Why are investment costs and charges important?

Over time, investment costs and charges could have a noticeable impact on the value of members’ retirement savings, so it’s important to understand how they work – and what members are getting for their money.

Fund charges can be thought about like a wine list – cheapest doesn’t mean bad and the most expensive, however fine it is, may not suit everyone. So whilst it’s important to understand investment costs and charges and how much members might pay, they’re just one of the things that need to be considered when deciding how to invest retirement savings.

What are the costs and charges?

The Trustee must calculate and disclose the charges and, so far as they are able to do so, the transaction costs, borne by members during the Scheme year.

For these purposes 'charges' means Scheme administration and investment charges. They do not include transaction costs, costs relating to certain court orders, charges relating to pension sharing on divorce, winding up costs, or costs solely associated with the provision of death benefits. Transaction costs are those incurred as a result of buying, selling, lending or borrowing investments.

During the Scheme year, the charges applied to the default arrangement that constituted the Scheme’s default Lifestyle option, the Diversified Lifestyle, were as follows:

  • a total of 0.25% a year in the period prior to 15 years to the member’s target retirement age,
  • ranged from 0.25% to 0.33% a year in the period 15 to 10 years to the member’s target retirement age,
  • a total of 0.33% a year in the period 10 to 3 years to the member’s target retirement age, and
  • ranged from 0.33% to 0.28% a year in the period within 3 years of the member’s target retirement age.

The charges applied to the other default arrangements, which includes funds to which members' assets have previously been transferred without explicit member consent were as follows:

  • Annuity Lifestyle:
    • were a total of 0.25% a year (0.24% a year prior to January 2018) in the period prior to 10 years to the member’s target retirement age,
    • ranged from 0.134% to 0.25% a year (0.13% to 0.24% a year prior to January 2018) in the period 10 to 3 years to the member’s target retirement age, and
    • ranged from 0.11% to 0.13% a year in the period within 3 years of the member’s target retirement age.
  • Schroders Diversified Growth Fund (pre January 2018) – 0.66% a year
  • BlackRock Diversified Growth Fund (pre January 2018) – 0.63% a year
  • YCB Diversified Fund (post January 2018) – 0.33% a year

The charges applied to all other funds in the fund range (non-default arrangements) available to members of the Scheme ranged from 0.09% to 0.72% a year. A full table of charges, along with additional transaction costs is shown below:

Fund name TER (%pa) Transaction costs (%pa)
Fund nameYCB Diversified Assets Fund (post January 2018) TER (%pa)0.33 Transaction costs (%pa)0.23
Fund nameYCB Property Fund TER (%pa)0.72 Transaction costs (%pa)-0.02
Fund nameHSBC Islamic Global Equity Fund (formerly Amanah Life Fund) TER (%pa)0.30 Transaction costs (%pa)0.03
Fund nameSchroders Diversified Growth Fund (Pre January 2018) TER (%pa)0.66 Transaction costs (%pa)n/a
Fund nameBlackRock DC Diversified Growth Fund (Pre January 2018) TER (%pa)0.63 Transaction costs (%pa)n/a
Fund nameAegon BlackRock Over 15 Years Corporate Bond Fund TER (%pa)0.145 Transaction costs (%pa)-0.02
Fund nameAegon BlackRock Over 15 Year UK Gilt Fund TER (%pa)0.09 Transaction costs (%pa)-0.01
Fund nameAegon BlackRock Over 5 Years UK Index Linked Gilt Fund TER (%pa)0.09 Transaction costs (%pa)-0.03
Fund nameAegon BlackRock Balanced Fund TER (%pa)0.13 Transaction costs (%pa)0.00
Fund nameAegon BlackRock UK Equity Index TER (%pa)0.09 Transaction costs (%pa)0.02
Fund nameAegon BlackRock World Ex-UK Equity Fund TER (%pa)0.21 Transaction costs (%pa)0.00
Fund nameAegon BlackRock Currency Hedged World Ex-UK Equity Fund TER (%pa)0.24 Transaction costs (%pa)0.03*
Fund nameAegon BlackRock Emerging Markets Equity Fund TER (%pa)0.31 Transaction costs (%pa)-0.06
Fund nameAegon BlackRock Cash Fund TER (%pa)0.125 Transaction costs (%pa)0.04
* For the year to 30 June 2018

All of the funds within the fund range, including the default arrangements, are below the statutory charge cap of 0.75% a year.

For these purposes, TER stands for Total Expense Ratio and contains management costs and additional expenses. Management costs are what the investment manager charges for the use of their funds. Additional expenses include other costs incurred in the day to day management of the investments.

What are the transaction costs?

