COMMONWEALTH WAR GRAVES COMMISSION SUPERANNUATION SCHEME

Members Report 2020

Dear MemberWelcome to the 2020 Trustees Report toMembers which provides members withinformation on the progress of theCommonwealth War Graves CommissionSuperannuation Scheme over the last yearand other news and information which wetrust you will find of interest.

This report provides a summary of the workperformed on your behalf during the period,and we hope it will give you a greaterunderstanding of key issues governing theprogress of the Scheme. A copy of the fullTrustees’ Annual Report and Accounts isavailable from the Scheme’s administrators,Capita, whose address can be found at theback of this report.

COMMONWEALTH WAR GRAVES COMMISSION SUPERANNUATION SCHEME MEMBERS REPORT 2020

The Trustees’ work over the last year hasfocussed on a number of important issues,including:-

l COVID-19

Looking after your pension is the Trustees’top priority. We are pleased to confirm thatthroughout the coronavirus pandemic ouradministrators, Capita, have been able tocontinue to operate as close as possible tonormal. We have been monitoring thesituation closely and will continue to do soduring these unprecedented times. Pleaserefer to the Current Issues section of thereport for further information.

l Investment disclosure changes and anew Statement of InvestmentPrinciples

Changes were made to the Trustees’Statement of Investment Principles (SIP) inSeptember 2020 to incorporate new

regulations which became effective from 1October 2020. The updated SIP nowincludes additional information on theTrustees’ stewardship policy and sets outtheir policy in relation to arrangementswith the Scheme’s investment managers.Further information is provided later in thisreport.

l New Member Website

The new investment disclosure regulationsrequire the Trustees to make the SIPavailable on a publicly available, free toaccess website. The Trustees are pleased toadvise that a member website has been setup which contains a copy of the SIP and anumber of other key Scheme documents.These documents can be found athttps://cwgc.pensions-directory.co.uk/.

l Changes to the Scheme’s Trustees

PTL Governance and Barry Murphy havestepped down as Trustees of the Scheme.Both were Commission nominated Trusteesand we are pleased to announce thatKaren Jamison has agreed to join theTrustee Board as a new Commissionnominated Trustee.

If you would like further information aboutthe Scheme or any of the issues covered inthis report, then please contact Capita or theSecretary to the Trustees. I would also like toencourage any members with any specificissues or concerns relating to the operation ofthe Scheme to contact myself and / or theScheme Secretary; we can then more closelymanage the provision of the requiredinformation to you and deal with any queriesthat you may have. All relevant contact detailsare included on the final page of this report.

Chris Farrell Chairman of the Trustees

The Trustees

The responsibility for overseeing the running of theScheme rests with the Trustees. The Scheme is set upas a trust and it is a fundamental duty of the Trusteesto administer the Scheme in line with the provisions ofthe Scheme’s Trust Deed and Rules. The Trusteestherefore work closely with the Commission to ensurethat, with the help of professional advisers, the Schemeis run in accordance with the Trust Deed and Rules andthe legislation governing UK pension schemes, andthat ultimately there will be sufficient funds available topay members’ benefits.

In total the Trustees met four times during the year todiscuss matters relating to the administration andinvestment performance of the Scheme. The Trusteesalso regularly attend seminars and training sessions inorder to remain up to date on pension issues andlegislative changes.

Under the Pensions Act 2004, scheme trustees arerequired to ensure that at least one third of trustees arenominated and selected by the members. At the startof the Scheme year the Scheme was administered byfive Trustees, of whom three were nominated by theCommission and two were Member NominatedTrustees (MNTs).

On the retirement of Steve Carrodus as a Director of PTLGovernance Limited in March 2020, the Commission decidedto revert to two Commission nominated Trustees with effectfrom 13 March 2020, and he was not replaced. His fellowTrustees would like to thank Steve for his wise counsel andsupport over the last 8 years and to wish him all the best forhis retirement. Barry Murphy stepped down as a Trustee on 6July 2020 and has been replaced by Karen Jamison. The otherCommission nominated Trustee, Martin Duffy, is anexperienced Trustee who is fully independent from theCommission as he has no link through employment or as abeneficiary of the Scheme.

