Considerations to help you formulate, refine and revise your investment strategy.
Issued: March 2017
Last updated: September 2019
19 September 2019
The latest updates to this guidance reflect a number of regulatory changes introduced in 2018 and 2019, including The Pension Protection Fund (Pensionable Service) and Occupational Pension Schemes (Investment and Disclosure) (Amendment and Modification) Regulations 2018, and The Occupational Pension Schemes (Investment and Disclosure) (Amendment) Regulations 2019.
The update has involved significant rewriting of various sections throughout the Investment Governance and Investing to Fund DB Schemes portions of the guidance; you may, therefore, find it useful to re-acquaint yourself with the guidance as a whole.
Updated information on investment decisions and your statement of investment principles, stewardship, reporting, sustainability and financial and non-financial factors may be of particular relevance.
1 August 2019
We have made some small updates to this guide to reflect the fact that an industry led body: The Cost Transparency Initiative, has produced standardised templates which we encourage trustees to use to obtain information about costs and charges from their provider.
Other minor changes have been made including minor editorial changes.
30 March 2017
First published.
What you need to do
- Decide as a trustee board whether to develop investment beliefs, ensuring your investment strategy then reflects these beliefs.
- Establish your risk capacity and risk appetite.
- Set investment objectives and an investment strategy consistent with your risk appetite.
- Take an integrated approach to investment strategy, which considers the employer covenant and funding level.
- Seek to work collaboratively with the employer to set the investment strategy.
- Understand your scheme’s principal investment risks, balance appropriately the risks you are taking and put in place suitable mitigation strategies including contingency plans.
- Take environmental, social and governance (ESG) factors into account if you believe they’re financially significant.
- Carry out an appropriate level of analysis on investment options and understand the limitations of the analysis.
Investment beliefs
You may find it helpful to develop and maintain a set of beliefs about how investment markets function and which factors lead to good investment outcomes. Investment beliefs, supported by research and experience, can help focus your investment decision-making and make it more effective. If you do this, your investment strategy should then reflect those beliefs.
Some example beliefs in the areas of risk, active management and responsible investment are set out below, to show how they can be set out as simple, short statements. They also show that different investors can hold different beliefs.
Example 3: investment beliefs
- Risk is necessary to achieve return, but not all risks are rewarded.
- Risks that are not sufficiently rewarded should generally be avoided, hedged or diversified.
- Markets are not always efficient and there are opportunities for good active managers to add value.
- Finding investment managers who can consistently spot and exploit market opportunities is generally difficult; passive management is usually better value.
- Well governed companies that manage their businesses in a responsible way will produce higher returns over the long term.
- Climate change is a long-term risk for the scheme and has the potential to impact the scheme’s investment strategy.
- Investing responsibly and engaging as long-term owners reduces risk over time and may positively impact scheme returns.
Sustainability
You must consider financially material risks relating to your investments over an ‘appropriate time horizon’ of the investments. ‘Appropriate time horizon’ means the length of time you consider is needed for the funding of future benefits by the investments of the scheme. This requires you to consider risks in the context of your scheme’s own profile and maturity.
The length of time refers to benefits payable by the scheme and not the duration of individual investments, so for example, trustees of schemes approaching buy-out or wind-up are likely to need to consider financially material short-term risks. By contrast, for many ongoing schemes the appropriate time horizon looks towards the longer-term in a way that reflects the demographics of members and beneficiaries.
Consideration of ESG factors allows you to evaluate the short and long-term financial risks and opportunities of your investments by looking at the current practices of the firms in which you invest. Environmental considerations might include carbon emissions and water management, social considerations might include employee or local community relations, and governance considerations might include board diversity and remuneration.
In seeking to apply your policy in relation to ESG issues in your investments, you should carefully consider the demographics of your scheme and the nature of potential ESG issues that may affect the risk adjusted return that the scheme may receive. Where a pooled fund is chosen, your ESG approach may be constrained by the fund options available. Care is then required to understand the ESG approach of the available funds, including in the selection criteria for new funds, and monitoring how managers take account of ESG factors in practice.
It is important to understand the implications of the systemic risk of climate change on investment decisions in the context of your scheme when developing your SIP. In doing so, you should consider talking to your advisers and asset managers (unless you have the relevant in-house expertise and capacity) about how climate change risk (including both long-term risk presented by raising global temperatures and potential short-term risks associated with transitioning toward a low carbon economy) is currently built into their recommendations and what, if any, measures are taken to reflect it within portfolios. As climate change is a systemic, macro-economic risk, you should also consider how engagement could be used to mitigate these risks by engaging with investee companies, policymakers and collaborative industry initiatives.
You should consider the recommendations of the Taskforce on Climate-Related Financial Disclosures (TCFD), which have been endorsed by the UK government. These recommendations provide a global framework for identifying, assessing, and managing climate-related risks. You can find asset owner guidance to help engage with fund managers on climate-related risks and opportunities.
The PLSA’s climate risk guide for trustees gives an overarching practical framework for schemes on how to consider climate risk for trustees.
Pension scheme investments are exposed to longer-term financial risks. These potentially include risks relating to factors you will probably have encountered while preparing your policy around ESG factors, and could be financially significant, both over the short and longer-term. When setting investment strategies, we expect trustee boards to take account of risks affecting the long-term financial sustainability of the investments.
You will want to assess the financial materiality of the ESG factors and to allow for them accordingly in the development and implementation of your investment strategy. You should ask your investment manager(s) and investment adviser for help with this if you do not have the necessary expertise in-house.
Once you have considered the longer-term sustainability of your scheme’s investments, you may need to take action to ensure that your policies are being applied; possibly including active public policy engagement, collaborative initiatives and advocacy. This might include engaging with the companies in which investments are held (either directly or via your investment manager or bundled service provider as appropriate).
Financially material and non-financial factors
Financially material factors
When considering investment decisions/setting investment strategy, you should take into account all ESG and other factors that are financially material to the performance of an investment and you may require professional legal advice to help clarify your understanding of them. From October 2019, it will be a legal requirement that your SIP includes your policy on these factors.
The following considerations may help you identify and assess whether the factors of your investment plan are financially material or not:
- You may need to consider the proportion of a fund that is owned by your scheme, particularly where you have been involved in its specific design. For instance, careful consideration may be needed where the fund viability might be compromised by any meaningful disinvestment (for example a member transferring out).
- Determining what will constitute a financially material consideration will often involve professional judgement.
