Opt Pensions & The Open Pension...

Opt Pensions, 3 Bakehouse Court, 19 High Street, Saffron Walden, Essex, CB10 1AT 01799 581200 www.optpensions.com

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Due Diligence

Opt Pensions &

The Open Pension Trust.

Opt Pensions is a trading style of Opt Corporation Limited. Registered in England & Wales, Company Number 10320894. Registered office: 3 Bakehouse Court, 19 High Street, Saffron Walden, Essex, CB10 1AT.

www.optpensions.com


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Contents

OPT PENSIONS ............................................................................................................................................ 3

THE OPEN PENSION TRUST ..................................................................................................................... 4

OPT PENSIONS - BOARD OF DIRECTORS ............................................................................................. 6

INDEPENDENT & EXPERIENCE BOARD OF PROFESSIONAL TRUSTEES AND ADVISERS

(REGULATED BY THE PENSION REGULATOR) .................................................................................... 7

INVESTMENT OPTIONS .............................................................................................................................. 9

STRUCTURE AND KEY PARTNERS ....................................................................................................... 15


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Opt Pensions Our Workplace Pension Scheme - Overview

Opt Pensions offers a guaranteed acceptance workplace pension scheme for automatic enrolment

through its master trust, The Open Pension Trust.

Opt Pensions has developed its own system to support advisers, employers and their employees:

Root. The Root system enables employers in a simple on-line environment to:

• assess their workforce

• calculate contributions

• issue compliant communications to the employees

• maintain records

• upload pre-assessed data

Employees can also use Root to:

• edit their personal information

• appoint a beneficiary

• view their contribution history

• see their fund value

• view all communications and member booklet

• see their projected retirement benefits

• increase their contributions

Background

Opt Pensions is a trading style of Opt Corporation Limited and is part of the Harwood Group. It was

established specifically to meet the demands of auto-enrolment and to assist small to medium-sized

companies. With this in mind, we have a team of locally based Regional Development Managers

ready to assist employers and their advisers with their auto-enrolment responsibilities. We have been

awarded a defaqto 4-star rating, placing us well amongst our peers. We are currently working to

achieve the Pensions Regulator’s Master Trust Assurance Framework, demonstrating our ongoing

commitment to provide an excellence of service and quality for our members.

Our Master Trust, The Open Pension Trust (OPT), which is regulated by the Pensions Regulator, is

run by 3 professional, independent firms of trustees, thus ensuring the highest standards of scheme

governance. OPT and its trustees provide a secure environment for members’ savings, with a

charging structure comfortably below the charge cap for Workplace Pension schemes.

• The Pension Scheme Registration Number is 12011742

• The Pension Scheme Tax Reference (PSTR) is 00825604RN


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The Open Pension Trust

Master Trusts

Master trusts offer a cost-effective and convenient solution for companies to auto enrol their

employees into a workplace pension scheme. Companies share a single master trust instead of

creating their own. The master trust governs the way the pension scheme is run. Companies make

their pension contributions through one trust, with one board of trustees, which is much more cost

effective. Employees’ money is ring-fenced into separate accounts called “sections”. Introduced in the

1950s and well-established, master trusts are regulated by the Pensions Regulator and governed by

independent trustees who by law must be qualified in the field of pensions, trusts and investments.

The trustees are also bound to safeguard employees’ interests.

Opt Pension’s Master Trust – The Open Penson Trust

Regulated by the Pensions Regulator, The Open Pension Trust is governed by independent trustees who ensure Opt Pension’s master trust is properly run. In May 2017, The Open Pension Trust was independently accredited with the Master Trust Assurance Framework (MAF) quality standard.

The Independent Board of Trustees for The Open Pension Trust consists of 3 trustees, Neil Copeland

(Chair) of Dalriada Trustee Limited, Diane Day of Independent Trustee Services Limited and Colin

Richardson of PTL (formerly Pitmans Trustee Limited). Each trustee is highly experienced and is a

specialist DC independent trustee.

