Pilkington Superannuation Scheme

…are pension contributions invested?

To build up a fund which will ensure a scheme can pay pensions and other benefits promised under its rules as and when they are due.

…are the different types of investments?

The fund's investments are spread over a variety of "asset classes" in order to balance growth with levels of risk and liquidity. The major asset classes are detailed below:

Equities - these are "ordinary" shares in companies, which can be traded on UK or foreign stock markets. The return on this type of investment is achieved through both growth in value of the holding (its stock market value) and any dividends received (essentially a share of the company's profits distributed to shareholders).

Over the long term, the return on UK equities has exceeded inflation and interest rates, making it an important type of investment. However, the price of this type of investment fluctuates on a daily basis. The timing of buying and selling of equities is therefore important.

Fixed interest securities - these are investments in bonds issued by companies, local authorities and governments, both in the UK and overseas. They give a fixed rate of interest over a fixed period, which is known at the outset.

These securities carry a risk as there is no protection against the effects of inflation.

Index-linked securities - these are issued by some governments and as the name suggests they provide interest and capital repayments linked to rises in inflation and as such are a low risk asset..

Property - this can be in the form of buildings owned directly by the fund, or can be pooled investments in a property fund. Generally speaking, over time property prices have increased above the rate of inflation. However they are speculative investments, and are not quickly converted into cash.

Cash / Short term investments - these are similar to an individual's savings account and will attract rates of interest, which over time is generally less than some of the other forms of investment. They do, however, provide security, and more importantly they are, by definition, the most liquid investment.

…are the investments chosen?

There is a legal requirement under the Pensions Act 1995 for the Trustee to prepare and maintain a written Statement of Investment Principles (SIP) detailing the investment policy of the Scheme. This statement covers:

the kinds of investments to be held;

the balance between the different kinds of investments;

risk;

the expected return on investments;

the realisation of investments;

other matters set out in the regulations.

The investment managers appointed by the Trustee must act in accord with the SIP when making detailed decisions as to how to invest the parts of the fund delegated to them.

...are things changing?

A report commissioned by the Chancellor of the Exchequer and published in March 2001 (the Myners Report) may result in further detail having to be included in SIPs.