From 1 October 2019 you will be required to consider your policy on financially material considerations over the appropriate time horizon for your members.
You should satisfy yourself and be able to demonstrate that you, or your chosen advisers, have considered, understood and adequately addressed issues of financial materiality relating to your scheme’s investments - in line with your SIP. Consider expertise on these issues when appointing advisers and fund managers.
Non-financial factors
Non-financial factors are not motivated by ‘financial’ concerns of balancing rewards against risk in certain circumstances. You may find it a useful exercise as a trustee board to challenge yourselves about what you believe to not be financially material.
While non-financial factors are subordinate to the main purpose of providing a pension, the Law Commission concluded that trustees may take account of non-financial factors:
- if they have good reason to think that scheme members share a particular view, and
- their decision does not risk significant financial detriment to the fund
See the Law Commission for more information.
From 1 October 2019, trustees preparing a SIP are legally required to include the extent, if at all, to which non-financial matters will be taken into account in the selection, retention and realisation of investments.
Here, ‘non-financial matters’ means the views of members and beneficiaries, including in relation to ethical matters and their views on social and environmental impact and present and future quality of life of the members and beneficiaries. You may consider some of the issues financially material due to the way you view their impact on investment returns and treat them accordingly.
In determining the investment principles for your scheme, you may in certain circumstances choose to consider matters reflected in members’ views which are not financially material to your scheme. These could include offering funds that select investments according to particular religious principles or are based on environmental or social impact.
Decisions based on non-financial matters should be taken considering all factors and considering evidence on both questions the Law Commission identified as a test, ie do you have good reason to believe that members share the concern and are you satisfied that the risk would not involve material detriment to members relative to a scenario where those factors were disregarded? If the issue is not controversial, and there is good evidence of agreement from some people, the Law Commission has said that you may act on these views even if many people fail to engage.
Where there is a disagreement among members around a controversial non-financial investment proposal, the Law Commission comments that the courts are likely to expect you to focus on financial factors.
You as trustees have primacy in investment decisions. While you should not necessarily rule out the option to take account of members’ views, you are never obliged to do so. Having a carefully considered policy in place on how you will take non-financial matters into account is likely to avoid uncertainty or disputes at a later stage.
See the Law Commission for more information.
In the following section, we consider the extent you may choose to canvas the views of members.
Example 4: considering financial factors
The trustees of ABC Scheme set an investment strategy to deliver a required level of return over the long-term.
When reviewing the statement of investment principles (SIP), the trustees consider market developments and conclude that climate risk is financially material to the investment strategy.
They set out the following investment belief:
‘As long-term investors, we believe climate risk has the potential to significantly affect the value of our investments.’
They develop this belief in the SIP as follows:
- We expect fund managers to have integrated climate risk into their risk analysis and investment process.
- We will try to ensure that we manage all new and existing investment arrangements in a way that takes account of climate risk.
- In monitoring the performance of our fund managers, we will also regularly consider how they are performing with reference to climate risk issues.
In addition, the trustees decide to report annually to members on how the climate risk policy has been applied.
Learning points: Many factors can impact investments over the long-term. Where you consider these to be financially material, you are required by law to factor them into your investment decision-making.
Example 5: considering non-financial factors
The trustees of ABC Scheme receive a number of communications from members setting out ethical concerns about some individual investments held within the scheme’s investment portfolio.
The trustees don’t have a position on the relevant ethical issues. The trustees conduct a survey of members and beneficiaries to ascertain whether the ethical concerns are reflected within the scheme’s membership.
The trustees receive a high number of responses as a proportion of the total membership, and greater than they might have expected when compared to responses they have received relating to other communications they have shared with members. Of the members who responded, the majority were strongly in favour of factoring these ethical considerations into investment decision-making. The remaining respondents were not strongly opposed to doing so, provided the returns for the scheme were not expected to be materially less as a result.
The trustees seek advice from their investment adviser, who performs a comparison of products with investment characteristics suitable for inclusion in the scheme’s portfolio, including the existing investments in question and alternative market products, including those which address the majority members’ ethical concerns. They indicate that investing in a way which would address the ethical concerns expressed would not be expected to materially reduce the scheme’s expected returns (net of fees) nor increase the scheme’s investment risks.
The trustees review their investment beliefs and develop an addition to their policy on non-financial matters in their SIP. They also engage with their investment managers to embed the ethical principle in their existing mandates and all new investment mandates, where that is possible and having given due consideration to transaction costs arising from any fund switching required to achieve this.
NB Some research methods can be expensive. Alternatives might involve reviewing relevant publicly available data from sources such as YouGov surveys or corporate position statements.
Learning points: There is no legal requirement to do so but you may take non-financial matters into account if you have good reason to consider the membership holds a similar view and you are satisfied that the investment does not present a risk of significant financial detriment - and that the costs involved with making the necessary assessments and adjustments are justified.
Members' views
Low levels of member engagement, as noted in The Law Commission’s report, Pension Funds and Social Investment, can make it hard to understand how your members want to see their scheme’s assets invested.
See The Law Commission’s report, Pension Funds and Social Investment for more information.
We don’t expect you to consult with members on every aspect of how you should be investing scheme assets, but you may wish to consider representations that members do make to you about their preferences.
If you believe there is a chance the wider membership would support a proposed ethical investment position, you might conduct a member survey before adopting or rejecting the proposal.
When you consider that the suggested proposal will not present an additional risk of significant financial detriment to members, you can adopt it as part of your investment principles. This should align with the policy set out in your SIP. If it does not, we expect that you consider whether you need to revise your SIP.
The Law Commission has made clear that it is not always necessary for trustees to survey scheme members to understand their concerns. It should be possible to make assumptions based on the information you already know about the membership of the scheme or the population as a whole.
Aside from surveys, you could use other methods of gaining members’ views as set out in our communicating and reporting guide, such as setting up a member panel (for larger schemes) or running focus groups or forums. Although this guide was prepared in relation to defined contribution schemes, it does contain some guidance that can be applied more generally.
See our guide to communicating and reporting for more information.
Example: Considering members’ views
It would be reasonable to assume that, in the UK, the overwhelming majority of people would be opposed to controversial business practices, investments in warfare or single-use plastics, even if they offer significant returns or are legal under UK jurisdiction.
The trustees might form a view that the risks associated with businesses relying on these products (for example reputational risk, or the risk of future legislation) elevates them into the category of material financial risks.