The current MNT arrangements allow all eligible deferred andpensioner members to stand as MNTs and to nominate andselect other members to act as MNTs. The current MNTs areChris Farrell who is serving his second term of office as anMNT and Bernard McGee who is serving his first term. Thecurrent term of office for both MNTs runs for 5 years until 31August 2023.

Turning now to former Trustees of the Scheme, we note withgreat sadness that David Kennedy passed away on 28October 2020. David was Director General of theCommonwealth War Graves Commission until his retirementin 2000 and served as a Member Nominated Trustee of theScheme from 2006 to 2009.

The current Trustees of the Schemeare:-

Commission Nominated

Mr Martin DuffyIndependent Trustee

Ms Karen JamisonCommission Employee – Member ofthe Scheme

Member Nominated

Mr Christopher FarrellCommission Employee – Member ofthe Scheme and Chairman of theTrustees

Mr Bernard McGeePensioner Member of the Scheme

Secretary to the Trustees

Mrs Sue KettleCapita Employee Solutions

Scheme Members

The following table shows how the membership of the Schemechanged over the year to 31 March 2020:-

31 March 2020 31 March 2019

Members with Deferred Benefits 265 277

Pensioners 416 418

Total 681 695

Following the Scheme’s closure to future accrual on 31 March2016, all active members became deferred members of the Schemefrom 1 April 2016.

Meet the New Trustee of the Scheme

We welcomed Karen Jamisonto the Trustee Board in July2020, as a Commissionnominated Trustee.

Karen joined the Commissionin 2012 as Head ofManagement Accounts andis responsible for globalbudgets, month endreporting and payroll. Karensits on a number ofcommittees including theGroup Pension Plan GovernanceCommittee, which she Chaired from2018 to 2020.

Karen previously worked for VirginActive as Treasury Manager and SeniorManagement Accountant. She qualifiedas a Chartered Certified Accountant in2010 and holds an Honours Degree inInternational Business from PlymouthUniversity (1997-2001).

Although the Trustees have overallresponsibility for running theScheme, they have appointedprofessional advisers to assist inthe management of the Scheme.The Scheme’s current advisers are:-

ActuaryMatt Gurden from theGovernment Actuary’s Department(GAD). Working closely with theTrustees and the Commission, theActuary keeps the financial healthof the Scheme under review.

AuditorsMazars LLP carry out an annualaudit of the Scheme.

Investment ManagersSchroder Investment ManagementLimited Ninety One Fund Managers UKLimited (formerly Investec AssetManagement)Legal & General Assurance(Pensions Management) Limited

Threadneedle Asset ManagementLimited

Investment AdviserCapita Employee Solutionsprovides investment advice to theTrustees.

AdministratorsCapita Employee Solutionsmaintains the records and carriesout the administration of theScheme.

Legal AdviserDLA Piper UK LLP provides legaladvice to the Trustees. The LegalAdviser reviews and updates theTrust Deed and Rules to reflectdecisions made by the Trustees aswell as legislative changesintroduced by the Government.

BankersRoyal Bank of Scotland plc

The Trustees’ Advisers

Asset Class Strategic AssetAllocation%

Global Equity 25.00

Emerging Market Equity 3.75

Emerging Market Debt 3.75

Property 7.50

Diversified Growth Funds 35.00

Total Growth Assets 75.00

Liability Driven Investments (LDI) 25.00

Total Risk-reducing Assets 25.00

Total 100.0

Investments and Fund Performance

Investment Strategy

The primary objective of the Trustees is to ensure that they can meet theirobligations to the beneficiaries of the Scheme both in the short and thelong term.

