Quest UK Pension Scheme (“the Scheme”)
Statement of Investment Principles for the Scheme (“the Statement”)
Scope of Statement
This Statement has been prepared in accordance with section 35 of the Pensions Act 1995 (asamended by the Pensions Act 2004, and the Occupational Pension Schemes (Inv estment)
Regulations 2005).
The effectiv e date of this Statement is
2020. The Trustees will rev iew this Statement
and the Scheme’s inv estment strategy no later than three years after the effectiv e date of thisStatement and without delay after any significant change in inv estment policy.
Consultations Made
The Trustees hav e consulted with the principal employer, Giv audan UK Limited (“the Employer”), prior
to writing this Statement and will take the Employer’s comments into account when they believ e it isappropriate to do so. This Statement includes changes made to the inv estment strategy that were
initially presented by the principal employer and hav e now been agreed by the Trustees.
The Trustees are responsible for the inv estment strategy of the Quest UK Pension Scheme. They
hav e obtained written adv ice on the inv estment strategy appropriate for the Scheme and on the
preparation of this Statement. This adv ice was prov ided by Aon UK Solutions Limited who are
authorised and regulated by the Financial Conduct Authority.
The day-to-day management of the Scheme's assets has been delegated to Aon Inv estment Limited
who are authorised and regulated by the Financial Conduct Authority. A copy of this Statement has
been prov ided to the appointed inv estment manager and is av ailable to the members of the Scheme.
The Trustees hav e decided to inv est the Scheme’s assets in Aon's Delegated Consulting Solution(“DCS”). Aon Inv estment Limited ("AIL") manage the Scheme’s assets in a range of funds which can
include multi-asset, multi-manager and specialist third party liability matching funds. DCS in
conjunction with the managers of these underlying funds conduct the necessary day to day
management of the Scheme’s assets required to meet the Scheme’s objectiv es.

Objectives and Policy for Securing Objectives
The Trustees' primary objectiv es are:“funding objectiv e” - to ensure that the Scheme is fully funded using assumptions that containa margin for prudence. Where an actuarial v aluation rev eals a deficit, a recov ery plan will be
put in place which will take into account the financial cov enant of the Employer;“stability objectiv e” – to hav e due regard to the likely lev el and v olatility of required
contributions when setting the Scheme’s inv estment strategy; and“security objectiv e” – to ensure that the solv ency position of the Scheme (as assessed on agilt basis) is expected to improv e. The Trustees will take into account the strength of
Employer’s cov enant when determining the expected improv ement in the solv ency position of
the Scheme.

1Choosing Investments
The types of inv estments held and the balance between them is deemed appropriate giv en the liability
profile of the Scheme, its cashflow requirements, the funding lev el of the Scheme and the Trustees’
objectiv es.
The assets of the Scheme are inv ested in the best interests of the members and beneficiaries.
The Trustees exercise their powers of inv estment (or delegation where these powers hav e beendelegated to an inv estment manager) in a manner calculated to ensure the security, quality, liquidity
and profitability of the portfolio as a whole. In order to av oid an undue concentration of risk a spreadof assets is held. This div ersification is both within and across the major asset classes.
Assets held to cov er the Scheme’s technical prov isions (the liabilities of the Scheme) are inv ested in amanner appropriate to the nature and duration of the expected future retirement benefits payable
under the Scheme.
The assets of the Scheme are inv ested predominantly on regulated markets (with inv estments not on
regulated markets being kept to a prudent lev el) and properly div ersified to av oid excessiv e relianceon any particular asset, issuer or group of undertakings so as to av oid accumulations of risk in theportfolio as a whole.
Inv estment in deriv ativ es is only made in so far as deriv ativ es contribute to the reduction of
inv estment risks or facilitate efficient portfolio management and are managed so as to av oid
excessiv e risk exposure to a single counterparty or other deriv ativ e operations.
The Balance Between Different Kinds of Investments
The Trustees recognise that the key source of financial risk (in relation to meeting their objectiv es)
arises from asset allocation. They therefore retain responsibility for setting asset allocation and takeexpert adv ice as required from their professional adv isers.
The Trustees will rev iew their inv estment strategy following each formal actuarial v aluation of the
Scheme (or more frequently should the circumstances of the Scheme change in a material way). The
Trustees take written adv ice from their professional adv isers regarding an appropriate inv estment
strategy for the Scheme.
The inv estment objectiv es set out in the Appendix to this Statement were implemented after
considering written adv ice from the Trustees’ adv isers.
A broad range of av ailable asset classes has been considered. This includes consideration of socalled “alternativ e” asset classes (namely priv ate equity, and hedge funds). The assets are inv ested
in pooled funds which offer div ersified exposure to a wide range of alternativ e asset classes.
Under DCS, the Trustees delegate responsibility for managing their asset allocation to Aon
Inv estment Limited. This allows the asset allocation of the Scheme to be adjusted quickly, where
needed, to best meet the inv estment objectiv es of the Scheme.