What happens to the money in The Open Pension Trust?

Opt Pensions undertake the day-to-day administration of the master trust (Opt Pensions is regulated

by the Pension Regulator). Opt receives the contributions made by employers into the Open Pension

Trust and after reconciling the contributions, the contributions are invested into funds managed by the

employers selected investment manager. All investments managers are authorised in the UK and

regulated by the FCA. Investments are protected under the Financial Services Compensation

Scheme (FSCS). These measures mean members’ pensions are safe if their employer or the fund

manager goes out of business.

What is Master Trust Assurance (MAF)?

MAF was developed by the Institute of Chartered Accountants in England and Wales, with the

Pensions Regulator. Trustees use it to evaluate their pension scheme, and demonstrate compliance

with control objectives for governance and administration. MAF stipulates how independent

accountants should assess the operational effectiveness of a master trust’s controls and procedures.

These objectives are designed to be consistent with the majority of the quality features in the

Regulator’s DC code of practice and with DC regulatory guidance. MAF enables trustees to

demonstrate their trust is managed to the highest of standards.

MAF Accreditation

To obtain a MAF accreditation, an independent reporting accountant, commissioned by the trustees,

assesses the design and operational effectiveness of the scheme’s control procedures. The

framework of the assessment follows the six principles listed below:

• Essential characteristics: Schemes that operate fairly and are designed to be durable whilst

delivering desirable outcomes for members.


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• Establishing governance: Schemes that establish a comprehensive governance framework, where

accountabilities and responsibilities are made clear and transparent from the start.

• People: Scheme decision-makers have a solid understanding of their obligations and the

competency to ensure their duties are actioned accordingly.

• Ongoing governance and monitoring: Schemes that have in place effective governance and are

monitored through their entire life cycle.

• Administration: Well administered schemes with comprehensive processes, and timely and

accurate records.

• Communication to members: Schemes that ensure communications to their members are clear,

enabling them to make well informed decisions about their investment.


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Opt Pensions - Board of Directors Alastair Burt – Managing Director

With over 35 years’ business development experience within the UK pension

industry, Alastair was recruited in February 2012 to develop our Auto

Enrolment proposition for Small to Medium Sized Enterprises (SME). He was

quick to realise that SMEs would require a friendly ‘hands on’ approach that

would deliver a simple, quick & cost effective solution to auto enrolment with

a robust underlying financial product. Opt Pensions is the solution.

Garry Crackle – Director

Recruited in 2012 with 30 years of experience working in financial services,

Garry has held high level managerial roles across the sector including

positions at Legal & General and Standard Life having started his career at

Barclays. With many of his roles being at a regional or national level, including

National Development Manager of Legal & General’s IFA division, Garry

provides a strong network throughout the UK IFA community.

Adrian Daly – Non-Executive Director

Adrian is a former chief executive of Hibernian Group, now part of Aviva, and a former president of both the Society of Actuaries in Ireland and the Irish Insurance Federation. An actuary by profession he has been involved in several company start-ups including the ICI Life which was re-launched as Prudential in 1985, and led the set-up of Prudential in Milan in 1987 which was a joint venture with the Benetton Group. He is also the founder of AdviserPlus, which provides technology backing for the independent intermediary sector.

Richard Philbin – Non-Executive Director

As a Chief Investment Officer, Richard is one of the UK’s best known Multi-

Manager investors and has previously been AA rated by OBSR, Citywire and

S&P. Richard has helped to grow assets of over £7bn with AXA Architas

Multi-Manager, and before that he was Head of Multi-Manager at F&C

Investments where he launched the launched the LifeStyle range of funds and

grew assets to over £1bn during his tenure.