The Trustee has requested, via its advisers, transaction costs information from the Scheme’s fund managers. Where the Trustee has been able to obtain transaction costs information, we have provided this above.

Transaction costs arise when the fund manager buys, sells, lends or borrows investments. These costs are allowed for within the unit prices of the funds, which means they are not readily visible. In 2017, the Financial Conduct Authority (FCA) published its policy on how fund managers must disclose transactions costs. Due to the way they are calculated, the cost of the transaction may be reported as a negative figure (i.e. a gain has been made as a result of the transaction), because the price of a trade when transacted was lower than when the instruction to make the trade took place.

For some fund managers, the processes and methodology needed to calculate transaction costs are taking a period of time to build into their systems, which means that there can be challenges in obtaining comprehensive data. As a result of incomplete data from the various fund managers, some of the transaction costs above have therefore been estimated by the Scheme’s investment consultants. The Trustee understands the importance of obtaining this information and continues to press for full costs disclosure from all of its fund managers.

The effect of charges over time - £ and pence illustrations

The Trustee must produce and disclose a '£ and pence' illustration showing the compounded effect of costs and charges on member’s savings within the Scheme.

The aim is to provide members with greater transparency so they can understand the impact of such costs and charges over time. As a result, the Trustee has set out an illustration below which shows the projected value over different time horizons, of the Diversified Lifestyle option, the Annuity Lifestyle option and representative range of funds.

Not all investments are shown because the Trustee has chosen to illustrate an appropriate representative sample of the different funds that members could be invested in. The illustration has been prepared in accordance with statutory guidance: ‘Reporting of costs, charges and other information: guidance for trustees and managers of relevant occupational schemes’.

Given that each member has a different amount of savings within the Scheme and the amount of any future investment returns and future costs and charges cannot be known in advance, the Trustee has had to make certain assumptions about what these might be.

The assumptions are explained in the Notes section below the illustration. Such assumptions may or may not hold true, so the illustrations do not guarantee what will happen in the future, and are not a substitute for the individual personalised illustrations which are shown in your benefit statement each year.

This table shows the charges you might pay and how those charges would affect the value of your savings over time, based on a representative sample of indicative fund values and the Scheme investment options.

