Message from the Fidelity Independent Governance Committee

2016 Annual Report

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Dear Policyholder

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Introducing your new Independent Governance Committee Last year, the Financial Conduct Authority (FCA) announced new rules that every insurance company providing pension plans was required to set up an Independent Governance Committee (IGC) with two clear objectives:

■ to act solely in your best interest

■ to assess the Value for Money delivered to you by your pension plan.

The Fidelity IGC is a committee formed of three independent members and two members from Fidelity. Appendix B provides further details on the individuals involved in the Fidelity IGC and how they were selected.

Part of this new process requires that we produce an annual chair’s report for our policyholders setting out the results of the Value for Money review carried out. As the Chair of the new IGC, I am pleased to share with you our assessment of the Value for Money delivered by your pension plan.

What have we been doing over the last year?In preparation for producing the 2016 Chair’s Report the IGC has:

■ received presentations from Fidelity on their long term strategy and met key members of the Fidelity management team

■ reviewed the way Fidelity oversees its investment strategy design and ongoing investment performance

■ met with a selection of employers to gain feedback on the performance of Fidelity and obtain any feedback provided by you to your employer on your pension plan

■ reviewed both written and online communications supporting you through your journey from joining the pension plan through to retirement

■ assessed the administration processes and quality control procedures

■ received feedback from you through surveys carried out by Fidelity

■ developed a Value for Money framework

■ reviewed and agreed Fidelity’s proposed actions to reducing charges in legacy products in light of the review they had undertaken.

When completing its Value for Money assessment, the IGC worked closely with Fidelity’s pension and investment teams who were very supportive and assisted the IGC with providing good quality information for review.

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What is Value for Money?For a pension plan to offer good value for money we would expect to see certain criteria present (see appendix A). The IGC documented all the criteria that we would expect to see in a good quality pension plan and then collected information from Fidelity to determine whether these criteria were met. Value for Money is not just about low cost and involves the following key elements:

■ The level and quality of benefits that you receive.

■ The level and quality of the communications and service you and your employer receive from Fidelity.

■ The costs associated with the plan.

Our Value for Money assessmentAfter undertaking the assessment detailed above, the IGC believe Fidelity’s pension plans offer you Value for Money.

Key areas of quality ■ Fidelity has a robust process for reviewing the structure of your investments and frequently

reviews the performance of your investments.

■ The administration is of a high standard and Fidelity looks to continually enhance their service.

■ Support is available to you online and by phone, throughout your time in the pension plan.

■ The charges you pay are clearly identified and easy to understand. There are no exit charges or commissions paid.

Areas for further developmentThe IGC identified areas where developments could be considered by Fidelity over the next year:

■ The way Fidelity supports you could be altered to make communications and online models more specific to your particular situation.

■ Continue developing the communications sent to you to make them as clear and engaging as possible.

■ Ensure that employers with bespoke investment strategies continue to employ an investment advisor, to ensure that the investment strategy remains right for you.

Our Value for Money assessment

The IGC believe Fidelity’s pension plans offer you Value for Money.

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Looking ahead – IGC focus for the next 12 months Over the next year, we will continue to monitor the Fidelity pension plans and we will write to you again in 2017 to provide you with our updated Value for Money assessment.

We already have some items for consideration for this year:

■ Consider whether both qualitative and possibly quantitative comparisons to other insurance companies’ pension plans would be useful.

■ Obtain information from the investment managers on the costs of investing aside from the fund management charge*.

■ Collect further feedback from you and employers through both the client and policyholder forums run by Fidelity, alongside visiting a cross-section of employers for feedback.

■ Carry out a more detailed consideration of the journey you take through the pension plan both online and through paper communications; we will also consider how easy it is for you to make changes and interact with the planning tools available.

Concerns raised by the IGC to Fidelity and the responseThe IGC has worked proactively with Fidelity and any concerns raised have been dealt with by the Fidelity representatives within our IGC meetings.

No formal concerns have been raised with the Board of Fidelity. We have shared the results of our Value for Money assessment with the Board and will be working with them to develop Fidelity’s pension plans going forwards.

Have your sayWhen concluding the Value for Money assessment, the IGC put measures in place to ensure your views were taken to account.

The IGC has looked to proactively source feedback from you in the following ways:

■ Independent IGC members have visited employers to discuss the feedback you have provided directly to them on your pension plan.

■ The IGC has taken into account the feedback you provided after dealing with Fidelity from surveys you have completed.

■ Policyholder forums have been held by Fidelity and the outcomes considered by the IGC.

Yours sincerely,

Kim Nash Independent Governance Committee Chair

* We requested the information this year but there is currently no industry standard for measuring these investment costs.

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Appendix A – Value for Money criteriaThe IGC determined the criteria that it expected a good quality pension plan to have present and then collected information from Fidelity to assess whether or not the criteria were met. The criteria that the IGC was looking to be present is below:

Communications ■ Communications are clear and engaging.

■ Online functionality is available with general education materials and planning tools.

■ Communications are sent at the right time to enable policyholders to make appropriate decisions.

■ Co-branding with the employer is possible.

Investment ■ Policyholders are fully invested at all times.

■ Default strategies are designed in a way to deliver a good outcome to policyholders.

■ Appropriate range of self-select funds.

■ Scope for Fidelity to modify the fund range in response to changing market conditions.

■ Clear fund objectives and risk parameters.

■ Underlying asset classes offer significant prospective real returns over the longer term and/or useful diversification.

■ Longer term investment performance consistent with fund benchmarks which are an adequate reflection of market opportunities.

Administration (policyholder)

■ Good quality administration which is both timely and accurate.

■ Helpline is available to policyholders to resolve queries.

