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ExxonMobil Pension Plan - The Chair’s Annual DC Governance StatementNOTE: THIS COMPLIANCE STATEMENT RELATES SOLELY TO THE PLAN’S MONEYPURCHASE BENEFITS (SUCH AS ADDITIONAL VOLUNTARY CONTRIBUTIONS (AVCS) ANDOTHER MONEY PURCHASE BENEFITS). THIS STATEMENT IS NOT RELEVANT TO ANYMEMBER’S DEFINED BENEFIT PENSION.This Statement has been prepared by the Trustee of the ExxonMobil Pension Plan (the ‘Plan’) todemonstrate how the Plan has complied with the governance standards introduced under TheOccupational Pension Schemes (Charges and Governance) Regulations 2015. This Statementrelates to the period from 1 January 2019 to 31 December 2019.It is generally the case that Defined Benefit (DB) schemes with only money purchase AdditionalVoluntary Contribution (AVC) arrangements are excluded from the above regulations. However, thePlan holds a small element of non-AVC money purchase benefits, most of which arise from historicaltransfers-in from non-AVC arrangements, and therefore the governance standards will apply to allmoney purchase assets in the Plan.Investment strategy and monitoringThe Trustee’s objective is to provide its members with a range of suitable funds from which they canconstruct their own portfolio. The Plan’s Statement of Funding and Investment Principles is enclosed(see Appendix A).The current AVC arrangement offers members the opportunity to select their own investments acrossa range of asset classes; members’ investments are not automatically invested in a default strategy.However, following the introduction of The Occupational Pension Schemes (Charges andGovernance) Regulations 2015, the Plan’s six self-select funds with Aegon (previously BlackRock)are considered to be default arrangements as a result of an investment transition which took place in2010 in which some members’ AVCs were moved automatically to these funds when they did notexpress an alternative choice. In 2014, further AVCs were mapped to the Mixed Asset RetirementTransition strategy, a lifestyle strategy that aligns with taking a cash lump sum at retirement.The Plan holds a number of legacy (or acquired) investment policies with Standard Life, Utmost(formerly Equitable Life) and Prudential. Within these policies there are a number of historical defaultfunds, for which further details (including the aims of the funds) are provided in Appendix A of thisStatement. The historical default funds are: A Standard Life Retirement Account policy comprising two sub-funds; the Standard LifePension With-Profits Fund and the Standard Life Pension Millennium With-Profits Fund.An Equitable Life policy holding non-AVC money purchase benefits which were invested inthe Equitable Life With-Profits Fund (noting that on 1 January 2020 these assets weretransferred to Utmost and invested in the Utmost Secure Cash Fund).These policies are closed to new contributions.The performance of the Plan’s Aegon investment fund range is reviewed quarterly to ensure thatperformance is in line with each fund’s objective. The legacy and acquired AVC provider funds’performance is monitored annually as part of a wider general review of all the Plan’s AVCarrangements. The Trustee annually reviews performance of the with-profits funds with Standard Lifeand Prudential in line with the annual bonus declarations and overall provider reviews.In 2019 the Trustee commenced an investment review of the funds offered on the Aegon platform.The Trustee (in conjunction with its investment adviser) started the process by considering the profileand needs of the members currently invested in the Aegon AVC arrangement and then reviewingwhether the current funds meet these needs. This was discussed at the September and November2019 Trustee meeting. The investment review was completed in March 2020 and the outcome will bereported in next year’s Chair’s statement.