Michael Brown – Non-Executive Director

Mike has spent over 20 years in the life and pensions and the investment

industries, having spent the last 10 years working in the City of London. He

has worked both in the UK and in many other parts of the world including

South America, North America, the Middle East and Northern Europe. Mike is

qualified at CII Diploma level, and holds the Investment Management

Certificate (IMC). He is fully qualified to advise on all aspects of the industry.


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Independent & Experience Board of

Professional Trustees and Advisers (Regulated

by the Pension Regulator) Neil Copeland – Chair of the Board of Trustees (Dalriada Trustees)

Neil entered the pensions industry in 1987, joining a major employee benefits consultancy, where latterly he was responsible for managing the administration team. Neil went on to found Spence & Partners Limited in 2000, within which he is responsible for the delivery of their administration and consulting services as well as supporting numerous trustee boards in a consultancy capacity.

As a specialist independent trustee, Neil provides strategic advice in developing and managing our master trust.

Dianne Day – Trustee (Independent Trustees Services Limited)

Diane joined ITS in February 2015. She has been a Pension Trustee since 2007

and has experience on both DB and DC schemes, as well as independent

Governance Committees. Dianne has a wealth of experience in investment,

governance and trusteeship in Australia and the UK. She has investment

credentials both as a Trustee serving arrangements with assets over £500M.

She is particularly interested in effective member communications and

engagement strategies.

Diane holds the Diploma of Applied Finance & Investment as well as an MBA. She is also a Fellow of

the Financial Services Institute of Australia

Colin Richardson – Trustee (PTL formerly Pitmans Trustee Limited)

Colin joined PTL as a Client Director in March 2014 having previously spent twenty-five years in pensions and actuarial consultancy. Colin acts as independent trustee on several DB and DC pension schemes both large and small including five DC Master Trusts. He is formerly a Director at KPMG and a partner at Barnett Waddingham with subsequent senior positions at JLT and Buck Consultants.

Colin has advised pension scheme trustees throughout his career and also has specialist employer consulting experience. His work has involved a wide range of work for both corporate and trustee clients, including actuarial valuations, accounting, benefit design, liability management and benefit insurance. Colin also has advised upon auto-enrolment design and implementation.

Being a qualified actuary provides Colin with the necessary technical ability and in depth knowledge of pensions issues. His extensive experience in strategic solutions for schemes together with communication skills means he is well placed to guide pension scheme trustees on the decisions and management of the path they need to take with their scheme.


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Appointed Advisers

Legal Adviser – Tom Barton (Pinsent Masons)

Tom is a pensions partner and advises providers, employers and trustees in relation to workplace pensions and associated benefits. Tom is a specialist in DC pension arrangements and advises on product development and distribution, governance requirements and duties in the context of an evolving legislative landscape. Tom is a member of the ILAG Workplace Benefits Committee and a founder

member of the PMI Committee responsible for the industry examination in auto-enrolment.

Investment Adviser – Dean Wetton Advisory Limited (DWA)

The board of trustees have appointed DWA to provide the investment advice

pertaining to The Open Pension Trust default funds. Since their humble

beginnings in 2009, DWA has earnt a strong reputation for investment advice

with £26bn of assets under advice. With a strong master trust background,

DWA now have advisory agreements with 5 other master trusts including

Legal and General.


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Investment Options Overview

The Trustee believes that different levels of risk are appropriate at different phases throughout all

employees’ career and saving journey. Within the investment options in The Open Pension Trust

there are two broad time phases to your pension investment strategy, as follows:

Growth Phase • Your planned retirement date is many years away

• You seek higher long term returns from higher risk growth assets, such as shares and property

• You accept that investment values and returns can fluctuate more in the short term

Transition Phase • Your planned retirement date is within a few years

• You seek to gradually reduce your investment risk as your planned retirement date approaches

• You want your investment values and returns to fluctuate to a lesser degree as your retirement date approaches

• You plan to take a combination of cash and/or annuity at retirement

With the overall target across a member’s typical working career being to provide a return more than

inflation (Consumer Price Inflation), after fees and charges, to maintain the purchasing power of

members’ savings at retirement. The Trustees offer a range of 5 possible appropriate “default” options

(one primary and 4 alternatives).

