Statement of Investment Principles (SIP)

Our Statement of Investment Principles (the Statement) sets out the principles, beliefs and policies adopted by NOW: Pension Trustee Limited (the Trustee) in investing the assets of NOW: Pensions Trust (the Trust), taking into account the requirements of the Pensions Act 1995 (the Pensions Act), the Occupational Pension Schemes (Investment) Regulations 2005 and other relevant legislation, as well as the principles recommended by the Myners Code.

Background
The Statement is available to members on our website (www.nowpensions.com). It will be reviewed at least once every three years or after any significant change in investment policy.

Nature of the Trust
The Trust is a defined contribution scheme and all the benefits it provides are based on the balances on the member’s individual pension account, without any guarantees of performance.

You can download the SIP here.

Our investment beliefs

The Trustee determines the investment strategy based upon the following key investment beliefs:

ChoiceGiven our members’ profile and limited member engagement/feedback, offering a single investment choice (or default strategy) is most appropriate. This approach is simple to communicate, efficient to implement and effective in meeting our members’ retirement needs. This option means one Journey Path and common risk/return profile for members at each stage of the Journey Path.  
Return-seekingFor long-term pension benefits, members must take risk and earn a return above inflation. Taking investment risk is usually rewarded in the long-term. Higher risk assets (e.g. shares) are expected to outperform lower risk assets (eg government bonds) but are also expected to have higher variability of returns (volatility).  
Journey PathA properly structured Journey Path allows additional return-seeking assets during the majority of the member’s investing period because the volatility is managed during the transition phase as the member approaches the retirement phase (which we call the glidepath). Therefore, members benefit from higher returns in early years as the investment time horizon is long and transition to cash at retirement. The Journey Path reflects the characteristics of the Trust’s membership.  
Responsible InvestmentAs long-term investors, incorporating environmental, social and governance (ESG) factors into a Responsible Investment (RI) process is integral to long-term success. RI matters in the long run and the risks associated with ESG factors should be measured and managed.  
Asset allocation and diversificationRisk-based strategic asset allocation is the biggest driver of long-term investment performance, more than manager selection or security selection. Diversification and volatility management are key to enhancing return while managing risk in all stages of the Journey Path.  
Decision makingTaking account of asset values/prices, economic conditions and long-term market developments enhances long-term performance and informs strategic decisions. The world is complex; judgment and qualitative research are important alongside quantitative analysis.  
Active vs passiveIndexed management may be more efficient than active management. The choice of the right index to follow is important. Market opportunities to deliver returns in excess of an index, net of fees, may exist, but identifying managers that consistently deliver excess returns after costs is challenging.  
Costs matterBoth annual management charges and transaction costs should be considered. The Trustee has a bias towards lower cost solutions.  
Derivatives and leverageDerivatives can be used to contribute to the reduction of risks or to facilitate efficient portfolio management. Their use and the use of leverage must be thoughtfully managed and communicated.  
CurrencyOur members work in pounds (GBP) and save in pounds (GBP). However, investments may be made overseas. Currency risk will therefore be considered in all investment strategy decisions and will be appropriately managed throughout the Journey Path.      
Less liquid assetsLess liquid assets (eg infrastructure, private equity) may provide an incremental risk-adjusted return. Less liquid assets that provide sufficient reward to compensate for illiquidity and additional costs may be suitable long-term investments. The use of these assets needs to be appropriately sized.