The Trustees have produced a Statement of Investment Principles (SIP),which sets out the Trustees’ policies on investments. The current investmentstrategy was implemented in 2018 and aims to improve the Scheme’soverall investment efficiency by increasing the long-term expected returnwhilst reducing the overall investment risk. A summary of the strategy isdetailed in the table below.

Schroders and Ninety One manage the Scheme’s diversifiedgrowth funds and Schroders also manages the liability driveninvestment (LDI) portfolio. The objective of LDI is to try to ensurethat the changes that occur in the value of the investments areclosely related to the changes in the value of the liabilities of theScheme.

The global equity and emerging market debt and equity fundsare managed by Legal & General and Threadneedle managesthe property fund.

In recent years, there has been an increased focus on the needfor pension schemes to invest ethically. Changes were made tothe SIP in September 2019 to incorporate new regulationswhich became effective from 1 October 2019, including detailsof the Trustees’ policy on environmental, social and corporategovernance (‘ESG’). Details of these changes were provided inlast year’s member report.

New investment disclosure regulations effective from 1 October2020 involved further changes being made and a new SIP wasproduced in September 2020. These changes set out theTrustees’ policy on their relationship with their investmentmanagers and cover four key areas as follows:

- Remuneration - how the remuneration for the investmentmanagers’ services is in line with the overall investmentstrategy set out in the SIP.

- Incentives – how the agreement with each investmentmanager incentivises the investment manager to align its

investment strategy and decisions with the overall investmentstrategy set out in the SIP.

- Trustee evaluation - how the Trustees’ method ofevaluating the performance of each investment manager,along with the time period over which they evaluate thatperformance, fits with the overall investment strategy set outin the SIP.

- Costs - how the Trustees monitor the portfolio turnover costsincurred by each investment manager and how they define,monitor and target an appropriate frequency within whichthe assets are expected to be bought and sold.

As part of the new regulations, the Trustees must make the SIPavailable on a publicly accessible website free of charge andreadily located via a search engine. The Trustees are pleased toadvise that a member website has been set up which holds anumber of key pension related documents. The SIP and otheruseful information can be found at https://cwgc.pensions-directory.co.uk/. Alternatively, a copy of the current SIP can beobtained on request from the Scheme Secretary.

From 1 October 2020 the Trustees are required to produce anannual statement which provides details about the extent towhich the stewardship and engagement policy has beenfollowed during the year and details of the voting behaviour ofthe Scheme’s investment managers. From 1 October 2021 theTrustees must publish their engagement and voting report on apublicly available, free to access website. The statement for theScheme will be added to the new member website with effectfrom 1 October 2021.

Monitoring of Performance

Together with their Investment Adviser, the Trusteessupervise and closely monitor the performance of themanagers and ensure that the specific assetallocations and strategy agreed with the Trustees,have in fact been complied with to minimiseinvestment risk relative to the Scheme liabilities.

Throughout the course of the Scheme year SchrodersInvestment Management Limited, Ninety One FundManagers UK Limited, Legal & General Assurance(Pensions Management) Limited and ThreadneedleAsset Management Limited have managed theirrespective parts of the Fund in accordance with theStatement of Investment Principles. The Scheme’sinvestments are held in pooled funds in whichdifferent asset categories are allocated and managedby the investment managers.

For a number of years the Scheme has held a smallprivate equity holding with UBS Global AssetManagement (UK) Limited which has been awaitingrealisation. In May 2019 UBS realised this holdingand a final payment of £532.25 was made to theScheme.

The spread of COVID-19 created uncertainty for globalgrowth outlook and sparked volatility in financialmarkets during the first quarter of 2020. In particular,UK and global equities plummeted in value during thefirst quarter of 2020 due to the coronavirus pandemic,with the FTSE 100 suffering its worst quarter in 30 years.The investment returns shown in the above table reflectthe market falls in the year to 31 March 2020.