2Investment Risk Measurement and Management
The key inv estment risks are recognised as arising from asset allocation. These are assessedtriennially in conjunction with the actuarial v aluation of the Scheme, following which the Trustees takeadv ice on the continued appropriateness of the existing inv estment strategy.
Risks associated with changes in the Employer cov enant are assessed by monitoring the Failure
Score (as defined for the purposes of calculating the risk-based element of the Pension Protection
Fund lev y). The Trustees also hav e an agreement with the Employer to receiv e notification of any
ev ents which hav e the potential to alter the creditworthiness of the sponsoring employers. In
particular, the Trustees will be informed of Type A ev ents, as defined in appropriate guidance issued
by the Pensions Regulator and employer-related Notifiable Ev ents. On receipt of such notification,
the Trustees will re-consider the continued appropriateness of the Scheme’s existing inv estment
strategy.
The Trustees monitor performance and risk on a quarterly basis v ia inv estment monitoring reports
prepared by the inv estment manager and guidance from their professional adv isors. The Trustees
hav e appointed Aon to alert them on any matters of material significance that might affect the ability of
the inv estment manager to achiev e their objectiv es.
The Trustees acknowledge that inv estment returns achiev ed outside the expected dev iation (positiv eor negativ e) maybe an indication that an inv estment manager is taking a higher lev el of risk than
indicated. For due diligence purposes the Trustees meet regularly with their inv estment manager.
CustodyInv estment in pooled funds giv es the Trustees a right to the cash v alue of the units rather than to theunderlying assets. The inv estment manager is responsible for the appointment and monitoring of thecustodian(s). The custodian(s) are independent of the Employer.
Expected Returns on Assets
Ov er the long-term the Trustees’ expectations are:
for the “growth” assets (UK and ov erseas equities, property), to achiev e a return which atleast keeps pace with the increase in national av erage earnings ov er the same period. The
Trustees are willing to incur short-term v olatility in asset price behav iour with the expectationthat ov er the long term these assets will outperform asset classes which may be regarded asmatching the liabilities;

for the “matching” assets to be inv ested in a manner appropriate to the nature and duration of
the expected future retirement benefits payable under the Scheme;

the neutral estimate of projected inv estment returns for the asset classes taken from theactuarial v aluation undertaken as at 31 March 2020 were: 7.2% pa UK equities, , 1.4% pa for
10-year UK inv estment grade corporate bonds, 0.2% pa for 15-year UK index-linked gilts and2.1% pa for price inflation (CPI).


Returns achiev ed by the inv estment manager are assessed against performance benchmarks set by
the Trustees in consultation with their adv isers and inv estment manager.