Learning points:
Where you determine that members are likely to hold a particular view on a matter and you therefore are unlikely to need to consult with them to confirm their position, your policy (if you have one) on taking account of non-financial factors and the circumstances you would account for in consulting members, will make clear what actions you may or may not chose to take to inform your decisions.
Having up-to-date policies in place will help you respond to members about their investment concerns.
Setting an appropriate investment strategy
An investment strategy essentially sets out how the scheme’s assets are to be invested. An appropriate investment strategy balances risk and return in light of evolving scheme circumstances and objectives over time. The scheme’s investment strategy is one of the most important drivers of the scheme’s ability to pay promised benefits, and you should ensure you allocate sufficient time and resource to it.
Considering the following will help you set an appropriate strategy:
Governance
You need to have appropriate investment governance arrangements in place for your investment strategy. Further details are provided in section 1: governance.
Setting scheme investment objectives
It’s important to set clear investment objectives for your scheme and to identify how and when they should be achieved. You may wish to set multiple objectives over different time periods. Your investment strategy should support and be consistent with your objectives.
Iterative process
The scheme objectives cover the trustees’ duty to pay benefits promised in accordance with their scheme rules as and when they fall due, linked to the statutory funding objective. You also need to have sufficient and appropriate assets to cover your scheme’s technical provisions (TP).
In practice, setting your scheme objectives and your investment strategy is likely to be an iterative process. This is because conclusions on your risk appetite will drive the level of expected return that the investment strategy can deliver. In turn, the level of expected return that can reasonably be targeted within your risk appetite will affect the likelihood of achieving the scheme objectives. You may need to reconsider the objectives in light of this.
Taking an integrated approach
Your scheme’s investment strategy is a key part of an integrated risk management (IRM) approach, and should be considered alongside the employer covenant and the funding level.
Our DB code of practice and IRM guidance set out the importance of taking an integrated approach in managing and monitoring the risks faced by your scheme.
Working collaboratively with sponsoring employer(s)
As a trustee, you are responsible for the scheme’s investment arrangements, including determining its investment strategy, but we anticipate that better outcomes will generally be achieved if trustees and employers work together to develop an understanding of investment and risk issues.
Risk capacity
Broadly speaking, your scheme’s risk capacity is the maximum level of risk that you could choose to take when setting an appropriate investment strategy.
Risk capacities are not static. You need to regularly monitor and assess whether there have been any material changes to the risk capacity, which will affect the suitability of the current investment strategy.
The strength of the employer covenant will inform the risk capacity. Please see our covenant guidance for further details about assessing the strength of the employer covenant.
Risk appetite
Risk appetite is a measure of how much risk you are willing for the scheme to bear, having considered the employer’s views and the upper risk limit set by your scheme’s risk capacity.
This risk appetite can help you determine whether the current investment strategy is appropriate or whether you should implement any alternative strategies to achieve the scheme’s objectives.
Things to consider when setting your risk appetite
- your risk capacity
- the employer’s risk appetite
- the scheme’s objectives
- how the factors which influence your assessment of risk capacity might change over time (eg the strength of the covenant)
- a greater level of risk requires a higher level of governance
- the scheme’s liability profile, including sensitivities
- the evolution of the scheme’s future cash flow requirements
- the level of expected return given the level of risk, now and as the strategy evolves
- the level of prudence the trustees view as appropriate
Example 6: setting an appropriate investment strategy – risk capacity and risk appetite
The trustees of ABC Scheme have a long-term objective to be fully funded on a low risk basis within the next eight years. The trustees also have a short-term objective of achieving full funding on their technical provisions (TPs) basis. The existing recovery plan has a six-year recovery period with fixed contributions of £4 million per annum. The sponsoring employer operates in a sector that has high barriers to entry but little scope for future growth.
As part of their triennial actuarial valuation, the trustees receive their employer covenant review from their covenant adviser, which indicates that the scheme’s employer can afford deficit repair contributions (DRCs) of up to a maximum of £10 million per annum before affecting the sustainable growth of the employer. The covenant adviser has also assessed the ability of the covenant to support the:
- TP deficit according to the latest actuarial funding report, which also indicates that the deficit has increased from the previous valuation
- risks within the scheme’s investments, as discussed in the investment adviser’s latest quarterly risk and performance report which shows a range of relevant Value at Risk (VaR) statistics
The covenant adviser believes that the covenant could support the increased deficit and the level of investment risk shown by the VaR statistics, if the trustees are prepared to accept them being made good over a 13-year period if the risk materialises at that level.
The trustees ask their investment adviser to carry out some initial modelling to help them work out investment and funding strategies as part of their triennial actuarial valuation process. The trustees are particularly concerned by the 13-year period over which the covenant would need to make good the TP deficit and scheme investment risk (if it were to materialise). They request analyses on a TP and lower risk basis using two contribution schedules - the existing £4 million per annum and the maximum £10 million per annum, as advised by their covenant adviser. The analysis is carried out on the scheme’s existing investment strategy and on an appropriate alternative lower risk investment strategy.
On receipt of the analyses, the trustees note that:
- £4 million per annum is no longer sufficient to achieve their short-term or long-term objectives with either investment strategy, on account of the increased deficit.
- Contributions of £10 million per annum should enable the scheme to achieve its short-term and long-term objectives. The likelihood of achieving these objectives is higher under the scheme’s existing investment strategy, but the downside risks are also materially higher.
- The risk in the new investment strategy proposed by their investment adviser (as shown by the corresponding VaR statistics) could be expected to be made good over nine years if it materialised at that level.
The trustees discuss their risk appetite and are concerned with the potential downside risk of the current strategy, especially as the deficit and current investment risk (if a downside event occurred at the level under discussion) could only be expected to be removed over a 13-year period. The trustees decide to adopt the proposed lower risk investment strategy while also requesting contributions of £10 million per annum. The TPs are then set in light of this lower risk investment strategy.
The trustees are more comfortable with this revised approach as it is consistent with their long-term objectives. They also believe that, given that there is little scope for future growth in the sector which the employer operates in, a nine-year period is a more reasonable term over which to expect the covenant to provide support.
Learning points:
You should assess the extent to which the level of risk you decide to accept in your scheme lies within your risk appetite and can be supported by your scheme’s risk capacity, in the event that those scheme risks materialise.