However, all asset classes bounced back during thesecond quarter of 2020, largely due to governmentsintroducing stimulus plans, such as the UK’s furloughscheme, and central banks increasing quantitative easingand reducing base interest rates to all-time lows.Although global (non UK) equity values have reachednear pre-pandemic levels there are concerns that thismay not be fundamentally stable, with fears thatgovernments may not be able to maintain their stimulusplans during a second wave. At the time of writing,uncertainty over the impact of Brexit also remains for UKequity markets.

The Trustees have been closely monitoring the impact ofthe COVID-19 and other political/economic factors onthe Scheme’s assets and liabilities. As noted later in thereport, the triennial valuation of the Scheme as at 31March 2020 is currently underway, along with a reviewof the Scheme’s investment strategy. Further details ofany changes made to the investment strategy will beincluded in the next Trustees’ Report to Members.

The asset allocation of the Scheme’s investments at 31 March2020 was as follows:-

Actual Asset Strategic AssetAllocation Allocation

Schroder Life Diversified Growth Fund andNinety One Diversified Growth Fund 32.7% 35%

Schroder LDI Portfolio 29.8% 25%

L&G All World Equity Fund 22.7% 25%

L&G EM Local Currency Government Bond Fund 3.9% 3.75%

L&G Emerging Market Equity Fund 3.3% 3.75%

Threadneedle Property Unit Trust 7.6% 7.5%

Scheme Return

The returns on the Scheme’s investment funds over the year to31 March 2020 are shown below.

Fund Return

Schroder Life Diversified Growth Fund -6.3%

Ninety One Diversified Growth Fund -10.4%

Schroder LDI Portfolio* 9.8%

L&G All World Equity Fund -6.2%

L&G EM Local Currency Government Bond Fund -2.0%

L&G Emerging Market Equity Fund -13.2%

Threadneedle Property Unit Trust 0.2%

* LDI portfolio return reflects a notional portfolio constructed to provide a fullyfunded hedging exposure.

Pension Increases

2019/20 2018/19 2017/18% % %

United Kingdom 2.4 3.0 1.0

Canada 2.02 2.45 1.01

South Africa 4.47 4.38 5.01

Your pension in retirement is increased each year tokeep in line with the cost of living in the country inwhich you are based. The table below shows howpensions have increased over the last three years.

Annual pension increases within the Scheme applied topensions in payment for those based on UK conditionsof service follow the statutory increases for PublicSector schemes.

The Scheme’s Accounts

Fund value at 1 April 2019 £ 86,795,743

Money going into the SchemeCommission contributions £ 500,000 Total income £ 500,000

Money coming out of the SchemeBenefits payable (pensions and lumpsum retirement and death benefits) (£ 4,286,220)Leaving service benefits (£ 112,952)Administrative expenses (£ 24)

Total expenditure (£ 4,399,196)

Income less expenditure (£ 3,899,196)Change in market value of investments (£ 2,599,042)

Fund value at 31 March 2020 £ 80,297,505

The Scheme Accounts have been audited by Mazars LLPand received an unqualified opinion that they represent atrue and fair view of the Scheme’s financial affairs.

Actuarial Report

Every three years our Scheme goes through a detailedfinancial analysis called an Actuarial Valuation, at whichan assessment is made of both our current and futureassets and liabilities. Each year in between, an annualreview is completed to check how the funding positionhas changed in the previous 12 months.

The most recent triennial actuarial valuation of theScheme was carried out as at 31 March 2017. Itshowed that the funding level of the Scheme as at thatdate was 95%. In view of this shortfall, the Commissionagreed to pay additional contributions to the Scheme.These contributions together with the expected returnson the Scheme assets were expected to eliminate theshortfall by 31 March 2027, although the funding levelwill fluctuate as market conditions change. Thecontribution requirements are being reconsidered aspart of the triennial actuarial valuation as at 31 March2020 which is currently in progress.

Since completion of the valuation, two annual fundingupdates have been carried out. The funding update asat 31 March 2018 showed that the Scheme’s fundinglevel fell over the year from 95% as at 31 March 2017to 92% as at 31 March 2018. This deterioration waslargely attributable to further changes in financial

market conditions, which increased the value placed onthe Scheme’s liabilities, and slightly lower than expectedinvestment returns. Offsetting this were the deficitcontributions paid by the Commission.