Employers may take professional advice on which of the five investment options is best suited to their

employees. Alternatively, employers may leave the choice of investment option to the Trustees, in

which case the Primary Employer Default Fund is selected.

With each of the 5 Employer Default Options implementing the Growth and Transition phases slightly

differently, detail of the options can be found below:

Primary Employer Default Fund Option: Wellian

Investment Solutions

Growth Phase: more than 10 years to members’ stated retirement date

During the member’s growth phase, all contributions are invested in the OPT 80:20 Fund. This fund’s

objective is to provide steady medium-risk returns from a portfolio of funds selected by the investment

manager. These funds invest mostly in growth assets such as UK and overseas shares and property.

The Fund can hold 65%-100% of its assets in shares, with the remainder invested in a variety of more

stable assets, depending on the manager’s forecasts and views about investment markets.

The manager will actively allocate and switch between different asset classes depending on their

outlook for the relative risk, return and valuations of each asset class. When certain assets classes or

sectors are considered over-valued, or the outlook for returns less favourable, their weighting in the

fund will be reduced in favour of assets that are considered better value. Any transaction costs involved

in switching between asset classes will be considered in this process. This dynamic approach relies

on the skill, experience, research and analysis of the manager’s investment team, whose performance

is carefully monitored by the Trustee and its investment adviser.


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The manager invests across 22 different sectors, using predominantly (at least 90%) passive funds.

These funds are sourced from a wide variety of different specialist managers, chosen according to their

cost and quality. To ensure adequate diversification and liquidity, there is a series of risk constraints

such as minimum and maximum exposure to individual managers, sectors and asset classes.

Transition phase: from 10 years prior to the member’s stated retirement date

When members reach ten years to their expected retirement date, the level of investment risk is

gradually reduced. This is to prepare members to take cash and/or an annuity at retirement (see 5,

above). You will receive notification that this transition phase has begun and have an opportunity to

reconfirm your expected retirement date. Each year, 10% of the member’s money is transferred from

the OPT 80:20 Fund and transferred to the OPT 0:100 Fund, as follows:

Years to retirement % of Member’s pension invested in OPT 80:20 Fund

% of Member’s pension invested in OPT 0:100 Fund

11 100 0

10 90 10

9 80 20

8 70 30

7 60 40

6 50 50

5 40 60

4 30 70

3 20 80

2 10 90

1 0 100

The OPT 0:100 Fund invests in a mix of cash, short term money market securities and fixed interest

securities, so that its investment risk is reduced in order protect capital value and to minimise the

transition risk to cash/annuity in retirement. The Fund’s objective is to provide a greater focus upon

the protection of capital from a lower risk portfolio of predominantly cash and short term fixed interest

investments.


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Alternative Employer Default Fund Option 1: AB Global Target

Date Funds

Target date funds operate differently to other default funds. Instead of fixing a specific asset allocation

based upon an age, or term-to-retirement, target date funds are managed to target a specific retirement

date range (usually 3 years), and investment risk is reduced progressively towards that range.

Target date funds seek to invest in a similar manner to the other funds, but rather than operating a

reducing split of investments based upon specific life-events, the whole fund will de-risk by switching

from higher risk market based assets to lower risk fixed income assets as the fund approaches its

“target date”.

A member will be allocated a fund that coincides with his or her projected retirement date (in line with

the scheme rules), and there are a wide range of these funds to accommodate different members’

retirement plans. For example, a scheme member aged 26 with 39 years before retirement where the

scheme retirement date is age 65 would have his or her pension savings allocated the Target Date

2053 to 2055 fund.