You need to recognise that as scheme liabilities mature, scheme and employer circumstances will change and the appropriate level of investment risk to accept will evolve. How you expect the scheme risk appetite to evolve should be reflected in how you expect the investment strategy to evolve over time in order to achieve the scheme objectives.
Understanding the asset risks
As well as ensuring the overall level of investment risk is appropriate, it’s important to have a suitable balance of individual asset risks within your investment strategy. You need to identify and understand the key individual risks and mitigate these where appropriate. You should also assess the return you expect for taking investment risk and consider whether this is sufficient for the risk taken.
Understanding the scheme liabilities and how they are valued
The law requires you to invest your scheme assets in a manner appropriate to the nature, timing and duration of the expected future retirement benefits payable under the scheme, considering how they may change over time.
Understanding your liquidity needs
Your strategy should be appropriate for your liquidity needs, for paying benefits and expenses and for any collateral requirements. It should take into account the risks introduced if your scheme is significantly cash flow negative, or is expected to become so in the future.
Understanding other risks
You should also bear in mind the potential for other risks to arise, for example, longevity risk and operational risks related to scheme administration, legislative and regulatory risks.
Contingency planning
As part of setting an investment strategy and taking an integrated approach, you also need to consider setting contingency plans. Where a scheme has a journey plan with specific downside triggers, these can be related to these agreed contingency plans.
Please see our guidance on IRM for further information.
Monitoring
Monitoring risks on an ongoing basis is important to ensure the level of risk taken remains appropriate. Monitoring can provide a flag to identify developing risks and investment opportunities. Ongoing monitoring of key scheme risks can be included within your scheme’s regular investment governance updates. Section 6: monitoring defined benefits provides further information on monitoring investment strategy.
Example 7: assessing whether investment risk can be supported by the employer covenant
The trustees of XYZ Scheme are in the process of their triennial actuarial valuation and receive the employer covenant report from their adviser. The report suggests that the employer can afford DRCs of £2.5 million per annum before it affects the sustainable growth of the employer. It also notes that, while the employer is profitable today, it operates in a declining sector and it would be reasonable for the trustees to assume the covenant will gradually weaken over the next decade. The deficit on the draft TP basis is £20 million.
To assess whether the level of investment risk the trustees are currently taking is supportable by the covenant, the trustees commission their investment adviser to carry out an asset-liability modelling study. This shows that, if £2.5 million per annum is paid the scheme would be expected to achieve full funding on the draft TP basis within six years under the current investment strategy. However, under this investment approach there is a significant risk that in ten years’ time (when the covenant is expected to have weakened) the deficit will be greater than or equal to £12 million, even assuming the £2.5 million per annum continues to be paid after six years.
The trustees are concerned about the future of the employer covenant (as highlighted in their adviser’s report) and the outlook for the sector it operates in. They decide that this level of downside risk is unsupportable and inappropriate to take. The trustees request that the modelling be updated to look at alternative investment strategies including strategies that gradually de-risk over the short to medium-term.
After considering the updated modelling, they decide to maintain the current investment strategy, which is supportable today, but to gradually reduce the risk being run. While this approach lowers their expected return and their discount rate, and extends their recovery plan by two years, it significantly reduces the likelihood of the scheme getting into a position where it cannot be supported by the employer.
Learning points: You should understand how the level of risk in your scheme can be supported by the employer, both initially and in the future. Where the employer covenant is expected to weaken, you should consider what action to take. This may include seeking to de-risk, increasing or accelerating recovery plan contributions and using the flexibilities available in the funding regime (for example, by extending the length of the recovery plan).
Example 8: collaborating on changes to the investment strategy
The trustees of the QRS Scheme are carrying out a review of the scheme’s investment strategy following a recovery in the employer’s business and its long-term outlook. After a difficult period, the employer has rebuilt the business - improving cash flows, strengthening their balance sheet and diversifying their product lines. As a result, the scheme covenant has improved materially and this has been confirmed by the trustees’ independent covenant adviser.
The trustees determine that, as a result of the increased covenant strength, they could take more risk in the scheme’s investment strategy. They consider with their advisers the advantages and disadvantages of strategically taking more investment risk now and targeting a higher return.
The trustees decide it could be attractive to increase their risk appetite and targeted return, in the expectation they will achieve their scheme funding targets sooner. They discuss this idea with the employer, which confirms that it is comfortable with an increase in investment risk, but the employer wishes to be kept informed of possible changes to the investment strategy to understand how this fits with the employer’s risk appetite.
The trustees are advised that the new covenant strength could support an increased allocation from 40% to 75% to growth assets. However, while an allocation of 75% to growth assets is supportable, the trustees and employer have lower appetites for risk and, following discussions, agree that the growth assets allocation should increase to 65%. This is expected to reduce the period over which the funding targets can be achieved by five years, which is attractive to both parties.
When implementing the strategy changes, the trustees, having consulted with the employer, set two further principles to mitigate risks:
- They will maintain the current interest rate and inflation hedging levels by using liability driven investments (LDI), which use leverage rather than physical bonds.
- They will increase the diversification of the growth portfolio, as it will now represent a greater proportion of total assets.
Learning points:
You need to implement an investment strategy that takes account of the employer’s covenant. You should engage with the scheme employer to understand their risk appetite before making changes to the investment strategy.
An open and collaborative approach between trustees and employers can lead to better member outcomes.
Implementation
When thinking about how you might implement a strategy and achieve your objectives for the scheme, consider also taking account of the following:
Implementation costs
Designing and implementing a new investment strategy involves costs and imposes demands on your time and your governance budget.
Consideration may help to determine whether these are costs that can add value, for example where the benefits of moving to a new product or fund strategy which offers better risk adjusted outcomes or a more appropriate level of risk outweigh the costs.
Consider the immediate and ongoing governance and cost requirements of different implementation options. Some strategies can be more difficult to implement and the ongoing requirements for monitoring and investment/administration input, eg in relation to switching funds to rebalance asset allocation, can be much more onerous.
Impact investment and patient capital
As markets develop and new instruments and analysis become more readily available to investors and product designers, new investment concepts and strategies emerge. These may create more choice (and complexity) but also potentially enable trustees to offer access to a wider range of investment themes and concepts than it was possible to do previously.
Two concepts that are currently gaining profile in the market – impact investing and patient capital - are described below.
These are provided for information only and should not be taken to be any representation as to the suitability for your scheme.
It is very important that you formally consider the suitability of such new strategies very carefully and always seek advice on how appropriate they are for your scheme.
