Pension Scheme Implementation Statement

The McCurrach Group Pension Scheme Implementation Statement

Background

The regulatory landscape continues to evolve as ESG becomes increasingly important to regulators and society. The Department for Work and Pensions (‘DWP’) has increased the focus around ESG policies and stewardship activities by issuing further regulatory guidance relating to voting and engagement policies and activities. These regulatory changes recognise the importance of managing ESG factors as part of a Trustee’s fiduciary duty.

Regulations also require that the Trustee details the McCurrach Group Pension Scheme’s (“the Scheme”) policies in its Statement of Investment Principles (SIP) and demonstrates its adherence to these policies in an Implementation Report.

Statement of Investment Principles (SIP)

The SIP can be found online at the web address:
www.mccurrach.co.uk/statement-of-investment-principles/

Changes to the SIP are detailed within this report.

Implementation Report

This Implementation Report is to provide evidence that the Scheme continues to follow and act on the principles outlined in the SIP. This report details:

Actions the Trustee has taken to manage financially material risks and implement the key policies outlined within the Scheme’s SIP;
The Trustee’s current policies and approach to ESG considerations, and the actions taken with each of the Scheme’s investment managers on managing ESG risks;
The extent to which the Trustee has followed policies relating to engagement, covering both their engagement with the Scheme’s investment managers and the engagement activity of each of the investment managers with the companies and counterparties in which they invest; and
The voting behaviour of the Scheme’s investment managers covering the reporting year to 31 December 2024 (noting the Trustee’s delegation of Scheme voting rights to the investment managers through its investment via pooled fund arrangements), including the most significant votes cast on the Scheme’s behalf.

Summary of key actions undertaken over the Scheme’s reporting year

Following the gilt market volatility at the end of 2022 and subsequent impact on industry-wide LDI leverage and collateral considerations, the Trustee agreed a revised investment strategy for the Scheme in Q1 2023. There have been no further changes to the investment strategy since its agreement, which is as follows: Diversified Growth (20%), Semi-Liquid Credit (15%), Absolute Return Bonds (30%) and LDI (35%). With the exception of the Semi-Liquid Credit mandate with Apollo, the remainder of the assets are held with LGIM.

The majority of the investment strategy implementation took place over the latter months of Q4 2023, prior to the current reporting period.

Over the reporting period, the implementation of the revised investment strategy was completed following the rebalancing of the Apollo Semi-Liquid Credit mandate. This involved a partial redemption at the 1 January 2024 trade date to improve Scheme alignment with the strategic asset allocation. The proceeds were received into the Scheme bank account on 31 January 2024, and were subsequently reinvested in the LGIM Diversified Fund and the LGIM Absolute Return Bond Fund on 7 February 2024.

The Trustee is satisfied that the out of market risks and transaction costs were minimised as much as possible over the course of the implementation.

Gilt yields declined in early Q1 2024, and some of the LGIM LDI funds reached their hedging multiple lower limits resulting in a cash distribution to maintain the same level of exposure. Over the remainder of the reporting year, gilt yields continued to increase, causing a decline in the value of the LDI mandate. As a result, several de-leveraging events occurred in both Q2 and Q4 2024, with the required collateral sourced from the LGIM Absolute Return Bond Fund in line with the Scheme’s collateral waterfall framework in place with LGIM.

Implementation Statement

This report demonstrates that the Trustee of the McCurrach Group Pension Scheme has adhered to the Scheme’s investment principles and its policies for managing financially material considerations, including ESG factors and climate change.