AB Global operates fixed asset allocation guidelines, from which their portfolio construction rules allow

them to deviate in the short term should there be a compelling investment reason to do so. This asset

allocation is applied to 14 different externally managed investment funds offered by 6 different fund

managers, including Blackrock, Vanguard, Legal & General Investment Management, Aquila, State

Street and UBS.

Target date funds operate by splitting the investments between this range of 14 sub-investment funds

which each give exposure to different investment markets and asset types. Investment risk is reduced

by diversifying across the skills of different investment managers and across different asset class types,

such as stock-market related assets, fixed interest assets such as government and corporate bond

funds, property and cash.

Growth Phase: until the member has 25 or fewer years to retirement

Initially this asset allocation will start with 90% invested in stock-market investments, subject to a

maximum of 20% UK stock-market exposure.

Transition phase: after the member has fewer than 25 years before retirement

Once the member has 25 or less his initial asset allocation will de-risk throughout the term of the fund

to maturity by reducing stock-market exposure in favour of lower risk fixed interest and cash, and this

process commences gradually after a member has 25 or less years to go before retirement. AB Global

operate a predominantly fixed structure for this, but reserve the right to deviate from this structure in the

short term should it believe there to be positive benefits from such a deviation.


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Alternative Employer Default Fund Option 2: Caerus

Portfolio Management Ltd.

Caerus Portfolio Management operates a range of suitable investment portfolios for employer selection,

which consist of a fixed asset allocation to a pre-selected range of investment funds. As the member

nears retirement the asset allocation to these funds will change so as to reduce exposure to stock-

market investments, and thus a reducing risk profile.

The underlying investments held in the Caerus portfolios consist of 11 different passive funds all

operated by Vanguard, straddling UK and overseas stock-market exposure to different fixed interest

products, and can all be traded daily. It is notable that none of these portfolios contain any exposure to

property.

Growth Phase: until the member’s 45th birthday

The table below demonstrates an initial allocation for members aged up to 45 of 70% in global stock-

market related assets of which 30% is UK and 40% is non UK. The remaining 30% is invested across

cash and other fixed interest assets such as government bonds and corporate bonds.

Transition phase: from the member’s 45th birthday

Once the member attains the age of 45, the exposure to stock-market related investments will decline

in four age-related life-stages, progressively reducing the percentage in UK and overseas shares and

increasing the exposure to fixed interest and cash-based securities to reflect the need for greater

investment security.

Member’s age % invested in shares (minimum UK shares)

% invested in fixed interest and cash

Up to aged 45 70% (30%) 30%

46-52 60% (27%) 40%

53-57 45% (22%) 55%

58-62 35% (18%) 65%

63+ 25% (14%) 75%


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Alternative Employer Default Fund Option 3: Sanlam

Wealth

Sanlam Wealth offers a passive range of investments via Source Pensions. The range consists of four

colour-coded funds, each of which applies fixed asset allocation to a pre-determined range of funds

offered by JP Morgan, Blackrock, Legal & General Investment Management (LGIM) and Vanguard. All

investments into which these portfolios invest are regulated passive investment funds which are able

to trade daily,

Growth phase: more than 20 years until member’s planned retirement date

There is a fixed asset allocation dependent upon age of the member, with the maximum stock-market

exposure of 65% (of which 32.5% must be invested into UK shares) being available to members with

more than 20 years before retirement. This portfolio is known as the Blue portfolio, and as a member

progresses towards retirement and will transition from Blue to Green and then Yellow, ending up in

Orange for the final five years of membership. The different asset allocation between these funds can

be seen from the table below.

Transition phase: less than 20 years until member’s planned retirement date

Once the transitional phase is under way, the level of stock-market exposure reduces in line with the

life-stages set out in the table below, and end up with 20% in stock-market linked investments, of which

10% must be in the UK, when there is five or fewer years to go before retirement.