3Realisation of Investments/Liquidity
The Trustees recognise that there is a risk in holding assets that cannot be easily realised should theneed arise. All of the assets held are realisable at short notice through the sale of units in pooled
funds.
Arrangements with Asset Managers
The Trustees hav e appointed AIL as their fiduciary manager, who they consider to be their asset
manager. References in this policy to ‘underlying asset managers’ refers to those asset managers
which AIL in turn appoints to manage inv estments on behalf of the Trustees.
The Trustees recognise that the arrangements with AIL, and the underlying asset managers, areimportant to ensure that interests are aligned. The Trustees seek to ensure that AIL is incentiv ised tooperate in a manner that generates the best long-term results for the Scheme and its beneficiaries.
The Trustees receiv e quarterly reports and v erbal updates from AIL on v arious items including theinv estment strategy, performance, and longer-term positioning of the portfolio. The Trustees focus on
longer-term performance when considering the ongoing suitability of the inv estment strategy inrelation to their objectiv es and assess AIL ov er 3-year periods.
The Trustees receiv e stewardship reports each calendar year on the monitoring and engagement
activ ities carried out by AIL, which supports the Trustees in determining the extent to which the
Scheme's engagement policy has been followed.
The Trustees share the policies, as set out in this SIP, with the fiduciary manager and ask thefiduciary manager to rev iew and confirm whether their approach is in alignment with the Trustees’
policies.
The Trustees delegate the ongoing monitoring of underlying asset managers to AIL, who areresponsible for monitoring the Scheme’s inv estments and considering the extent to which the
inv estment strategy and decisions of the underlying asset managers are aligned with the inv estment
objectiv es of the Scheme.
This includes monitoring the extent to which the underlying asset managers:
make decisions based on assessments about medium- to long-term financial and nonfinancial performance of an issuer of debt or equity; and

engage with issuers of debt or equity in order to improv e their performance in the medium- tolong-term.

Before appointment of a new fiduciary manager, the Trustees will rev iew the gov erning documentation
associated with the inv estment and will consider the extent to which this aligns with the Trustees’
policies. Where possible, the Trustees will seek to amend that documentation or express their
expectations (such as through side letters, in writing, or v erbally at trustee meetings) to improv ealignment.
The Trustees believ e that hav ing appropriate gov erning documentation, setting out clear expectations
to AIL and carrying out regular monitoring of the performance of the inv estment strategy will be
sufficient to incentiv ise AIL to make decisions that align with the Trustees’ policies and which will bebased on assessments of medium and long-term financial and non-financial performance.
Where AIL is considered to make decisions that are not in line with the Trustees’ policies,
expectations, or the other considerations set out abov e, the Trustees will typically engage with thefiduciary manager to understand the circumstances and materiality of the decisions made.

4

There is typically no set duration for arrangements with the fiduciary manager, although the continued
appointment will be rev iewed periodically. Similarly, there are no set durations for arrangements withthe underlying asset managers that the fiduciary manager inv ests in, although this is regularly
rev iewed as part of the manager research and portfolio management processes in place.
Costs and Performance

The Trustees are aware of the importance of monitoring their asset managers' total costs and theimpact these costs can hav e on the ov erall v alue of the Scheme's assets. The Trustees recognisethat in addition to annual management charges, there are other costs incurred by asset managers that
can increase the ov erall cost incurred by their inv estments.
The Trustees receiv e annual cost transparency reports from their fiduciary manager. These reports
present information in line with prev ailing regulatory requirements for fiduciary managers. They clearly
set out on an itemised basis:

The total amount of inv estment costs incurred by the Scheme;

The fees paid to the fiduciary manager;



The fees paid to the inv estment managers appointed by the fiduciary manager;

The amount of portfolio turnov er costs (transaction costs) incurred by the inv estment
managers appointed by the fiduciary manager;–

The Trustees define portfolio turnov er costs as the costs incurred in buying andselling underlying securities held within the funds of the inv estment managers
appointed by the fiduciary manager;

Any charges incurred through the use of pooled funds (custody, administration, and audit
fees)



The impact of costs on the inv estment return achiev ed by the Scheme.