Financial transactionsThe Trustee has in place Service Level Agreements (SLAs) with the Plan Administrator which coverthe timescales of all administration tasks (DB and AVC) including all core financial transactions.These core financial transactions include the investment of contributions, transfers into and out of thePlan, fund switches and payments out of the Plan to and in respect of members.The Plan Administrator carries out monthly monitoring, reconciliation and record keeping of AVCcontributions, investments and payments from the Plan. All discrepancies are investigated andreconciled. The Plan’s accounts are also independently audited annually by the Trustee’s appointedauditors. The Trustee monitors the receipt and investment of AVCs in the quarterly report. All monthlyAVC contributions over the period were invested in line with the agreed SLAs.The Plan Administrator follows an agreed administration manual and has a checking/authorisationprocess in place for all financial transactions.The Trustee monitors performance against the SLAs via the quarterly reports it receives from the PlanAdministrator. During the reporting period (particularly the first half) the Trustee was aware of instanceswhere core financial transactions were not processed within the desired SLA timescales. This was acontinuation of the issues from 2018 and as such, the Trustee continued with the additional monitoringit had implemented in 2018 (recovery plan and weekly meetings with the Administrator to discussperformance against SLAs). The results from this were seen in the second half of 2019, when theperformance against SLAs greatly improved.The 2018 Chair’s Statement reported on some unit pricing errors occurring at Aegon. In 2019, thefinal rectification actions for this were completed.Charges and transaction costsFund charges paid by the members are set out below:Total ExpenseRatio (TER)Transaction costs asat 31 December 2019(unless stated)Aegon BlackRock (Aquila Life) Mixed AssetAegon BlackRock (Aquila Life) (40:60) Global EquityAegon BlackRock (Aquila Life) CashAegon BlackRock (Aquila Life) UK Equity IndexAegon BlackRock (Aquila Life) Over 15 Year UK GiltAegon BlackRock (Aquila Life) Corporate BondMixed Asset Retirement Transition StrategyGlobal Equity Retirement Transition StrategyUK Equity Retirement Transition StrategyFunds closed to future contributions0.26% *0.26% *0.28% *0.26% *0.26% *0.27% *0.26% - 0.28% *0.26% - 0.28% *0.26% - 0.28% 0% – 0.0116%0.0116% – 0.0400%0.0116% – 0.0898%Equitable Life Property (from 1 January 2020 this fundis renamed the Utmost Property Life and PensionFund)Standard Life Property Pension FundPrudential UK PropertyEquitable Life With Profits (on 1 January 2020investments in the with-profits fund were moved to theUtmost Secure Cash Fund)Standard Life Millennium With ProfitsStandard Life Millennium With Profits 2006Standard Life With %Fund nameFunds open to future contributionsPrudential With Profits1.00%See ** below0.0004%0.0004%0.0006%Not available **** The Aegon investment funds benefit from competitive charges negotiated by the Trustee. The TER includesthe investment manager fees and operational costs incurred for the benefit of members (such as administration).These charges are clearly disclosed to members throughout all relevant documentation.
** In relation to the Plan’s legacy investment polices with Standard Life, Equitable Life and Prudential, due to theirnature, the charging structures for the with-profits policies are opaque with costs incorporated into declaredbonus rates. The Trustee took account of this (based on publicly available information) when it considered theongoing suitability of these investments.***Prudential does not publish transaction costs for its with-profits fund.Transaction costs are those incurred by fund managers as a result of buying, selling, lending orborrowing investments.The Trustee asked its providers and fund managers for the transaction cost disclosures as at 31December 2019. Aegon and Prudential were unable to provide data as at 31 December 2019 in timefor this Statement but could provide data as at 30 September 2019 and 30 June 2019 (respectively).Costs and charges illustrationThe Occupational Pension Schemes (Administration and Disclosure) (Amendment) Regulations 2018requires the Trustee to produce an illustration showing the compounding effect of costs and chargeson DC funds. As a result, the Trustee has set out an illustration in Appendix B, which shows theprojected values based on three example AVC members (these are not actual members). The threeexamples show members at different ages, with different average pension savings and investing in arange of different investment options. The projections compare what the investments could grow to atage 65 before and after charges have been deducted.The illustration has been prepared by