The funding update as at 31 March 2019 showed thatthere had been a further deterioration in the Scheme’sfinancial position with the estimated funding leveldecreasing to 85%. This deterioration was primarilyattributable to changes in financial market conditionsand the outlook for future expected investment returns,which increased the value placed on the Scheme’sliabilities. Additionally, investment returns were slightlylower than expected over the period resulting in a lowerasset value than expected. However, these impacts werepartly offset by the deficit contributions paid by theCommission. Whilst the recent deterioration in theScheme’s funding level is disappointing, this is asnapshot in time during a period when markets havebeen very volatile.

The next full valuation of the Scheme is due as at 31March 2020 and is in the process of being finalised.Once concluded, an update will be provided tomembers in the form of a summary funding statement.

Impact of COVID-19

The coronavirus pandemic has had a devastatingimpact on human life and global economies. Atthe start of the outbreak, stock markets felldramatically and, although they have largelyrecovered, they are likely to remain volatile forsome time.

In these uncertain times the Trustees want toreassure members that we have taken thenecessary steps to ensure that the Scheme’sbenefits are secure and continue to beadministered effectively. Throughout 2020, wehave continued to work closely with our advisersand the Commission to ensure that they haveplans in place to minimise any impact on the dayto day operations of the Scheme; in particularCapita, who provide the administration, havebeen a key focus.

Most of Capita’s staff are now working remotelywith communications being directed accordinglyand therefore there is continuity of service. Capitawill continue to endeavour to deliver the tasksthat are of utmost importance to you, withpriority being given to pension payments, bereavements, retirement and transfer

settlements and pension increases, in accordancewith guidance issued by The Pensions Regulator.As staff are working remotely, the most effectiveway of contacting Capita is by email - using thecentralised email addressEdinburghpensions4@capita.co.uk.

The Trustees have continued to hold regularquarterly meetings with their advisers to discussmatters relating to the administration andinvestment performance of the Scheme. However,these have had to be held remotely via MicrosoftTeams in view of the requirements for physicalsocial distancing; this has proved to be a veryefficient means of communication.

Current Issues

GMP Equalisation

We have noted the issue of GuaranteedMinimum Pension (GMP) equalisation in ourprevious member reports. You may recall thatGMPs built up in the Scheme prior to April1997 as a result of the Scheme beingcontracted out of the State Earnings RelatedPension Scheme.

Since the High Court published its ruling inthe Lloyds Banking Group case back inOctober 2018 on the need for pensionschemes to equalise for the impact of GMPs,the pensions industry has been scrutinisingthe options put forward in the judgment.Another court hearing was held earlier thisyear to address some of the previouslyunanswered questions, including issuesaround transferred benefits. The judgementin this second hearing was issued on 21November 2020, confirming that schemesmust top up historic transfer values calculatedon an unequal basis.

The Trustees are working through thecomplex and technical issues associated withGMP equalisation for the Scheme with theiradvisers and will continue to keep membersupdated on this issue as appropriate.

Watch out for Pension Scams

A major event like the coronavirus pandemiccan unfortunately initiate new types of scamactivity. A rise in pension scams has beenreported as scammers try to exploit publicfears over the uncertainty in financial markets.Scammers can come across as beingfinancially knowledgeable, have seeminglylegitimate websites, references and materialsand can seem like the real deal.

The Pensions Regulator regularly updates itsguidance on scams and its latest leaflet liststhe following four simple steps to protectyourself:

• Reject any unexpected offers – whethermade online, on social media or over thephone, a free offer from a company youhave not heard of before is likely to be ascam.

• Check who you’re dealing with - checkthe Financial Services Register(www.register.fca.org.uk) or call the FCAhelpline on 0800 111 6768 to see if thefirm you are dealing with is authorised bythe Financial Conduct Authority (FCA).