Example Member Years Diversified Lifestyle option (Default) Annuity Lifestyle option Aegon BlackRock World ex UK Equity (Currency Hedged) Fund YCB Diversified Assets Fund Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund
Before charges After charges Before charges After charges Before charges After charges Before charges After charges Before charges After charges
Example MemberYoungest member Years1 Diversified Lifestyle option (Default) - before charges£1,000 Diversified Lifestyle option (Default) - after charges£1,000 Annuity Lifestyle option - before charges£1,000 Annuity Lifestyle option - after charges£1,000 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£1,000 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£1,000 YCB Diversified Assets Fund - before charges£1,000 YCB Diversified Assets Fund - after charges£1,000 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£1,000 Retirement savings of £25,000 - after charges£1,000
Example MemberYoungest member Years3 Diversified Lifestyle option (Default) - before charges£3,100 Diversified Lifestyle option (Default) - after charges£3,100 Annuity Lifestyle option - before charges£3,100 Annuity Lifestyle option - after charges£3,100 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£3,200 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£3,100 YCB Diversified Assets Fund - before charges£3,100 YCB Diversified Assets Fund - after charges£3,100 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£3,000 Retirement savings of £25,000 - after charges£3,000
Example MemberYoungest member Years5 Diversified Lifestyle option (Default) - before charges£5,200 Diversified Lifestyle option (Default) - after charges£5,200 Annuity Lifestyle option - before charges£5,200 Annuity Lifestyle option - after charges£5,200 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£5,500 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£5,400 YCB Diversified Assets Fund - before charges£5,400 YCB Diversified Assets Fund - after charges£5,300 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£5,000 Retirement savings of £25,000 - after charges£5,000
Example MemberYoungest member Years10 Diversified Lifestyle option (Default) - before charges£11,000 Diversified Lifestyle option (Default) - after charges£10,800 Annuity Lifestyle option - before charges£11,000 Annuity Lifestyle option - after charges£10,800 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£11,900 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£11,800 YCB Diversified Assets Fund - before charges£11,600 YCB Diversified Assets Fund - after charges£11,300 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£10,000 Retirement savings of £25,000 - after charges£10,000
Example MemberYoungest member Years15 Diversified Lifestyle option (Default) - before charges£17,300 Diversified Lifestyle option (Default) - after charges£16,900 Annuity Lifestyle option - before charges£17,300 Annuity Lifestyle option - after charges£16,900 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£19,600 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£19,200 YCB Diversified Assets Fund - before charges£18,900 YCB Diversified Assets Fund - after charges£18,100 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£15,000 Retirement savings of £25,000 - after charges£14,900
Example MemberYoungest member Years20 Diversified Lifestyle option (Default) - before charges£24,200 Diversified Lifestyle option (Default) - after charges£23,500 Annuity Lifestyle option - before charges£24,200 Annuity Lifestyle option - after charges£23,500 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£28,800 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£27,900 YCB Diversified Assets Fund - before charges£27,300 YCB Diversified Assets Fund - after charges£25,700 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£20,000 Retirement savings of £25,000 - after charges£19,900
Example MemberYoungest member Years25 Diversified Lifestyle option (Default) - before charges£31,700 Diversified Lifestyle option (Default) - after charges£30,700 Annuity Lifestyle option - before charges£31,700 Annuity Lifestyle option - after charges£30,700 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£39,600 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£38,200 YCB Diversified Assets Fund - before charges£37,000 YCB Diversified Assets Fund - after charges£34,300 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£25,000 Retirement savings of £25,000 - after charges£24,800
Example MemberYoungest member Years30 Diversified Lifestyle option (Default) - before charges£40,000 Diversified Lifestyle option (Default) - after charges£38,400 Annuity Lifestyle option - before charges£40,000 Annuity Lifestyle option - after charges£38,400 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£52,500 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£50,200 YCB Diversified Assets Fund - before charges£48,300 YCB Diversified Assets Fund - after charges£44,000 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£30,000 Retirement savings of £25,000 - after charges£29,700
Example MemberYoungest member Years35 Diversified Lifestyle option (Default) - before charges£49,000 Diversified Lifestyle option (Default) - after charges£46,700 Annuity Lifestyle option - before charges£49,100 Annuity Lifestyle option - after charges£46,800 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£67,800 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£64,200 YCB Diversified Assets Fund - before charges£61,400 YCB Diversified Assets Fund - after charges£55,000 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£35,000 Retirement savings of £25,000 - after charges£34,600
Example MemberYoungest member Years40 Diversified Lifestyle option (Default) - before charges£58,200 Diversified Lifestyle option (Default) - after charges£54,500 Annuity Lifestyle option - before charges£58,800 Annuity Lifestyle option - after charges£55,700 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£86,000 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£80,700 YCB Diversified Assets Fund - before charges£76,500 YCB Diversified Assets Fund - after charges£67,300 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£40,000 Retirement savings of £25,000 - after charges£39,500
Example MemberYoungest member Years45 Diversified Lifestyle option (Default) - before charges£67,900 Diversified Lifestyle option (Default) - after charges£62,200 Annuity Lifestyle option - before charges£65,700 Annuity Lifestyle option - after charges£61,900 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£107,600 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£100,100 YCB Diversified Assets Fund - before charges£94,100 YCB Diversified Assets Fund - after charges£81,300 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£45,000 Retirement savings of £25,000 - after charges£44,400
Example MemberYoungest member Years49 Diversified Lifestyle option (Default) - before charges£75,100 Diversified Lifestyle option (Default) - after charges£67,800 Annuity Lifestyle option - before charges£67,600 Annuity Lifestyle option - after charges£63,700 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£127,800 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£117,900 YCB Diversified Assets Fund - before charges£110,200 YCB Diversified Assets Fund - after charges£93,700 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£49,000 Retirement savings of £25,000 - after charges£48,300
Example MemberAverage member Years1 Diversified Lifestyle option (Default) - before charges£25,200 Diversified Lifestyle option (Default) - after charges£25,200 Annuity Lifestyle option - before charges£25,200 Annuity Lifestyle option - after charges£25,200 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£25,600 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£25,500 YCB Diversified Assets Fund - before charges£25,500 YCB Diversified Assets Fund - after charges£25,300 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£24,800 Retirement savings of £25,000 - after charges£24,800
Example MemberAverage member Years3 Diversified Lifestyle option (Default) - before charges£35,900 Diversified Lifestyle option (Default) - after charges£35,700 Annuity Lifestyle option - before charges£35,900 Annuity Lifestyle option - after charges£35,700 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£37,300 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£37,100 YCB Diversified Assets Fund - before charges£36,900 YCB Diversified Assets Fund - after charges£36,400 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£34,400 Retirement savings of £25,000 - after charges£34,400
Example MemberAverage member Years5 Diversified Lifestyle option (Default) - before charges£47,100 Diversified Lifestyle option (Default) - after charges£46,600 Annuity Lifestyle option - before charges£47,100 Annuity Lifestyle option - after charges£46,600 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£49,900 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£49,500 YCB Diversified Assets Fund - before charges£49,000 YCB Diversified Assets Fund - after charges£48,100 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£44,000 Retirement savings of £25,000 - after charges£43,900
Example MemberAverage member Years10 Diversified Lifestyle option (Default) - before charges£76,200 Diversified Lifestyle option (Default) - after charges£74,600 Annuity Lifestyle option - before charges£76,700 Annuity Lifestyle option - after charges£75,400 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£85,500 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£84,000 YCB Diversified Assets Fund - before charges£82,700 YCB Diversified Assets Fund - after charges£79,700 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£68,000 Retirement savings of £25,000 - after charges£67,700
Example MemberAverage member Years15 Diversified Lifestyle option (Default) - before charges£107,000 Diversified Lifestyle option (Default) - after charges£102,700 Annuity Lifestyle option - before charges£106,100 Annuity Lifestyle option - after charges£103,800 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£127,700 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£124,500 YCB Diversified Assets Fund - before charges£121,800 YCB Diversified Assets Fund - after charges£115,500 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£92,000 Retirement savings of £25,000 - after charges£91,500
Example MemberAverage member Years20 Diversified Lifestyle option (Default) - before charges£139,200 Diversified Lifestyle option (Default) - after charges£131,400 Annuity Lifestyle option - before charges£128,200 Annuity Lifestyle option - after charges£125,200 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£177,900 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£171,900 YCB Diversified Assets Fund - before charges£167,000 YCB Diversified Assets Fund - after charges£155,700 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£116,000 Retirement savings of £25,000 - after charges£115,200
Example MemberAverage member Years21 Diversified Lifestyle option (Default) - before charges£145,100 Diversified Lifestyle option (Default) - after charges£136,600 Annuity Lifestyle option - before charges£131,400 Annuity Lifestyle option - after charges£128,300 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£189,000 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£182,400 YCB Diversified Assets Fund - before charges£176,900 YCB Diversified Assets Fund - after charges£164,400 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£120,800 Retirement savings of £25,000 - after charges£119,900
Example MemberApproaching retirement Years1 Diversified Lifestyle option (Default) - before charges£29,300 Diversified Lifestyle option (Default) - after charges£29,200 Annuity Lifestyle option - before charges£28,800 Annuity Lifestyle option - after charges£28,800 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£29,900 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£29,900 YCB Diversified Assets Fund - before charges£29,800 YCB Diversified Assets Fund - after charges£29,700 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£29,000 Retirement savings of £25,000 - after charges£29,000
Example MemberApproaching retirement Years3 Diversified Lifestyle option (Default) - before charges£37,900 Diversified Lifestyle option (Default) - after charges£37,500 Annuity Lifestyle option - before charges£36,100 Annuity Lifestyle option - after charges£36,000 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - before charges£40,400 Aegon BlackRock World ex UK Equity (Currency Hedged) Fund - after charges£40,100 YCB Diversified Assets Fund - before charges£39,900 YCB Diversified Assets Fund - after charges£39,300 Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund - before charges£37,000 Retirement savings of £25,000 - after charges£36,900