Willis Towers Watson, who confirmed that they had regard tothe statutory guidance when preparing the illustration.Value assessmentIn accordance with regulation 25(1)(b) of The Occupational Pension Schemes (Charges andGovernance) Regulations 2015, the Trustee annually assesses the extent to which the charges andtransaction costs for the funds available through Aegon represent good value for members. The latestassessment was undertaken in April 2020.Within the independent assessment, the Trustee has considered the value for members of the fivekey areas of Charges, Scheme Governance and Management, Investment, Administration andCommunication. Within each section we have considered: Need – the Trustee considered the need of the service from members. This covers both theappropriateness of the service for the membership as well as the actual and perceived valuemembers gain. This includes the effect of charges and transaction costs on the funds andhow these compare with other providers. Performance – the Trustee considered the quality of the service to meet the need. This looksat the current service provided, the performance of the service provider and how well thismeets the needs of the membership.These two areas offer a view of the overall value that the AVC arrangements provide, based on thePlan and its membership. We have considered both the legal requirement to assess the value ofservices where the cost is met by the member and where value is added through services where thecost is met by the Trustee and Company. The member pays the costs set out on the previous pageand this covers, investment management, administration and communication costs.The Trustee continues to consider the charges and costs represent good value for members. Theindependent assessment determined that the charges for the funds available through Aegon areconsiderably lower than those obtained by other similar pension plans. There is a closely monitoredpassive fund range in place, including three lifestyle strategies. Members predominantly use theirmoney purchase (AVC) benefits to fund their tax free cash, leaving more of the valuable main Planbenefits to be used towards a pension. Members who have money purchase benefits (includingAVCs) receive communications and access to online tools explaining the funds and member choices.The Trustee also assesses the value to members of the legacy funds. It recognises that somemembers may value their investment options with the legacy providers. For example some of thelegacy funds contain guarantees and there may not be a direct alternative fund in the Aegon range.As such, each member invested in the legacy funds will need to consider whether they wish to keep
their money invested in the funds or switch them to the Aegon investment options.Trustee’s Knowledge and Understanding (TKU)The Trustee has a robust TKU structure in place which enables it, together with the support of itsprofessional advisors, to ensure it has sufficient knowledge to effectively discharge its duties andresponsibilities under the Plan. Generally, the Trustee has a good working knowledge of thedocuments governing the Plan, (including the Trust Deed and Rules, the Statement of Funding andInvestment Principles, and all documents which set out current policies). The Trustee takes advicefrom professional advisers when it is appropriate to do so.The Trustee Directors are generally long standing and have worked together for a number of yearsand as such have learnt to operate in a way which plays to each director’s strengths and area ofexpertise. All the Directors have completed The Pension Regulator’s Trustee Toolkit.The Trustee’s approach to meeting the TKU requirements, and ensuring they retain good workingknowedge of the Plan documents, include: Maintaining a rolling programme of bespoke Trustee training which is delivered during adesignated training day and within Trustee meetings where appropriate (depending upon itsurgency). Recording all training and attendance at appropriate seminars in the Trustee training log. Reviewing the training programme annually. An online site for Trustees to access the latest Plan documents. Annually (at the start of each year) the Trustee reviews the training it received in the previousyear, what training would be beneficial for the coming year (taking account of the Plan’sexpected activities) and seeks to establish any gaps in knowledge, all of which can then beaddressed within the training programme for the year.At the September 2019 training day, the Trustee covered the following topics which have a relevanceto the AVCs: TPR’s 21st Century Trusteeship and Environmental Social Governance (ESG) investing.The effectiveness and performance of the Trustee is monitored in the following way: Maintenance and progression against the annual business plan Monitoring of the SLAs which