Signed

Zahir Fazal
26.03.2026

Trustee

Managing risks and policy actions

Risk / Policy	Definition	Policy	Actions over reporting period
Interest rates and inflation	The risk of mismatch between the value of the Scheme’s assets and present value of the liabilities from changes in interest rates and inflation expectations.	To hedge 60% of the impact of interest rates and inflation on the value of the Scheme’s liabilities (measured on a gilts basis).	During the 12-months ending 31 December 2024, rising gilt yields led to a decline in the Scheme's LDI portfolio resulting the pooled funds reaching their upper leverage limits. This triggered a de-leveraging events and required additional investments to maintain the hedge exposure. Capital was sourced in line with the collateral waterfall in place with LGIM and redemptions were made from the LGIM Absolute Return Bond Fund. The LDI target hedge and portfolio was reviewed by the Trustees after the reporting period.
Liquidity	Difficulties in raising sufficient cash when required without adversely impacting the fair market value of the investment.	To maintain a sufficient allocation to liquid assets so that there is a prudent buffer to pay members benefits as they fall due (including transfer values), and to meet regulatory guidance around providing collateral to the LDI manager.	The Trustee monitors the Scheme’s liquidity position as part of the regular performance reporting.
Market	Experiencing losses due to factors that affect the overall performance of the financial markets.	To remain appropriately diversified and hedge any unrewarded risks (e.g. interest rates, inflation), where affordable and practicable.	Prior to the reporting period, the Trustees agreed to rebalance the Scheme’s investment strategy to as follows: Diversified Growth (20%), Semi-Liquid Credit (15%), Absolute Return Bonds (30%) and LDI (35%). The implementation of this revised strategy was completed in early-2024. The increased allocation to Absolute Return Bonds and introduction of LGIM Diversified Fund serve to increase the Scheme’s overall liquidity, diversification and to increase the efficiency of the Scheme’s collateral waterfall.

Risk / Policy	Definition	Policy	Actions over reporting period
Credit	Default on payments due as part of a financial security contract.	To diversify this risk by investing in a range of credit markets across different geographies and sectors. To appoint investment managers who actively manage this risk by seeking to invest only in debt securities where the yield available sufficiently compensates the Scheme for the risk of default.	As mentioned above, the Trustee implemented a restructuring of the Scheme including a reduced allocation to diversified growth (20%) and an increased allocation to Absolute Return Bonds (30%). The Scheme terminated the M&G Diversified Credit mandate as part of the revised strategy. No other Trustee actions or amendments were implemented over the reporting period in respect of credit risk.
Environmental, Social and Governance (ESG)	Exposure to ESG factors, including but not limited to climate change, which can impact the performance of the Scheme’s investments.	To appoint managers who satisfy the following ESG criteria, unless there is a good reason why the manager does not satisfy each criteria: Responsible Investment (‘RI’) Policy / Framework Implemented via Investment Process A track record of using engagement and any voting rights to manage ESG factors ESG specific reporting UN PRI Signatory The Trustee monitors the managers on an ongoing basis.	No Trustee actions or amendments were implemented over the reporting period in respect of ESG risk/policy. The ESG credentials of the selected managers for the new strategic benchmark allocation was considered throughout the manager selection process.
Currency	The potential for adverse currency movements to have an impact on the Scheme’s investments.	The Scheme’s diversified growth and credit mandates hedge all currency risk back to Sterling.	No Trustee actions or amendments were implemented over the reporting period in respect of currency risk.
Non-financial	Any factor that is not expected to have a financial impact on the Scheme’s investments.	Non-financial matters are not taken into account in the selection, retention or realisation of investments.	No Trustee actions or amendments were implemented over the reporting period in respect of non-financial risks.

Changes to the SIP

The SIP was updated over the 12-month reporting period to reflect the recent regulatory requirements, strategy and strategic asset allocation changes, and collateral management.
The new SIP was signed in November 2024.