The Trustees acknowledge that portfolio turnov er costs are a necessary cost in order to generate
inv estment returns and that the lev el of these costs v aries across asset classes and managers. The
fiduciary manager monitors the lev el of portfolio turnov er (defined broadly as the amount of purchases
plus sales) of all the inv estment managers appointed on behalf of the Trustees.
The Trustees benefit from the economies of scale prov ided by the fiduciary manager in two key costareas:
The ability of the fiduciary manager to negotiate reduced annual management charges withthe appointed inv estment managers;The ability of the fiduciary manager to monitor ongoing inv estment costs (including additional
fund expenses and portfolio turnov er) incurred by the inv estment managers and achiev eefficiencies where possible;

The Trustees assess the net performance of their fiduciary manager on a rolling three-year basis
against the Scheme's specific liability benchmark and inv estment objectiv e. The remuneration paid tothe fiduciary manager and fees incurred by third parties appointed by the fiduciary manager areprov ided annually by the fiduciary manager to the Trustees. This cost information is set out alongside
the performance of the fiduciary manager to prov ide context. The Trustees monitor these costs andperformance trends ov er time.

5Environmental, Social and Governance considerations
The Trustees' primary concern when setting the inv estment strategy is to act in the best financial
interests of the beneficiaries, seeking the best return that is consistent with a prudent and appropriate
lev el of risk. The Trustees believ e that, in order to fulfil this commitment and to protect and enhancethe v alue of the Scheme’s inv estments, they must act as responsible stewards of the inv estments.
The Trustees acknowledge that financially material considerations include env ironmental, social andcorporate gov ernance (ESG) factors, such as climate change. Understanding these factors can help
identify inv estment opportunities and financially material risks.
As part of their delegated responsibilities, the Trustees expect the inv estment managers to include
ESG considerations in the selection, retention and realisation of inv estments. Such decisions should
consider, amongst other things, the sustainability of business models and not be influenced bypersonal, ethical or moral judgments.
The Trustees are taking the following steps to monitor and assess ESG related risks andopportunities:


The Trustees will undertake periodic training on Responsible Inv estment to understand how
ESG factors, including climate change, may impact on the Scheme's assets and liabilities.



As part of ongoing monitoring, the Trustees will use information, where av ailable, prov ided by
Aon of their assessment of the inv estment managers against ESG factors.

On an annual basis, the Trustees will ask the inv estment managers to prov ide their policy on
Responsible Inv estment to include details of how they integrate ESG in their inv estment
decision making process. Should the Trustees look to appoint a new manager, they will
request this information as part of the selection process. All responses will be rev iewed andmonitored.

Stewardship - voting and engagement
The Trustees recognise the importance of their role as a steward of capital, promoting corporate
responsibility and ensuring the highest standards of gov ernance. The Trustees recognise that
ultimately this will help to protect the financial interests and create long-term financial v alue for the
beneficiaries of the Scheme.
The Trustees rev iew the stewardship activ ity of managers on an annual basis to ensure the Scheme's
stewardship policy is being appropriately implemented in practice. The Trustees receiv e annual
reports on stewardship activ ity carried out by their managers and these reports include detailed v oting
and engagement information from underlying asset managers.
The Trustees expect the inv estment managers to use their influence as institutional inv estors toensure that underlying asset managers exercise the Trustees' v oting rights in relation to the Scheme's
assets and report to the Trustees on stewardship by underlying asset managers as required.
The Trustees will engage with the inv estment managers as necessary for more information, to ensurethat robust activ e ownership behav iours, reflectiv e of their activ e ownership policies, are being
actioned. This will take the form of reporting which will be made av ailable to Scheme members onrequest.
Where possible, the transparency for v oting should include v oting actions and rationale with relev ance
to the Scheme, highlighting in particular those v otes by the asset managers against management thatwere significant and where v otes were abstained. Where v oting is concerned we would expect our
underlying asset managers, to recall stock lending, as necessary, in order to carry out v oting actions.
The Trustees may engage with their inv estment managers, who in turn are able to engage with
underlying asset managers, inv estee company or other stakeholders, on matters including theperformance, strategy, risks, social and env ironmental impact, corporate gov ernance, capital
structure, and management of actual or potential conflicts of interest, of the underlying inv estments
6made. Where a significant concern is identified, the Trustees will consider, on a case by case basis, arange of methods by which they would monitor and engage so as to bring about the best long-term
outcomes for the Scheme.
Members' views and non-financial factors
The Trustees do not explicitly take the v iews of members and beneficiaries of the Scheme into
account in relation to ESG factors or the present and future quality of life of the members andbeneficiaries of the Scheme (defined as 'non-financial factors' in the 2018 Regulations). The Trustees
will rev iew this policy on an annual basis.
Additional Voluntary Contributions (“AVC”) Arrangements
Following the closure of the defined contribution section of the Scheme, there is no prov ision formembers to pay AVCs in order to increase their benefits under the Scheme.