are in place with the internal ExxonMobil team who support theTrustee to ensure timely completion of required activities The Trustee regularly reviews the service it receives from its advisers and service providers,in addition to having formal reviews. The Trustee Directors proactively provide comments on possible improvements in relation tothe operation and performance of the Board as a whole.The above were continually monitored throughout 2019.Statement of complianceOn behalf of the Trustee of the ExxonMobil Pension Plan, I confirm that the Trustee is comfortablethat the Plan has met the minimum governance standards (in relation to money purchase assets) asdefined in The Occupational Pension Scheme (Charges and Governance) Regulations 2015 duringthe period 1 January 2019 to 31 December 2019.Signed on behalf of the Richard Henderson (Chair of the Trustee)
Appendix A – Statement of Funding and Investment Principles
Appendix B - Illustration of the effect of costs and charges on a members AVC pension potThe illustration has been prepared in accordance with the relevant statutory guidance and reflects theimpact of costs and charges for three typical examples of AVC members within the Plan, using twofunds and a Retirement Transition strategy (which were selected for broadly representing the highestand lowest investment returns and popularity with members).The illustrations below show the projected fund values based on certain assumptions before and aftercharges so that the potential impact of charges is clearly shown. Members should be aware thatthese are simply illustrations, and so the actual fund values and implication of charges for anindividual member are likely to differ due to personal details, investment choices and actualperformance of the funds. This means that the information contained in this Appendix is not asubstitute for the individual and personalised illustrations which are provided to members each yearby the Plan.Example MemberYoungest AVCmemberAverage active AVCcontributorAverage deferredAVC la Life (40:60)Global Equity FundAquila Life Over 15Global EquitiesYear UK Gilt Fund Retirement TransitionBeforechargesBeforecharges 800 2,300 4,000 8,400 13,400 18,900 25,100 32,000 39,700 48,400 56,200 69,000 82,300 118,500 158,800 204,000 51,100 53,500 55,900 62,500 69,800 78,000Aftercharges 800 2,300 3,900 8,300 13,000 18,300 24,100 30,500 37,500 45,200 56,000 68,400 81,300 115,800 153,800 195,600 51,000 53,000 55,100 60,700 66,800 73,600 700 2,200 3,500 6,700 9,500 12,100 14,300 16,300 18,100 19,700 53,800 61,200 68,300 84,500 99,100 112,100 48,900 46,700 44,600 39,800 35,500 31,700Aftercharges 700 2,200 3,500 6,600 9,300 11,700 13,900 15,700 17,300 18,800 53,700 60,700 67,500 82,800 96,400 108,300 48,700 46,300 44,000 38,700 34,100 30,000Beforecharges 800 2,300 4,000 8,400 13,400 18,900 25,100 32,000 39,600 42,000 56,200 69,000 82,300 118,500 158,500 177,700 51,100 53,500 55,900 62,500 69,700 67,500Total contributionspaid during theperiodAftercharges 800 2,300 3,900 8,300 13,000 18,300 24,100 30,500 37,400 39,300 56,000 68,400 81,300 115,800 153,500 170,400 51,000 53,000 55,100 60,700 66,700 63,600 750 2,250 3,750 7,500 11,250 15,000 18,750 22,500 26,250 30,000 5,000 15,000 25,000 50,000 75,000 100,000 0 0 0 0 0 0Notes:1.2.3.4.5.6.7.8.9.Projected pension account values are shown in today’s terms.Contributions and costs/charges that are shown as a monetary amount and reductions are made halfwaythrough the year.Investment returns and costs/charges as a percentage reduction per annum are assumed to be deductedat the end of the year.Charges and costs are deducted before applying investment returns.Switching costs are not considered in the lifestyle strategy.Inflation is assumed to be 2.5% each year.Contributions are assumed to be paid from age 25 to 65 and increase in line with assumed earningsinflation of 0% per year (in real terms).Values shown are estimates and are not guaranteed.The real projected growth rates for each fund are as follow:o Aquila Life (40:60) Global Equity Fund – 2.25%o Aquila Life Over 15 Year UK Gilt Fund – -2.25%o Global Equities Retirement Transition – from -2.25% to 2.25% (adjusted depending on term toretirement).
10. Transaction costs and other charges have been provided by Aegon and cover the period 1 October 2018to 30 September 2019.11. Pension scheme's normal retirement age is 65.12. Example memberso Youngest: age 25, total initial contribution: 750, starting fund value: 0o Average active: age 45, total initial contribution: 5,000, starting fund value: 50,000o Average deferred: age 45, total contribution: 0, starting fund value: 50,000
exxonmobil pension plan - the chair’s annual dc governance statement note: this compliance statement relates solely to the plan’s money purchase benefits (such as additional voluntary contributions (avcs) and other mone
