When members are 10 years from their target retirement date, increasing levels of capital and retirement income protection assets are introduced (this is known as the glide path). Members at and beyond their target retirement date are invested in the UKRF Lifestyle Mature Fund, comprising a range of investments with the aim of being broadly aligned to the wider range of options now available when accessing retirement savings.

• The UKRF Lifestyle (Closed) Fund – Members at and beyond their target retirement date are invested predominantly in government bonds and cash with the aim of providing a broad compromise between capital protection and tracking movements in annuity prices. This fund range is only comprised of the UKRF Lifestyle (Closed) Mature Fund.

Investments in the UKRF Lifestyle Fund ranges are made through index-tracking funds, derivatives or segregated assets.

Statement of Investment Principles (SIP)

The Trustee has a SIP which governs its decisions about default investment funds (as well as the other DC investment options). The SIP is reviewed following any material changes to the investment strategy of the Fund and no less frequently than every three years. The SIP was last updated in October 2024.

A copy of the UKRF’s SIP is available here. The SIP includes the Trustee’s policy on the types of investments it considers appropriate and how it recognises and monitors investment risk. The SIP covers the:

• Trustee’s investment responsibilities;
• Investment objectives of the UKRF;
• Investment strategy of the UKRF, including the expected return on investments;
• Investment risks involved and the Trustee’s methods for managing these;
• Trustee’s policy in relation to how it takes environmental, social and governance (ESG) factors into consideration and the stewardship of investments; and
• Other relevant investment policies including the Trustee’s policy on the use of derivatives and employer related investments.

The Trustee has reviewed the performance of all of the DC investment options, including the default investment funds, on a quarterly basis and is satisfied that the long term performance is in line with the aims and objectives of each fund. A summary of the investment returns for each of the available DC investment options, along with fund factsheets and an investment guide (which provides more detail on the default investment funds and glide path), can be found on the member website.

Charges and transaction costs

The Trustee assessed the charges and transaction costs borne by members over the reporting period, for each of the investment funds in which members are invested, and has considered the extent to which the services these charges and costs relate to deliver value for members. The Trustee monitors the charges and transaction costs, to the extent updated information is available, on a regular basis.

DC investment funds available within the UKRF

The table below shows the total expense ratio and transaction costs for each investment fund available to members of the UKRF:

• Total expense ratio – This is the charge levied by the investment manager each year and is a measure of the provider’s total costs for managing and operating the investment fund. The charge consists primarily of management fees and additional expenses, such as fixed trading fees, legal fees, and the investment manager’s auditor and custody fees. The total expense ratio for the UKRF’s default investment funds varies depending on how far the member is from their target retirement date, as the mix of underlying assets changes.
• Transaction costs – For all funds, including the default investment funds, there are additional transaction costs paid by members. These arise when the investment managers trade within the funds and include commission, taxes, levies and the cost of stock lending. The level of transaction costs can vary depending on whether an investment fund is actively or passively managed. Transaction costs can also vary from year to year depending on the amount of transactional activity carried out by investment managers of each fund.

For the UKRF Lifestyle Fund ranges the table shows:

• The costs for the UKRF Lifestyle Mature Fund (where assets are invested if members do not access their retirement savings at their target date);
• The costs for each of the ten funds currently on the glide path (the UKRF Lifestyle 2025 – 2034 Funds); and
• The cost of the funds that have yet to enter the glide path (the UKRF Lifestyle 2035 – 2062 Funds).

The table also includes the costs for the UKRF Lifestyle (Closed) Mature Fund (where assets are invested if members do not access their retirement savings at their target date).

The Trustee followed statutory guidance when gathering data for the transaction costs for each default and self-select fund have been obtained for the reporting period. There is no transaction cost data missing for any of the UKRF’s investment options. Further information on each investment fund can be found in the individual fund factsheets, which can be accessed on ePA.

