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Set the default strategy

As a pension trustee you must make sure you have set the investment strategy for the scheme’s default arrangement.

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

The default strategy should help you make sure the assets of the default arrangement continue to be invested in the best interests of members.

Issues to consider

You should consider the needs of the scheme membership. This includes looking at characteristics such as age, salary, intended retirement date and how members might choose to access their benefits. This will help you to form aims and objectives for the default fund investments.

You will need to make decisions on matters such as:

  • the kinds of investments that can be held and how these are chosen
  • how risks are identified, measured and managed
  • performance targets, ie the expected return on investments
  • how investments are bought and sold
  • your approach to social, ethical and environmental considerations

You should check with your administrator that the membership data is up to date.

Get and consider advice

You need to consider advice from someone suitably qualified and appointed to advise you when you set the default strategy.

If you need to appoint an investment adviser, you can check they are authorised on the Financial Conduct Authority financial services register.

Document the strategy

You need to set out the default strategy in a statement of investment principles (SIP). You can either have a separate SIP for the default arrangement or one SIP for all investment options that the scheme offers.

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

Review the strategy

You will need to review the default strategy at least every three years.

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.

Trustee toolkit online learning

You can learn about default investment arrangements in the ‘Introduction to investment’ and ‘Investment in a DC scheme’ modules of the Trustee toolkit. You must log in or sign up to the Trustee toolkit.

Go to the Trustee toolkit