Value for member assessment

Scheme year ended 31 March 2024

The Trustee’s value for members assessment framework considers both the costs and benefits of membership of the DC arrangements. The costs and charges on all strategies and funds in which members are invested over the period are considered in order to evaluate the costs of membership.

In relation to the benefits of membership, the Trustee has identified five core benefit categories of value for members as follows:

• Scheme governance – The Trustee believes that good governance is important to ensuring that a framework exists and is actively in use to help deliver better member outcomes. Only strong and stable providers should be appointed as this is important for the long-term outcome of members’ benefits. The use of safeguards and controls to manage operational risk is important and the number of errors should be minimised and any impact from errors should be corrected to put members back in the position they should have been in.
• Investments – The Trustee considers a well-designed investment portfolio, which is subject to regular monitoring, and a varied range of investment funds, with appropriate charging structures, to be important to delivering better member outcomes. The Trustee believes it is important that performance of funds, over the long term, is in line with their market sector.
• Administration – The Trustee considers good administration and record keeping play a crucial role in ensuring that Scheme members receive the fund or income that is due to them. In addition, the type and quality of service experienced by members has a bearing on the level of member engagement.
• Member communications – The Trustee considers effective member communications, and delivery of the right support and tools to help members improve their outcomes, to be essential to aid member understanding.
• Retirement options – The Trustee believes it is important to have retirement processes that enable members to make informed decisions and select an appropriate option(s) at retirement.

The Trustee has reviewed the above five core benefit categories and its assessment is summarised as follows:

Scheme governance: The Trustee has suitable governance monitoring in place. Core financial transactions and other key governance metrics are monitored quarterly. Regular meetings are held with the administrator to discuss and progress areas of the administration that require input from the Trustee. The adequacy and effectiveness of governance and control over Data Protection, Information Security and Cyber Security is periodically reviewed by Smiths Pensions. The Trustee also reviews the risks relating to the DC arrangements annually, as part of the Scheme’s risk assessment framework. The Trustee has an Investment Committee in place which spends time discussing the Scheme’s DC arrangements. Any decisions that need to be taken by the full Trustee board are considered accordingly. An annual review, using professional advisers, is undertaken which assesses the financial strength of providers and the suitability and relevance of the DC arrangements and whether they represent value for members.

Investments: The Scheme offers an appropriate range of investment options to members which have been agreed, following advice from the Scheme's investment adviser, with the specific needs of members in mind. The Trustee has pro-actively consolidated unit-linked funds where possible, to improve value for members. With Profits and Deposit Funds have been retained as the Trustee believes members are likely to value the guarantees they provide.

Administration: The Trustee monitors the administration of members’ DC benefits.  The Trustee is satisfied that the Scheme administrator and the DC providers have robust systems and the capability to process financial transactions promptly and accurately in line with the agreed service levels and relevant regulatory requirements.  The Scheme’s administration procedure manuals are regularly reviewed and updated. Aptia provides a member helpline and the member experience is monitored through call statistics, complaint details and surveys that members are asked to complete after contacting the helpline.

Member communications: The Scheme website (pensions.smiths.com) hosts a variety of information and documents and L&G provides a Scheme-specific website for members of the L&G arrangement (legalandgeneral.com/workplace/s/smiths-group). The Trustee includes reminders for members to monitor their DC funds in the annual newsletter and, where concerns are raised regarding a particular fund or provider, these concerns are communicated to affected members and alternative available options are set out.

Retirement options: The Trustee allows the proceeds arising from the DC arrangements to be taken as part of the tax-free cash sum or, in certain circumstances, to purchase a pension in the Scheme at retirement. The conversion factors are such that, in many cases, they are expected to be more favourable than annuity rates available elsewhere in the market, which enhances member outcomes at retirement. The Trustee provides access to a Scheme Independent Financial Adviser to support members in understanding the options available to them (with the member being required to meet the subsidised cost).

Costs and charges: In evaluating the costs and charges borne by members against the benefits of the DC arrangement, the Trustee has undertaken a benchmarking exercise to compare costs and charges against expectations. The table below sets out the current TERs for each of the unit-linked funds held at the end of the Scheme Year along with the Trustee’s adviser’s expected range for each asset class considering structure, investment style and assets under management.

A Red/Amber/Green (“RAG”) rating based on the following methodology is assigned to each fund.

GREEN – Lower 50th percentile AMBER – Upper 50th percentile RED – Outside of expected range.

Based on the information and the circumstances outlined above, the Trustee has concluded that, during the Scheme Year, the Scheme’s DC arrangements represented good value for members.