Impact investment
Impact investment (sometimes referred to as social and/or environmental impact investment) aims to deliver tangible positive impacts on society and the environment alongside generating investment returns.
Typically, the positive impacts address basic societal and environmental problems such as food production, the provision of clean drinking water and healthcare. Impact investors expect companies and enterprises to measure and report their wider impact on society and hold themselves accountable for delivering and increasing positive impact.
Impact investments have a range of objectives, strategies and approaches to investment, governance, impact measurement, monitoring and reporting. Assets range from large-scale infrastructure projects, to social housing, to companies with a specific social aim.
Investment structures can be anything from listed equities and bonds, to private equity allocations, to bonds with a specific purpose.
Some less liquid investments, which may include investments referred to as patient capital, can form part of an impact investment approach. You may consider such an allocation for diversification, positive risk adjusted returns and higher-yielding, long-duration, inflation-linked income streams.
The impact of investment decisions is a lesser concern to the primary purpose of pension investing, which is enabling the scheme to pay the promised benefits. There is, however, no barrier to investments that have a social impact as a by-product where that primary purpose is met.
As trustees, you can also choose to actively take account of impact considerations in making an investment decision where you have good reason to think scheme members share their view and there is no risk of significant financial detriment to the fund. You should not choose impact investments where there is a risk of significant financial detriment to the fund.
Risks can include liquidity and a lack of common standards. Your investment adviser should be able to assist you in considering these areas and any proposed allocations to impact investments and how the investments would affect the security, quality, liquidity and profitability of the portfolio as a whole (given the legal requirement for trustees of schemes with more than 100 members to exercise their investment powers with a view to securing this).
Patient capital
Patient capital investment involves the provision of long-term finance to firms that have potential for growth over the long-term, to help them realise that potential.
Patient capital investment is typically directed towards start-ups which are looking to up-scale or innovate, but it might also be needed by more established businesses looking to achieve next-level growth. In practice, many of these investments are likely to be targeted towards capital intensive research and development companies, businesses with long product development cycles, or businesses with innovative technologies or significant intellectual property which need access to growth funding.
These investments are typically illiquid, so are likely to represent only a small proportion of a pension fund’s overall asset allocation. Patient finance investments offer the potential to benefit from longer-term outperformance through:
- investing in an inefficient market which is (currently) fragmented and underdeveloped
- enabling businesses to up-scale and achieve transformational development, and
- eliminating short-term financing constraints and enabling management to focus on business development, optimisation of value creation and improving any future business disposal strategy
If you are considering patient capital investment, you need to complete sufficient due diligence before investing to ensure you properly understand the main drivers of the expected return and how risks are managed and mitigated. You also need to consider the suitability of the scale, expected time horizon and illiquidity of the investment in the context of your scheme’s objectives and member profile.
Unregulated investments
‘Unregulated’ investments purporting to offer more ‘exciting’ investment returns than conventional assets can understandably appear attractive.
While such investments cannot be promoted to the general public, they may be promoted to trustees of workplace pension schemes.
While some unregulated investments may be legitimate and suitable for you to consider, we expect that you should understand an unregulated investment is not subject to the same controls and restrictions in relation to their investment powers and how they are operated. In the absence of regulatory oversight, there is no ongoing scrutiny of their operations and therefore investors will not be protected by regulators, ombudsmen or official compensation schemes.
Consequently, it is critically important that you ensure you fully understand the nature of such an investment and seek the advice you need. This includes a thorough understanding of the underlying investment proposition, the inherent risks that exist within it and an ability to clearly explain the charges that apply. You and your advisers must be able to demonstrate a thorough understanding of the components and assumptions behind the investment return being promoted to effectively verify it.
Journey planning
When setting your investment strategy, you should not only consider the asset allocation and risk mitigations you’ll use today but also how you expect these to evolve over time. Journey planning can assist you in setting a long-term investment plan.
Journey planning involves setting out:
- clear long-term objectives for your scheme and interim milestones
- how you propose to meet them
- how you will measure and monitor progress towards them
- what you will do to try and keep progress on track
We encourage trustees to have a journey plan appropriate and proportionate to their scheme’s circumstances. This plan should be realistic and demonstrate the principles of IRM.
You should discuss the journey plan with your sponsoring employer as part of a collaborative working approach. Information and idea-sharing between trustees and employers should assist you in formulating and maintaining your journey plan for your scheme, and help the employer to see your investment strategy in context.
Journey plans may help your scheme plan towards being well-funded on a low-risk investment strategy, which places minimal reliance on the employer covenant, in the future. A valuation basis consistent with this low-risk investment strategy is then often used as a secondary funding target alongside the formal scheme funding (ie TP) valuation. Journey milestones can then be set by reference to this secondary target.
Monitoring your journey plan
Monitoring progress along your journey plan will enable you to take action where appropriate. It’s important to consider in advance what actions to take if progress is not as expected. This applies whether progress is behind expectations or ahead of it. It’s also good practice to consider how these actions will be implemented so you can put the necessary governance and operational infrastructure in place beforehand.
Monitoring arrangements will depend on your scheme’s circumstances, including the available resource. Triggers are one common monitoring approach, especially ones based on the scheme’s funding level.
As part of developing a journey plan, you need to decide who will carry out the monitoring and how often.
Monitoring investments is more beneficial when you consider in advance how you will respond to what the monitoring reveals.
Example 9: journey planning and monitoring
Following their annual scheme strategy day, the trustees of EFG Scheme decide it would be beneficial to implement a journey plan to help them to assess the progress of their scheme against their long-term objective to be 105% funded on a low risk basis within 10 years. At the previous valuation date, on this basis, the scheme was 76% funded.
The scheme actuary advises the trustees of how the scheme’s funding position is expected to progress over 10 years. The trustees recognise that any journey plan they develop will be most useful if it sets out actions that will be implemented if progress differs materially from expectations, ie if funding is outside certain agreed boundaries.
They agree that if the actual funding progression is more than 4% different from expectations, this will be a flag for action. For example, in two years’ time, they expect the scheme to be 80% funded. However, if the scheme is less than 76% funded (ie below their lower bound) or more than 84% funded (ie above their upper bound) they will take action.