Policies added to the SIP	(Updated in May 2024)
Investment Objective	The Trustee have updated the investment object target return, to achieve around 1.8% p.a. above the return on UK Government bonds, to reflect the target return of the new, revised investment strategy.
Investment Strategy	In late-2023, the Trustee agreed a revised investment strategy and completed the strategy implementation in Q1 2024. The revised investment strategy is as follows: Diversified Growth (20%), Semi-Liquid Credit (15%), Absolute Return Bonds (30%) and LDI (35%). With the exception of the Semi-Liquid Credit mandate with Apollo, the remainder of the assets would be held with LGIM.
Collateral Waterfall Framework	The Trustee will adhere to all relevant regulatory guidance and requirements in relation to leverage and collateral management within the Scheme’s liability hedging (LDI) portfolio. The Trustee has a stated collateral management framework. The Trustee has agreed a process for meeting collateral calls should these be made by the Scheme’s LDI manager. The Trustee will review this policy on a regular basis.
Environmental, Social, Corporate Governance factors and the exercising of rights	The Trustee will engage, via their investment adviser, with investment managers and/or other relevant persons about relevant matters at least annually.
Employer-related Investments	The policy of the Trustee is not to hold any employer-related investments as defined in the Pensions Act 1995 and the Occupational Pension Schemes (Investment) Regulations 2005 except where the Scheme invests in collective investment schemes that may hold employer-related investments. In this case, the total exposure to employer-related investments will not exceed 5% of the Scheme’s total asset value. The Trustees will monitor this on an ongoing basis to ensure compliance.
Direct Investments	Direct investments, as defined by the Pensions Act 1995, are products purchased without delegation to an investment manager through a written contract. When selecting and reviewing any direct investments, the Trustee will obtain appropriate written advice from their investment advisers.
Realisation of Investments	The significant majority of the Scheme’s investments may be realised quickly if required. The L&G Absolute Return Fund and Diversified Growth Fund allocations, which make up 50% of the portfolio, can be realised daily. The Apollo Semi Liquid Credit allocation, which has a target weight of 15% within the strategic benchmark, is relatively illiquid and is subject to 60 days’ notice, following a 2 year hard lock-up period.
Interest rates and inflation risk	The significant majority of the Scheme’s investments may be realised quickly if required. The L&G Absolute Return Fund and Diversified Growth Fund allocations, which make up 50% of the portfolio, can be realised daily. The Apollo Semi Liquid Credit allocation, which has a target weight of 15% within the strategic benchmark, is relatively illiquid and is subject to 60 days’ notice, following a 2 year hard lock-up period.
Interest rates and inflation risk	To hedge 60% of the impact of interest rates and inflation on the value of the Scheme’s liabilities (measured on a gilts basis).
Credit risk	To appoint investment managers who actively manage this risk by seeking to invest only in debt securities where the yield available sufficiently compensates the Scheme for the risk of default.
How the investment managers are incentivised to align their investment strategy and decisions with the Trustee’s policies.	As the Scheme is invested in pooled funds, there is not scope for these funds to tailor their strategy and decisions in line with the Trustees policies. However, the Trustee invests in a portfolio of pooled funds that are aligned to the strategic objective.
How the investment managers are incentivised to make decisions based on assessments of medium to long-term financial and non-financial performance of an issuer of debt or equity and to engage with them to improve performance in the medium to long-term.	The Trustee reviews the investment managers’ performance relative to medium and long-term objectives as documented in the investment management agreements. The Trustee monitors the investment managers’ engagement and voting activity on an annual basis as part of their ESG monitoring process. The Trustee does not incentivise the investment managers to make decisions based on non-financial performance.
How the method (and time horizon) of the evaluation of investment managers’ performance and the remuneration for their services are in line with the Trustee’s policies.	The Trustee reviews the performance of all of the Scheme’s investments on a net of cost basis to ensure a true measurement of performance versus investment objectives. The Trustee evaluates performance over the time period stated in the investment managers’ performance objective, which is typically 3 to 5 years. Investment manager fees are reviewed annually to make sure the correct amounts have been charged and that they remain competitive.
The method for monitoring portfolio turnover costs incurred by investment managers and how they define and monitor targeted portfolio turnover or turnover range.	The Trustee does not directly monitor turnover costs. However, the investment managers are incentivised to minimise costs as they are measured on a net of cost basis.
The duration of the Scheme’s arrangements with the investment managers	The duration of the arrangements is considered in the context of the type of fund the Scheme invests in. - For closed ended funds or funds with a lock-in period the Trustee ensures the timeframe of the investment or lock -in is in line with the Trustee objectives and Scheme’s liquidity requirements. - For open ended funds, the duration is flexible and the Trustee will from time-to-time consider the appropriateness of these investments and whether they should continue to be held.
Voting Policy - How the Trustees expect investment managers to vote on their behalf	The Trustee has acknowledged responsibility for the voting policies that are implemented by the Scheme’s investment managers on their behalf.
Engagement Policy - How the Trustees will engage with investment managers, direct assets and others about ‘relevant matters’	The Trustee has acknowledged responsibility for the engagement policies that are implemented by the Scheme’s investment managers on their behalf. The Trustees, via their investment advisers, will engage with managers about ‘relevant matters’ at least annually.

