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Investment Strategy

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There are over 100 individual Sections within the Railway Pensions Scheme and the characteristics of those Sections can be very different. These characteristics depend on certain factors such as:

• the sponsoring employer (and strength thereof)
• whether the Section is open or closed to new members
• the proportion of pensions already in payment

The interplay of these factors, along with employee/employer contributions and investment returns, help to determine the Section’s appetite for risk and return.

An integrated approach to funding is used at Railpen to arrive at a solution for each Section and an important underpin of this process is that the Trustee has agreed a Return, Risk and Liquidity framework (RRL) which attempts to balance the Section’s need for investment return to fund pensions with the amount of risk that can be taken given the expected covenant strength of the sponsoring employer. Issues such as a Section’s maturity and cash-flow are also factored in to assess their appetite for liquidity. We can then arrive at a default asset allocation for Sections to be used as a starting point in considering investment strategy
RRL wheel