The trustees discuss the potential options available if the funding level is ahead of expectations (ie above their upper bound). In particular, the trustees consider:
- reducing the allocation to growth assets to a level where the objective is still expected to be met with no further contributions over and above those already promised by the employer
- bringing forward the target date to achieve full funding, while maintaining the prevailing asset allocation
- reducing risk by increasing the level of scheme hedging
The trustees also discuss the potential options if the funding level is behind expectations (ie below their lower bound). They consider asking the employer to provide:
- contingent contributions to take the scheme back up to the lower boundary funding level over the following three years
- a guarantee from the employer or another entity in the employer’s group to cover the funding gap compared to expectations
- a funded escrow account from which contributions to the scheme will only become payable if the funding level is still below the lower bound at the next valuation date
- an agreement to reduce dividends and increase the cash held by the employer until the scheme is back within the boundaries
- re-risking the investment strategy as long as it remains supportable by the covenant
The trustees decide they will review progress against this journey plan at each future quarterly meeting and will revisit the underlying assumptions following each future triennial valuation. They also agree to review the journey plan basis periodically to check it remains appropriate.
Learning points: You should consider developing a long-term funding objective for your scheme, for example, to enable the scheme to be run on a lower-risk basis once that objective has been reached. This funding objective should be reflected in a realistic journey plan, which should include actions to be taken if the funding level is above or behind expectations.
Example 10: hedging triggers
The trustees of the ABC Pension Scheme have recently implemented a liability hedge to reduce their interest rate and inflation risks. The scheme is currently 85% funded on the TP basis. After receiving advice on the risk and reward trade-off, as well as assessing the ability of the employer to support the scheme, the trustees initially decide to hedge 50% of both their interest rate risk and inflation rate risk on the TP basis.
The trustees would like to increase their level of hedging. Following advice, they decide to set some opportunistic triggers where their investment manager will automatically increase the levels of hedging if long-dated yields hit particular levels.
The trustees develop a plan and governance framework setting out the following:
- The levels at which triggers will be set: their advisers help them set some realistic triggers based on the levels of interest rates and inflation rates.
- The actions to take when these triggers are hit: the trustees decide to increase their hedging levels by 30%. This is expected to reduce the VaR by a material amount for the scheme.
- Responsibility for monitoring: they decide to formally document the triggers so the investment manager will implement actions automatically if the triggers are hit.
- Timescales for review: they agree to formally review the levels at which the triggers are set at least every 18 months (and more frequently following significant market events) to make sure they remain appropriate in the prevailing market conditions.
The trustees are aware that their scheme liabilities are gradually maturing and are keen to ensure that their level of hedging (and risk reduction) continues to increase – at least until they are hedged at a similar level as the TP funding level. They also agree to set some time-based triggers which will lead to increased hedging as time passes.
Learning points: Where you set triggers to help hedge the interest and inflation risks of your liabilities, you should develop a formal plan and governance framework. You should ensure you consider a range of trigger bases, for example, related to scheme funding level, time-periods (time-based) or market levels (opportunistic). You should regularly review the frameworks, assess progress and take action where necessary to ensure scheme risks are appropriately managed.
Trustee toolkit online learning
The module 'An introduction to investment' contains a tutorial called 'Setting an investment strategy'. You must log in or sign up to use the Trustee toolkit.
Understanding investment risks
When setting your investment strategy you should:
- identify the key risks to your scheme
- understand, quantify and document the materiality of each risk to achieving your objectives
- determine whether the return associated with the risk is appropriate
- develop strategies to mitigate and manage these risks (where appropriate)
- monitor the key risks to your scheme regularly
You need to understand the risks associated with your investment strategy and the impact those risks may have on your scheme achieving its objectives. Sharing relevant information with the employer will help them understand their exposure to these pension scheme risks as part of the prudent management of their business.
Your approach should be proportionate to the size and complexity of the risks and you should identify the key risks to focus on. While some investment risks can be quantified, you may need to assess others qualitatively (such as political or regulatory risks, or future climate change).
You need to explore ways of mitigating risks, to address those that merit immediate mitigation, and to identify those that are acceptable today but you may wish to mitigate in the future. This will allow you to make more informed and efficient choices in the future.
Risk mitigation strategies
Some risk mitigation strategies used by pension schemes are:
- changing the allocation from higher to lower risk investments
- hedging liabilities, eg against interest rate and inflation risks
- diversification – within and across asset classes, by drivers of return (or risk factors), geographies, investment managers and counterparties
- hedging asset exposures, eg equity options and currency hedges
- liquidity and collateral risk management frameworks
Investment products are available that enable smaller schemes to implement types of risk mitigation that were previously only practicable for larger schemes. We’d encourage you to keep abreast of market developments in this area if applicable to your scheme. Your investment adviser should be able to assist with this.
You can mitigate risk by having robust investment governance and monitoring procedures in place for your scheme.
When setting your investment strategy, you need to consider the scheme’s asset, liability valuation and cash flow risks. We explore these below.
Asset risks
With all assets, there’s a risk that the returns they provide may be lower than was expected when the investment was made. You should understand the expected economic and market drivers of return that underlie your investment strategy and what may cause returns to be different from expected.
In setting the scheme’s asset allocation, we’d encourage you to consider investing in a wide range of asset classes. You should also consider the available implementation routes as these influence the risks and return expectations of the investment. Issues related to implementation are covered further in section 5: implementation.
Asset risk can be mitigated in various ways, including through diversifying asset allocations and through hedging using derivatives.
More information on asset risks is covered in section 3: matching assets and section 4: growth assets.
Liability valuation risks
A pension scheme’s funding level compares a value placed on the scheme’s liabilities with the market value of the scheme’s assets. Both of these values vary with investment market conditions. Schemes are typically exposed to liability valuation risk. This means the values of the liabilities and assets do not usually respond in exactly the same way to changing market conditions. The difference in response can have a material impact on the scheme’s funding position. You therefore need to understand and quantify the liability valuation risks you are running.
You can mitigate liability valuation risks by investing in assets that move in a similar way to the value placed on the liabilities as market conditions change. These asset strategies are known as liability driven investment (LDI) or liability hedging strategies.
The way the liability value varies with market conditions depends on how the valuation assumptions are derived. Typically, long-term interest rates and long-term inflation expectations have a significant influence on the valuation. Therefore, LDI strategies typically involve a portfolio of high quality bonds and other assets and / or derivatives and their collateral whose value responds to changes in market conditions similarly to how the liability value responds.
You need to understand the nature and extent of liability valuation risks your scheme is exposed to and clearly document your rationale and approach to managing these risks.
More information on liability valuation risks is covered in section 3: matching assets.
