The Statement Of Investment Principles

Question 1

What is the purpose of The Statement of Investment Principles?

Answer 1

1. SIP is required for ALL pension funds with 100+ members under the Pensions Act 1995.
2. It defines how investment decisions are made by trustees.
3. It ensures trustees act independently from the employer while considering the sponsor’s views.

Question 2

SIP set out the principles governing how decisions about investments are made. What are the key elements of an SIP?

Answer 2

1. Choosing Investments –
   How trustees decide what to invest in.
2. Investment Types & Balance –
   The different types of investments to be held and the balance between the different kinds
3. Risk & Return –
   How risk is measured, managed, and expected returns on investments
4. Realising Investments –
   When and how assets are sold.
5. Ethical & ESG Considerations –
   The extent the scheme takes into account (if at all) of the social, environmental or ethical considerations when taking investment decisions
6. Voting Rights –
   If applicable, how trustees use voting rights attached to investments.

Question 3

What are the responsibilities of trustees before an SIP is put together?

Answer 3

1. Must obtain and consider written advice of a person who is reasonably believed to have the appropriate knowledge and experience of financial matters and investment management.
2. Must consult (consider the views of) the scheme sponsor but, do not have to agree or follow their wishes.
3. SIP must be reviewed every 3 years or after a major investment policy change.
4. Trustees may appoint investment managers to carry out investment policies BUT -
   A. they will remain liable for any losses due to negligence UNLESS,
   B. investment manager has been properly appointed and trustees have taken all reasonable steps to supervise them.