IAN MESSENGER
Chair of Trustees

7Quest UK Pension Scheme (the “Scheme”)
Appendix to Statement of Investment Principles
This Appendix sets out the Trustees’ current inv estment strategy and is supplementary to the Trustees’
Statement of Inv estment Principles (the “attached Statement”).
The Trustees’ inv estment strategy has been established in order to maximise the likelihood of achiev ing
the primary objectiv es set out in the attached Statement. The details are laid out below:
1.

Investment Strategy and Investment Manager Arrangement

The Trustees hav e appointed Aon Inv estment Limited (AIL). Assets are inv ested in pooled funds at
AIL.
The Trustees hav e constructed a Liability Benchmark which represents the discounted v alue of the
Scheme's liability cashflows on the assumptions underlying the Technical Prov isions basis.
The Trustees hav e decided to hedge the Liability Benchmark, scaled to the v alue of the Portfolio.
The current inv estment objectiv e is to outperform the Liability Benchmark by 3.0% pa, ov er rolling
three-year periods.
AIL has been appointed to update and monitor the Scheme’s funding lev el against the agreed trigger
lev els on a daily basis. As successiv e funding lev el triggers are met, the portfolio will be restructured inline with the new inv estment objectiv e.
The following table sets out the funding lev el trigger points and the associated inv estment objectiv e.
Investment objective ofexcess of Liability
Benchmark (% p.a.)

2019

2020

2021

2022

2.75%

86.6

90.3

94.0

97.9

2.50%

87.7

91.2

94.7

98.4

2.25%

88.7

92.0

95.3

98.8

2.00%

89.7

92.8

95.9

99.2

1.75%

90.7

93.6

96.5

99.6

1.50%

91.8

94.5

97.2

100.1

1.25%

92.7

95.3

97.8

100.5

Funding Trigger Levels (%)

Funding level trigger points effective from 1 April each year

The Trustees will consult the Employer prior to amending the funding trigger points, inv estment returnobjectiv e or hedge ratios as set out in the Appendix.
2.

Use of Derivatives

Inv estments made for the Portfolio may use deriv ativ es in so far as they contribute to the reduction of
inv estment risks or facilitate efficient portfolio management.

3.

Cash balances

A working balance of cash is held for imminent payment of benefits, expenses, etc. Under normal
circumstances it is not the Trustees’ intention to hold a significant cash balance and this is carefully
monitored by the Scheme’s administrator.
4.

Fee structure for advisers and investment manager

4.1

Advisers

The Trustees’ inv estment adv isers are paid for adv ice receiv ed on the basis of the time spent by theadv iser. For significant areas of adv ice (e.g. one off special jobs, or large jobs, such as asset andliability modelling), the Trustees will endeav our to agree a project budget.
These arrangements recognise the bespoke nature of the adv ice giv en and that no inv estment
decisions hav e been delegated to the adv iser.
4.2

Investment manager

The inv estment manager is remunerated as a set percentage of the assets under management. This isin keeping with standard market practice.
The total fee for proposed solution is 0.45% pa and may be broken down as follows:
AIL fiduciary fee
Underlying manager fee
Custody fee
Inv estment consultancy fee
5.

0.20% pa
0.23% pa (may change from time to time)
0.02% pa (charged at 0.05% pa up to a maximum of £35,000 pa)
The majority of serv ices are cov ered by the AIL fiduciary fee

Additional Voluntary Contributions (“AVC”)

There is no prov ision for members to pay AVCs in order to increase their benefits under the Scheme.