Sequencing risk
You should understand how your scheme’s assets, liability values and cashflows are expected to develop in the short, medium and long-term when setting your investment strategy. This is because the impact of investment performance on meeting scheme objectives depends on when the performance occurs. For example, investment underperformance when the scheme is relatively large is potentially more significant than underperformance when it is relatively small. This is referred to as sequencing risk.
Put simply, it matters when investment returns occur, as underperformance when the asset base is large will need to be made good in future, all else being equal, either by higher DRCs or through higher investment returns from a smaller asset base.
Sequencing risk is particularly relevant for schemes that are more mature, where the asset base is expected to decline over time due to the net cash flow out of the scheme being greater than the investment return achieved. Schemes in this position can be more vulnerable to investment underperformance.
The materiality of sequencing risk to your scheme will depend on several factors. Schemes where it is most significant are likely to have some of the following characteristics:
- cash flow negative, ie more benefits and expenses are being paid out than income received from contributions and investments
- mature (and hence a short time horizon to make good any reduction in funding level)
- volatile investment strategy (hence the degree of any underperformance is likely to be greater)
- poorly funded (so that the outgo from scheme benefits and expenses is a greater proportion of the asset base than if the scheme were better funded)
- weak covenant (so that the employer will find it difficult to pay additional DRCs to make good any underperformance)
It’s good practice to explore how material this risk is to your scheme, especially if your scheme exhibits some of the above characteristics or is expected to do so in the future. Where this risk is material, having robust risk management and risk mitigation strategies is key.
Scenario projections or asset-liability modelling can be useful tools to assess this risk. For smaller schemes, instead of carrying out a detailed asset liability modelling exercise, a useful insight could be obtained, for example, by applying a shock to the assets and/or to interest rates, and projecting the value of the assets and liabilities over a reasonable future time period.
Cash flow and liquidity risks
You should understand how your scheme’s benefit and expense payments and contribution income are expected to develop when setting your investment strategy, so your strategy can take into account the scheme’s cash flow and liquidity risks.
If the benefit and expense payments exceed the contribution income, they will need to be met from investment income or asset sales. Meeting them from asset sales introduces the risk that assets cannot be sold quickly enough, or they can only be sold quickly enough at a reduced price. This is known as liquidity risk. Cash can also be needed to make collateral payments if you have certain types of derivative arrangement in place, such as those associated with LDI, or currency hedging arrangements.
Your investment strategy should take account of your scheme’s need for cash, and the associated liquidity risks, and we would encourage you to develop a cash flow management policy. This should address the typical cash flows’ in ‘business as usual’ circumstances, and how you would deal with more exceptional circumstances.
When considering your cash flow management policy, you need to be aware of the liquidity characteristics of all the investments the scheme holds and how they might vary in different market environments. You need to ensure you have sufficient liquidity within the portfolios to meet scheme benefit cash flows and any collateral requirements arising from derivative or currency positions held.
Even where the risks associated with cash flows are not material, we consider it good governance to set a cash flow management policy to help keep the scheme’s actual asset allocation in line with the investment strategy. It can also help you deal with unexpected cash flow requirements promptly and efficiently.
Example 11: considering the impact of meeting benefits as they fall due
The XYZ Scheme is currently invested 35% in UK equities, 35% in global equities and 30% in gilts. The scheme has TPs of £160 million, a deficit of £35 million and a nine-year recovery plan of £4 million per annum. The scheme is mature, with 70% of its liabilities being in respect of pensioner members, and the employer has been rated as ‘tending to weak’.
As part of their investment strategy review, the trustees look at long-term projections of how they expect their assets and liabilities to evolve over time. While the scheme is expected to achieve its TP funding objective in nine years in over 50% of the scenarios, the analysis also shows there are several scenarios where the scheme’s funding level deteriorates over time, sometimes quite rapidly. Their adviser explains that these scenarios are being driven by a combination of the funding position (ie the underfunding), the volatility in the investment strategy and the fact that the scheme is paying out between £7 million to £10 million per annum in benefits over the projection period.
Their adviser further explains that:
- in the event of a sustained period of underperformance or a significant downside event, the prevailing (and smaller) asset base would have to perform even better in future years to recover any underperformance
- benefits continue to be paid out in full while the scheme is underfunded. If the investments underperform expectations over a sustained period or a significant downside event occurs, the cumulative effect will lead to deterioration in the funding position of the scheme
In light of this analysis, the trustees recognise they need to take steps today to reduce the risk of significant investment underperformance now and in the future. As a result, the trustees decide to:
- increase the diversification of their return-seeking assets (to help minimise the volatility of their combined asset value)
- identify a more appropriate split between matching and return-seeking assets
- design an IRM trigger based on the minimum level of funding, below which recovery to full funding would not be possible through future investment performance (taking account of the maximum acceptable level of investment risk) and planned future contributions to the scheme
- share the analysis with the scheme employer so that they are aware of the risks in the current strategy
Learning points: Trustees need to understand how their scheme cash flows are likely to evolve. In particular, where their scheme is underfunded and the assets held are volatile, the trustees should seek to understand the impact that significant benefit outflows might have on the ability of the remaining assets to deliver enough performance to recover the funding level.
Trustee toolkit online learning
The module 'An introduction to investment' contains a tutorial called 'Capital markets and economic cycles', and the module 'Investment in a DB scheme' contains a tutorial called 'Changing asset and liability values'. You must log in or sign up to use the Trustee toolkit.
Using models to assist in setting your investment strategy
You or your investment adviser may make use of models to assist in setting your investment strategy. You can use models to help identify and quantify risk as well as to illustrate the likelihood of achieving scheme objectives. Modelling can also be useful when comparing the risk and rewards of different investment strategies.
We expect your use of models to be proportionate to the complexity of the risks concerned. Sophisticated risk assessment tools may not be necessary if the risks facing the scheme are simple and straightforward; the modelling approach should be appropriate to the circumstances. You may wish to seek the help of your investment adviser on whether a detailed risk analysis would be beneficial. As a minimum, we expect you to complete some scenario or sensitivity analysis.
If it is appropriate to carry out comprehensive modelling of your scheme, for example long-term modelling and/or decomposition of the risks into the key components, you will need to review and update this modelling at appropriate intervals as the scheme develops. When undertaking long-term modelling you need to consider the potential impact of the covenant on the payments under the recovery plan and on any contingent assets.