* In a passively managed fund, the investment manager aims to match the return of a specific index. They do this by investing in assets that are broadly the same as those in the index. An active manager uses their expertise to select investments that they believe will perform better than an index over a period of time. As active funds require more time and involvement from the manager they tend to have higher costs than passive funds. The UKRF Lifestyle Fund ranges and the UKRF Mixed (Gilts, Cash and Growth) Fund invest in a mixture of actively and passively managed funds.

** The FCA has prescribed a methodology for calculating transaction costs known as ‘slippage’. This methodology captures explicit costs incurred when carrying out a transaction, such as taxes and broker commissions. It also captures implicit costs such as the change in the price of the asset being traded during the period the transaction is being carried out. This methodology can result in negative transaction costs where for example other market activity pushes the price of the asset being traded down, whilst the transaction was in progress, resulting in the asset being purchased for a lower price than when the trade was initiated.

External With-profit policies

The providers of the With-profit policies have been unable to share cost data for the full reporting period. Therefore, the most up to date cost data available has been reported in the above table.

The charges deducted from the With-profit policies include the cost of administering the fund, whereas the Total Expense Ratio applied to the UKRF investment funds just refers to the investment costs.

Effect of charges on members’ funds

The Trustee has provided illustrative examples of the cumulative effect over time of the charges and costs shown above on the value of a representative sample of members’ DC savings. In this section, we provide these illustrations for a range of investment funds and a range of different member DC pot sizes that are broadly comparable to the most common DC pot sizes currently found in the UKRF. The Trustee followed statutory guidance when preparing these illustrations and gathering data for the assumptions used.

Illustration assumptions

Guidance to the illustrations

Illustrations for the open default investment fund

Illustrations for the closed default fund

Illustrations for the self-select funds

Additional information on the pot sizes used in the illustrations

For many members, the DC section of the UKRF is a top-up to benefits they have built up in either the final salary section or in the cash balance section (called ‘Afterwork’). The pot sizes used in the above illustrations reflect the comparatively small size of DC benefits compared to the final salary and cash balance benefits. The pots have been calculated with reference to each element of DC benefits within the UKRF, such as the Retirement Investment Scheme (RIS). The RIS has a large number of members with small DC pots (this is a historic section with no active members where members tended to save small amounts for a short period of time).

The pot sizes used for the illustrations are detailed in the guidance to the illustrations above. By way of comparison, active members of Afterwork have an average DC pot size of £27,826, but an average cash balance fund value of £70,000 which demonstrates how the DC section tends to be a top-up to other benefits in the UKRF. The illustrations shown do not include the cash balance section.

How to read the illustration tables

It is important to note that the illustration tables are designed to show the potential impact of costs and charges on investment returns. All of the illustrations assume a growth rate for each type of investment fund that is applied at the same rate for each year of the illustration. In reality the value of investments and the returns they generate are not guaranteed and can go down as well as up and this risk to members' retirement savings is not reflected in these illustrations.

The illustrations also assume the investment charges and transaction costs remain the same and are deducted each year. In reality the costs and charges will fluctuate each year.

The illustrations are not designed to provide UKRF members with a personalised projection of what their benefits may be worth at retirement. DC members of the UKRF should review their latest benefit statement which is available on the member pages of ePA.

The diagrams below show you how to read the tables.

More information on the DC investment funds available for UKRF members

Where are the UKRF’s DC funds invested?

The UKRF’s DC investment funds invest in underlying pooled or collective investment funds provided by investment managers. If members would like further information on the underlying investment funds that the UKRF DC funds invest in, they are able to request it from the Barclays Team. They will be able to provide members with the International Securities Identification Numbers (these are unique to each individual fund) of the funds that members are invested in.

Where can members find more information on the performance of the DC investment funds?

For the latest performance figures for each fund members should go to the Investment Performance section under Investment Information on the member pages of ePA. Past performance is not a guide to future performance and members should refer to the relevant factsheets for more information on the objectives of the funds.

Where can I find more information on the Trustee’s investment responsibilities?

The Trustee has prepared a Statement of Investment Principles which includes the Trustee's investment responsibilities, its investment strategy and approach to risk management, and how the default funds are designed and governed.

For further information, members should read Your DC Investment Guide.