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Review the default strategy

As a pension trustee you need to review your scheme’s default investment strategy and performance at least every three years.

The strategy should be set out in a statement of investment principles (SIP) that details how the trustees plan to invest the default arrangement assets.

Generally, the default arrangement is used for members of defined contribution (DC) schemes who don’t choose other investment options.

You will need to set the default strategy if you haven’t already got one.

1. Check if the strategy needs reviewing

You must review the default strategy if:

  • you haven’t done so in the last three years
  • you have significantly changed your investment policy since the last review
  • the profile of the default arrangement membership (eg the average age) has changed significantly since the last review

There are new requirements that apply from 1 October 2019. If your SIP does not already address them, you will need to review your default strategy by 1 October 2019 and update your default SIP.

You will need to state your policies on the following in the SIP:

  • matters which you consider financially material over the appropriate time horizon, such as environmental, social and governance issues (including climate change) – this includes how these are taken into account when selecting, retaining and realising investments
  • the extent to which members’ views have been taken into account when selecting, retaining and realising investments
  • stewardship issues such as voting rights (only applies to schemes with 100 members or more)

Check with your legal adviser if you’re unsure about complying with the requirements.

2. Know what your members want

You should understand the needs of your scheme members before you review the default strategy. This will help you to decide if the default strategy is still suitable.

Issues you should focus on include:

  • when they expect to take their pension
  • how they expect to do that, eg if they want to take their pension as cash or receive an income

If you don't already have this information you could ask members for their views. For example, you could carry out interviews or run an online survey.

If you can't get enough information from members, you should ask your advisers about their experience of other similar schemes.

If you don't have an adviser who can help, you should look at information that is publicly available. For example, read pensions research by Citizens Advice.

3. Carry out the review

Your review needs to check if the default strategy is still suitable. You should take into account the information you have gathered about your members’ needs.

You also need to review the performance of the default arrangement. In particular, check how the investments are performing against the aims and objectives you agreed when you set the default strategy.

With the assistance of your investment adviser or provider, consider whether the default arrangement still meets your aims and objectives, particularly if you have amended your default strategy. If it doesn’t, you should choose an alternative that does.

If you need to appoint an investment adviser, you should choose someone suitably qualified. You can check if an adviser is authorised on the Financial Conduct Authority financial services register.

4. Update paperwork and record decisions

It is important that you keep a record of how you reviewed the default strategy and suitability of the default arrangement. This includes the decisions you made. You should do this even if you make no changes.

If you take any action as a result of the review, you need to update the SIP for the default arrangement.

Information that must be provided on a website

You are now required to provide the default SIP free of charge on a website. You should check when this requirement applies to your scheme.

You must also describe any review carried out during the year and explain any changes made as a result. If you have not reviewed the default SIP during the year you must provide the date of the last review.

You should provide the website address in the members’ annual benefit statement and make sure that no passwords are needed to access it.

Confirm your strategy is suitable

If we’ve asked you to confirm you have reviewed your default strategy, you should submit the form below once you have completed the review. The review of the strategy and performance is the trustees’ duty.

If you are a trustee of a relevant small scheme (commonly referred to as a small self-administered scheme (SSAS)), or believe you are exempt from these requirements for another reason, you need to let us know on the form. You also need to update your scheme details on Exchange.

If you have more than one default arrangement, you should complete the form for the one with the most members. You should also email us at DefaultStrategy@tpr.gov.uk with the scheme's PSR number, details of how many default arrangements it has and the percentage of members within each.

Declaration form

Please complete all fields marked with an asterisk (*).

Your information

Declaration

By submitting this confirmation I declare that:

  • I am the trustee or one of the trustees of the scheme
  • I am authorised to submit the confirmation on behalf of the scheme trustees
  • the scheme trustees are aware of the information supplied on this form
  • the information is true and correct to the best of my knowledge

Please be aware that we may use any information you provide in response to this request as part of our wider regulatory activity. It is a criminal offence to knowingly or recklessly provide information which is false or misleading.

Data protection

We may use your name and email address to further contact you about your legal duties relating to your pension scheme.

If you have any questions about how we handle your personal data please contact our Data Protection Officer by email at dpo@tpr.gov.uk or you can write to us at Napier House, Trafalgar Place, Brighton, BN1 4DW. You can find further information on how your personal data is used, kept secure and your rights in our privacy notice.