Where the scheme risks are significant in the context of the employer’s business, we would expect you (and the employer) to consider the risk management benefit that might be achieved by undertaking more comprehensive analysis.
Metrics used to quantify and assess risks
You may find it useful to develop specific risk metrics for your scheme. Identifying and quantifying risks, as well as considering mitigation strategies, may be carried out using models and metrics such as stress tests, scenario analysis, asset-liability modelling and / or VaR analysis decomposed into the various contributing risk factors (amongst other models and metrics).
Modelling output can help you identify the most material risks for your scheme, so you can monitor and mitigate them. It may also show you where your scheme is exposed to common risk factors across its investments, the employer’s business and any contingent assets.
This process will also help you identify which modelling assumptions you should consider in greater detail when interpreting the results.
While models can be useful tools in setting investment strategies, it’s important that you are aware of model limitations and the key assumptions that underlie their outputs. This is important as the output is ultimately a reflection of those assumptions. There are significant differences between models and between modelling approaches; not all models identify the same risks.
For example, a short-term VaR model will not identify the risks to a scheme associated with how its cash flow profile is expected to evolve over the medium or long-term. For schemes where this is a significant risk, long-term modelling, where the asset cash flows are modelled accurately, would be appropriate.
Example 12: choosing the most suitable modelling
The Trustees of the ABC Pension Scheme are carrying out a review of their investment strategy following the appointment of a new investment adviser. The scheme is mature, cash flow negative and 75% funded on a TPs basis. The trustees have set a secondary funding target to reach full funding on a basis similar to buyout over the next 15 years.
The scheme’s investment adviser suggests carrying out some modelling as part of the strategy review. The adviser acknowledges that while modelling will not capture all the risks to a scheme, it can be a useful tool to compare the high level risk and return characteristics of different investment strategies. Historically, the trustees have only looked at the scheme’s overall VaR figure as a high-level metric to assess the risks to the scheme, so they are hesitant to incur costs. The adviser suggests the scheme carry out:
- a decomposed VaR assessment (ie a VaR measure broken down into the key component risk parts)
- some long-term projections to assist the trustees in their decision making
The adviser suggests that the decomposed VaR would be beneficial as it will identify those risks which are the most material to the scheme. He believes that identifying these risks will help the trustees to focus their time appropriately.
The adviser suggests that long-term modelling, such as scenario projections or asset-liability modelling, would be beneficial to help understand whether the current strategy, and how it’s expected to evolve, is appropriate given the scheme objectives. The adviser highlights that looking only at a VaR figure would not illustrate the range of ways in which the funding level of the scheme and the risks associated with the scheme strategy could develop in the future.
The employer, having been informed by the trustees, advises that the long-term projections will assist with their longer term corporate planning and acknowledges that the additional work, even though it would incur costs, will have significant value. The trustees decide to include a decomposed VaR analysis and scenario projections in the scope of their investment strategy review.
Learning points: There are different risk measures and different models look at risk from different angles, for example, over different time horizons or to consider individual risks versus overall risks. Trustees and their advisers should consider what analysis would be most appropriate for the scheme and employer’s circumstances.
Understanding assumptions
We expect your advisers to clearly identify the key assumptions used in their advice. We encourage you to discuss these assumptions with them to ensure you understand them and assess the degree of confidence the advisers have in them. You need to ensure that they are consistent with your documented investment beliefs and that they are appropriate for how the investment strategy will be implemented in practice.
Given that interest rates are often the primary source of funding volatility, it’s important that you understand whether the central modelling assumptions follow current market expectations or whether they incorporate a different view of how these rates will evolve over time. For example, some models assume interest rates and / or gilt yields will rise to a higher level in the long-term than currently priced into markets.
For some alternative asset strategies, advisers may have limited experience and data from which to develop modelling assumptions. Where you consider it proportionate, you may wish to look at the model output using a different set of assumptions to help you assess how material the assumptions that underlie the model are.
There can be significant differences between theoretically modelling an investment and the real-life implementation of that investment. In practice, asset classes can be accessed through various routes and the asset modelling may not reflect the possible implementation routes and / or investment manager approaches to the assets. This can be a particular issue when modelling and implementing multi-asset investment strategies such as diversified growth funds (DGF).
For more information on modelling and DGFs see section 4. DB growth assets.
Considering alternative assumptions
Key assumptions to consider will depend on your scheme’s unique circumstance, but may include the:
- future path of interest rates and / or gilt yields
- future path of inflation expectations
- expected returns and volatility of asset classes that are material to the scheme
- risk premium assumed for each asset class and its stability over time
- correlations between asset classes, particularly between those which are expected to offer significant diversification benefits
Example 13: understanding models
The trustees of the XYZ Pension Scheme request some asset-liability modelling (ALM) from their adviser as part of their review of the investment strategy. The adviser demonstrates their latest modelling tool to the trustees, to show them the impact in real-time of making investment strategy changes.
At the meeting, the trustees consider various investment strategies and review the ALM output of those strategies. They decide not to make any changes to the strategy as it is expected to achieve their TPs funding target by the end of the recovery plan and they believe the downside risks of the strategy are supportable by the covenant.
A year later, the trustees observe that their investment strategy had performed as expected. However, the scheme funding level is noticeably lower than expected when considered against the ALM projections. They ask their advisers why this might be the case.
Their adviser notes that one of their model’s central assumptions was that interest rates would rise faster than priced into markets. However, in practice, interest rates have not moved significantly over the one-year period. This factor is the primary reason for the difference.
The trustees request their advisers show them the ALM output, on an alternative basis, using a central assumption that interest rates follow what is priced into markets. The ALM output is materially different and the trustees acknowledge that, had they been aware of the differences, they may have made different decisions at last year’s meeting. The adviser explains that this assumption was noted in the appendix to their strategy review.
The trustees agree that they should seek to understand material assumptions and the implications on scheme outcomes of key assumptions not being borne out in practice. The advisers agree they will be more explicit with the trustees on the significance of individual assumptions underlying their models and will explain the rationale of their central assumptions.
Learning points: Trustees should understand the key assumptions that underlie any modelling they receive and consider the impact of making alternative assumptions. Advisers should also be transparent with their clients on the key assumptions that influence the model output.
Examples: For further examples on modelling, see the appendix of the IRM guidance.
Trustee toolkit online learning
The module 'Investment in a DB scheme' contains tutorials called 'Future projections and scenario planning' and 'Stochastic modelling'. You must log in or sign up to use the Trustee toolkit.