Implementing the current ESG policy and approach

ESG as a financially material risk

The SIP describes the Scheme’s policy with regard to ESG as a financially material risk. The below table outlines the criteria the Trustee uses to assess managers’ ESG policies against and describes how the Scheme monitors and engages with the investment managers regarding the ESG policies. The rest of this statement details our view of the managers, our actions for engagement and an evaluation of the engagement activity.

Implementing the Current ESG Policy

Investment Strategy	In late-2023, the Trustee agreed a revised investment strategy and completed the strategy implementation in Q1 2024. The revised investment strategy is as follows: Diversified Growth (20%), Semi-Liquid Credit (15%), Absolute Return Bonds (30%) and LDI (35%). With the exception of the Semi-Liquid Credit mandate with Apollo, the remainder of the assets would be held with LGIM.
Reporting & Monitoring	6. Ongoing monitoring and reporting of how asset managers manage ESG factors is important. 7. ESG factors are dynamic and continually evolving; therefore, the Trustee will receive training as required to develop their knowledge. 8. The role of the Scheme’s asset managers is prevalent in integrating ESG factors; the Trustee will, alongside the investment advisor, monitor ESG in relation to the asset managers’ investment decisions.
Voting & Engagement	9. The Trustee will seek to understand each asset managers’ approach to voting and engagement when reviewing the asset managers’ approach. 10. Engaging is more effective in seeking to initiate change than disinvesting.
Collaboration	11. Asset managers should sign up and comply with common codes and practices such as the UNPRI & Stewardship code. If they do not sign up, they should have a valid reason why. 12. Asset managers should engage with other stakeholders and market participants to encourage best practice on various issues such as board structure, remuneration, sustainability, risk management and debtholder rights.

ESG Summary and engagement

As the Scheme invests via fund managers, the managers provided details of their engagement actions including a summary of the engagements by category for the 12-month period to 31 December 2024.

The Trustee carried out an Impact Assessment review of the Scheme’s investment managers in September 2021.

Investment managers’ engagement activity

As the Scheme invests via pooled funds managed by various investment managers, each manager has provided details on their engagement activities, including a summary of the engagements by category over the Scheme’s reporting year to 31 December 2024.