■ Online self-service system available.

Administration (employer)

■ Quality Management information available to enable good governance.

■ Workforce management systems easy to use.

Provider ■ Will be around in the long term and prepared in invest in their DC business.

■ Policyholders recognise Fidelity’s brand.

■ Providers can scale up operations and offer appropriate resource to the business.

Ability to exit ■ Policyholders should be free to leave a pension plan without financial penalties at any time.

Risk management ■ Robust procedures and controls in place to manage risk.

■ Manage errors so that policyholders not disadvantaged.

Charges ■ All charges should be at a reasonable level.

■ Transparent and easy to understand.

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Appendix B – Who is the Fidelity IGC?The Fidelity IGC membersThe Fidelity IGC is made up of three independent members and two members from Fidelity.

Independent Chair Kim Nash, Pitmans Trustees Limited

Independent members Rachel Brougham, BESTrustees

David Felder, LawDeb Pension Trustees

Fidelity members Julian Webb, Head of Workplace Investing

Paul Mason, Head of Business Management

You can read more about each of the IGC members below or by visiting the following link: https://www.fidelity.co.uk/pensions/about-us/dc-governance/fidelitys-igc.page

The IGC operates under Terms of Reference dated 7 May 2015 and these can be viewed at: https://www.fidelity.co.uk/static/pdf/pensions/common/fil-uk-dc-igc-terms-of-reference.pdf

Recruitment Fidelity wanted to ensure it had a good quality IGC, with the sufficient skill set to make judgements on the Value for Money provided by your pension plan.

A robust recruitment process was undertaken to source the Independent members of the IGC. This included open advertising, a multiple stage interview process and consideration of the skill mix of the IGC.

The members of the IGC are all experienced pension professionals with many years’ experience of dealing with Defined Contribution (DC) pensions. Within the IGC members there is investment management, consulting, actuarial and administration experience and the IGC collectively has the experience required to undertake a Value for Money assessment.

An annual performance review of the IGC will be carried out to ensure the committee members remain appropriate and the mix of skills and service provided by all IGC members is of a high quality.

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Members of Fidelity’s Independent Governance Committee

Kim Nash – Independent Governance Committee Chair

Kim Nash is a Client Director at Pitmans Trustees Ltd (PTL). She joined PTL in February 2012. Kim is a qualified Actuary and previously worked for Towers Watson as an actuarial benefit consultant. She has significant DC trustee experience with DC Master Trust, single employer trusts and hybrid schemes. Kim also sits on governance committees for contract based arrangements.

Rachel Brougham – Independent Member

Rachel Brougham is Trust Executive at BESTrustees PLC. Prior to this, she worked at Mercer as an actuary for 26 years. Rachel has a wealth of experience in exercising independent and effective governance oversight of pension arrangements, either as a member of a pension fund trustee board, a company’s pensions’ governance committee or a pension provider’s Independent Governance Committee.

David Felder – Independent Member

David Felder is a trustee director at Law Debenture Pension Trust Corporation (Law Deb). He has over 30 years of experience working with pension funds in both the public and private sectors. He has worked for Morgan Grenfell (now Aberdeen Asset Management), Kleinwort Benson as Head of Fixed Income and then Daiwa SB Investments where he was Head of Investments. David joined Law Deb in 2002 and is a fellow of the Chartered Institute for Securities and Investment.

Julian Webb – Fidelity Representative

Julian is Head of Workplace Investing. He leads the overall strategic and corporate management of the DC businesses in the UK. Julian joined Fidelity in 2004 as Head of DC Business Development and later became Head of the UK DC Business. He has over 25 years’ experience in the corporate pensions market.

Paul Mason – Fidelity Representative

Paul Mason joined Fidelity in 2008 as Chief Administration Officer, providing a central management focus on operational, regulatory and financial issues. In December 2015 Paul was appointed as Head of Business Management for UK Financial Services. Paul is a Director of FIL Pensions Management, a Trustee of Fidelity’s Master Trust Board and a member of Fidelity’s Independent Governance Committee. Paul has over 20 years financial services experience.

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Independence of the IGCPTL, BESTrustees and LawDeb are independent of Fidelity and meet the independence criteria set by the FCA. The FCA criteria are set out below.

Any potential conflicts of interest are recorded in a log and considered by the IGC in accordance with its conflict of interest policy.

The FCA independence criteria are:

■ They or their representatives are not directors, managers, partners or employees of FIL Life, or any company within the groups, or paid by them for any role other than as members of the IGC nor are they members of the share option or performance related pay schemes of FIL Life nor have they been within the last five years.

■ They do not have a material business relationship of any description with FIL Life or any company within their group, and have not done so within the last three years (except as trustee of the insurance company’s Mastertrust).

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Appendix C – the legal requirementsIn assessing the Value for Money offered by Fidelity’s workplace personal pension plans, the IGC has considered the following point’s set out in the FCA regulations:

a) The default investment strategies available to you are designed and managed to meet your requirements.

b) Each default investment strategy has a clear statement of aims and objectives.

c) The default investment strategies are kept under regular review by Fidelity and changes are made when necessary.

d) Core financial transactions (such as the investment of new contributions) are carried out promptly and accurately.

e) You pay a reasonable level of charges.

f) The direct and indirect costs of investing are identifiable and reasonable.

The IGC has also considered other relevant factors throughout their Value for Money assessment.

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Contacting the IGCIf you have any feedback that you would like to raise with the IGC or would like further detail on the Fidelity’s IGC Chair’s Report 2016 please contact:

Email: FidelityIGCChair@PTLUK.com

Post: Fidelity IGC Chair PTL Park House Park Square East Leeds LS1 2PW

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