Number of years before member’s retirement age

% invested in shares (minimum UK shares)


20 + years to retirement (Blue) 65% (32.5%) 35%

10-19 years to retirement (Green) 50% (25%) 50%

5-9 years to retirement (Yellow) 35% (17.5%) 65%

Less than 5 years to retirement (Orange) 20% (10%) 80%


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Alternative Employer Default Fund Option 4: Vanguard

Vanguard offers a series of Lifestyle Strategies with reducing stock-market exposure after age 50.

These strategies are diversified through sub-investment into a predetermined selection of Vanguard’s

own range of sector-specific funds to achieve geographical and sector diversification. Asset allocation

is fixed in advance and applied to the funds. All funds into which the strategies invest are regulated

passive investment funds, which can be redeemed daily when necessary.

The Growth Phase invests into the Vanguard Lifestyle Strategy 80% Equity Fund, which stipulates that

20.1% must be invested in the UK, and 20% must be invested in fixed income and cash. Members will

remain in this fund until achieving age 50, whereafter the member’s investments are moved into different

funds at five year intervals, each with a reducing exposure to stock-markets and an increased exposure

to fixed interest and cash. The purpose of this is to progressively reduce risk as the member nears

retirement. Further details can be seen from the table below.

Transition Phase: this begins on the member’s 50th birthday and progressively reduces stock-market

exposure in preference to lower risk fixed income and cash assets to reduce risk as the member draws

closer to retirement. The table below shows how this works.

Member’s age % invested in shares (minimum UK Shares)


Up to aged 50 80% (20.1%) 20%

Age 51-55 60% (15/2%) 40%

Age 56-60 40% (10.1%) 60%

Age 61+ 20% (5.1%) 80%

Each of the four investment funds identified above for the four different life-stages invests into a pre-

determined allocation of Vanguard’s passive investment fund range to gain exposure to the multiple

investment sectors.


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Structure and Key Partners

Pension Scheme – The Open Pension Trust (Regulated

by The Pension Regulator)

The Open Pension Trust is the regulated legal entity into which pension contributions are made. The

master trust is regulated by the Pensions Regulator, fully ring fenced and overseen by experienced

independent trustees, to ensure employees’ funds are fully protected at all times.

Trustees – Dalriada Trustee Limited (Regulated by the

Pension Regulator)

Dalriada Trustee Limited Chairs Opt Pension’s board of three independent professional trustees. The

trustees ensure pension legislation is followed, act in the best interests of the beneficiaries and

procure an investment strategy for the scheme’s assets per the trust deeds, all at the best price

possible. The trustees appoint the master trust’s investment manager.

Funds – Various (All regulated by the Financial Conduct

Authority)

The Trustee offers employers a choice of 5 investment options for their employees’ pension

contributions. Employers may take professional advice on which of the five default investment options

is best suited to their employees. Alternatively, employers may leave the choice of investment to the

Trustee, in which case the Primary Employer Default Fund is selected.

• Primary Employer Default Fund invested with Wellian Investment Solutions

• Alternative Employer Default Option # 1 invested with AB Global

• Alternative Employer Default Option # 2 invested with Caerus Portfolio Management Ltd

• Alternative Employer Default Option # 3 invested with Sanlam Wealth

• Alternative Employer Default Option # 4 invested with Vanguard

Investment Management – Dean Wetton Advisory Limited

(Regulated by the Financial Conduct Authority)

We understand that financial expertise in balancing performance, risk and cost is

key here and are delighted to be leveraging the deep expertise of our trustees

with investment advice from Dean Wetton Advisory Limited, an experienced independent provider of

investment and consultancy services to pension schemes, charities and asset managers.

Pension Administrator – Opt Pensions (Regulated by the

Pension Regulator)

Opt Pensions is the Pension Administrator, which administers the day to day operation of The Open

Pension Trust. Together with their innovative Pension Platform and portal Opt Pensions has the

capabilities to reconcile tens of thousands of transactions a day and deals with large volumes of

trades as a matter of course.

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