Manager and Fund	Engagement summary	Commentary
LGIM Diversified Fund	Total Engagements: 3,605 Environmental: 2,527 Social: 574 Governance: 398 Other: 106 *One engagement can comprise of more than one topic across each company	LGIM currently do not provide examples of specific engagement activities at Fund level. LGIM’s Investment Stewardship team are responsible for engagement activities across all funds. LGIM share their finalised ESG scorecards with portfolio companies and the metrics on which they are based.
Apollo Total Return Fund	Total Engagements: 2361 Environmental: 218 Social: 209 Governance: 214	Apollo have a clear due diligence and engagement framework. The team continually engage with portfolio companies through discussion with management, and these engagements have been a key driver for the production for formal company ESG reports and Key Performance Indicators. As bond investors, Apollo’s voting rights are limited, making it more difficult to engage with portfolio companies in comparison to equity investors. Examples of significant engagements are: Guitar Centra, Inc. – Apollo met with the Company to discuss multiple financially material ESG risks and opportunities which could impact performance or fail to meet stakeholder needs. This engagement focussed on the Company’s rationale for moving its music instructors from being workers to become employees in 2020, and the impact this had on credit risk. While this initially put strain on the Company’s margins, in the long-term they believe it will lead to more satisfied instructors and expanded their student base. Apollo will continue to engage with the Company on any issues they identify as being financially material. AP GRANGE HOLDINGS, LLC – In May 2024, Apollo-managed funds acquired a 49% equity interest in Intel's Fab 34 for ~$11bn, classifying it as a Transition investment given the industrial decarbonisation qualities of the acquisition. Apollo engaged with the company to understand how Fab34 contributes to Intel’s decarbonization efforts, including EUV lithography, heat recovery, renewable energy, waste recycling, and water conservation. Intel's LEED Gold scorecard confirmed these initiatives. Apollo plans to continue their engagement for further sustainability disclosures.
LGIM ARB Fund	Total Engagements: 392 Environmental: 205 Social: 79 Governance: 78 Other: 30 *One engagement can comprise of more than one topic across each company	LGIM currently do not provide examples of their engagement activities at Fund level. LGIM’s Investment Stewardship team are responsible for engagement activities across all funds. LGIM share their finalised ESG scorecards with portfolio companies and the metrics on which they are based.
LGIM LDI and Gilts	-	LGIM currently do not provide a breakdown of engagement activities for LDI Funds.

Notes: ¹For some managers, total engagements do not sum up, as a number of engagements are related to a combination of E,S and G issues.

Voting (for equity/multi asset funds only)

The Trustee has acknowledged responsibility for the voting policies that are implemented by the Scheme’s investment managers on their behalf.

The Scheme’s fund managers have provided details on their voting actions including a summary of the activity covering the reporting year up to 31 December 2024. The Trustee has adopted the managers definition of significant votes and has not set stewardship priorities. The managers have provided examples of votes they deem to be significant, and the Trustee has shown the votes relating to the greatest exposure within the Scheme’s investment. When requesting data annually, via their investment consultant, the Trustee informs their managers what they deem most significant.

Fund name

Engagement summary

Examples of significant votes

Commentary

LGIM Diversified Fund

Meetings eligible to vote for: 10,851

Resolutions eligible to vote for: 108,048

Resolutions voted for: 99.8%

Resolutions voted with management: 76.7%

Resolutions voted against management: 22.4%

Resolutions abstained from: 0.9%

Shell Plc.
Date: 21/05/2024
Percentage of portfolio: 0.3%
LGIM voted against management on a resolution on Shell's Energy Transition Strategy, seeking more clarity on how the Company's revisions to Net Carbon Intensity (NCI) targets and ambitions to grow its gas and LNG business align with an orderly transition to net-zero emissions by 2050. Concerns included the lifespan of assets, production flexibility, and transparency in lobbying activities. This resolution passed. LGIM will continue to engage with the company and monitor its progress against this topic.

Apollo Global Management, Inc. - Date: 24/06/2024
Percentage of portfolio: 0.2%
LGIM voted against the election of a director to the Board due to concerns over diversity and independence. LGIM voted against management as they expect Board members be at least one-third female. LGIM views gender diversity as a financially material issue for clients, with implications for the assets they manage on their behalf. LGIM will continue to engage and monitor the progress of the investee company against these topics.

LGIM’s Investment Stewardship team are responsible for managing voting activities across all funds. The team uses ISS’s ‘ProxyExchange’ electronic voting platform to electronically vote clients’ shares. All voting decisions are made by LGIM and they do not outsource any part of the strategic decisions.