• Don’t be rushed or pressurised intoanything - take your time to make all thechecks you need – even if this meansturning down an ‘amazing deal’.

• Get impartial information and advice –

- The Pensions Advisory Service (TPAS)provides free independent and impartialinformation and guidance. You can callTPAS for free guidance on 0800 011 3797or go to the website(www.thepensionsadvisoryservice.org.uk).

- Financial advisers – It’s important you makethe best decision for your own personalcircumstances, so you should seriouslyconsider using the services of a financialadviser. If you do opt for an adviser, be sureto use one that is regulated by the FCAand never take investment advice from thecompany that contacted you or an adviserthey suggest, as this may be part of thescam.

You can view a copy of the PensionsRegulator’s leaflet on the Pensions Regulator’swebsite:

https://www.thepensionsregulator.gov.uk/en/pension-scams

The FCA has dedicated a section of its websiteto help people avoid pension and investmentfraud. It keeps a ‘warning list’ of knownscams. You can find whether an offer youhave received is on the warning list byanswering a series of questions on the FCAwebsite. The website address is:https://www.fca.org.uk/scamsmart/warning-list

If you think you may have been contacted bya scammer, call the Scheme Administrator,Capita (contact details are at the back of thisreport) to check out the validity of yourcontact before you take any further action.

Finally, if you have taken up an offer totransfer your benefits but are now worried itcould be a scam, it may not be too late – butyou should act immediately.

• Contact Capita straight away. They may beable to stop a transfer if it has not yettaken place.

• Call Action Fraud on 0300 123 2040 toreport it.

Scheme Administration

In last year’s report we mentioned ourintention to conduct a survey for feedbackon members’ experiences of theadministration services provided in relation tothe Scheme. In view of the Trustee’s reviewof the administration services provider andthe ongoing impact of the coronaviruspandemic, we decided to defer the survey. Inthe meantime, the Trustees have kept theadministration service levels under closereview, through increased communicationwith, and reporting from, the Capitaadministration team. These services willcontinue to be kept under close review bythe Trustees over the coming months, withaction being taken as appropriate.

Keeping Us Informed

Keeping our records up to date is vital to thesmooth running of the Scheme. Pleasetherefore contact the Scheme Administratorwhenever you:

l change your address or, if you are inregular receipt of a pension, you changeyour bank account details

l wish to change your death benefitnomination

l want information about the Scheme oryour benefits

Also, we greatly value your feedback on theservice being provided by the SchemeAdministrator so if you have comments tomake please pass these to the Secretary.

Further Information

If you have any questions about theScheme, or would like any moreinformation, please contact the SchemeAdministrator:-

Administrator - Commonwealth WarGraves Commission SuperannuationScheme

Capita Employee SolutionsPO Box 555Stead HouseDarlington DL1 9YT

Tel: 0333 222 0085Email:Edinburghpensions4@capita.co.uk

Jamie Guille in the HR Service Centre atthe Commission runs the Commission’sside of Pension Administration and canbe contacted as follows:-

Jamie Guille Reward SupervisorCommonwealth War Graves Commission2 Marlow RoadMaidenheadBerkshire SL6 7DX

Tel: +44 (0) 1628 507131Email: jamie.guille@cwgc.org

You can also contact Sue Kettle, theScheme’s Secretary, at:

Capita Employee Solutions65 Gresham StreetLondonEC2V 7NQ

Tel: 07891 523172Email: susan.kettle@capita.com

Or you can contact Chris Farrell, Chair ofthe Trustees, as follows:-

Tel: 00 33 (0)607 156875Email: chris.farrell@cwgc.org

If you are unable to resolve a problemwith the Scheme through these normalchannels, you may wish to pursue acomplaint through the Scheme’s formaldispute resolution procedure. A copy ofthe procedure is available on requestfrom the Secretary.

COMMONWEALTH WAR GRAVES COMMISSION SUPERANNUATION SCHEME MEMBERS REPORT 2020