Notes for the costs and charges illustrations:

  1. Projected pension account values are shown in today’s terms, and do not need to be reduced for the effect of future inflation.
  2. The values shown are estimates prepared for illustrative purposes and are not guaranteed.
  3. The 'Years' column represents the period of investment in years from 30 September 2018. For example, fund values in a row where the years are equal to 30 represent the estimated fund values 30 years from 30 September 2018.
  4. Inflation is assumed to be 2.5% each year.
  5. Contributions are assumed to be paid up to age 65 and increase in line with assumed inflation of 2.5% per year.
  6. The real (after inflation) projected growth rates for each fund are as follows:
    1. Diversified Lifestyle option (Default) – from 0.75% to 1.85% (adjusted depending on term to retirement)
    2. Annuity Lifestyle option – from -1.22% to 1.85% (adjusted depending on term to retirement)
    3. Aegon BlackRock World ex UK Equity (Currency Hedged) Fund – 3.5%
    4. YCB Diversified Assets Fund – 3.0%
    5. Aegon BlackRock Over 5 Years UK Index Linked Gilt Fund – 0.0%.
  7. Transactions costs and other charges have been provided by Hymans Robertson LLP for Legal and General (year ending 30 September 2018) and BlackRock (year ending 30 June 2018).
  8. Pension scheme's normal retirement age is 65.
  9. Example members
    1. Youngest: age 16, starting contribution: £1,000 per annum, starting account value: nil
    2. Average: age 44, starting contribution: £4,800 per annum, starting account value: £20,000
    3. Approaching retirement: age 62, starting contribution: £4,000 per annum, starting account value: £25,000.

Fund factsheets

You can view factsheets about each of the funds by logging into your Retirement Account.