APT·INVESTMENT · Module 3: Investment for DB and DC Schemes·UnitINVESTMENT · Unit 05Access: Premium
Unit 3.5: The Statement of Investment Principles
Unit 3.5 covers the Statement of Investment Principles in detail. It sets out who is responsible for the decisions that go into preparing a SIP, what the statement has to contain, the investment objectives of a fund and the asset allocation strategy that follows from them, and the requirement to monitor the statement and update it, including the review cycle and the duties to take written advice and consult the sponsoring employer. The SIP is the document that ties the rest of Module 3 together, because a strategy decision should be traceable back to it.
What’s in it.
5 topics- Topic 01
Responsibilities for Decisions in Preparing a Statement of Investment Principles
45 questions - Topic 02
The Contents of a Statement of Investment Principles
45 questions - Topic 03
The Investment Objectives of a Fund
45 questions - Topic 04
The Asset Allocation Strategy of a Fund
Coming soon - Topic 05
The Requirement to Monitor and Update a Statement of Investment Principles
Coming soon
Sample questions
3 of manyA few questions from this unit, with the answer and a full explanation. The complete bank is available when you start practising.
Are 'financially material considerations' and 'non-financial matters' the same thing under the SIP content rules?
- No, because only one of the two is a legal requirement
- No, they are separate, distinct required policy categoriesCorrect answer
- Yes, since both concern member and beneficiary views
- No, but they overlap completely in practice
ExplanationRegulation 2 treats financially material considerations, factors affecting risk and return, and non-financial matters, the extent to which member views are taken into account, as two conceptually separate required policy areas. Key takeaway: the two terms describe different, non-interchangeable content categories.
A trustee is comparing how DB and DC schemes typically express investment objectives. Which statement about DB objectives is accurate?
- DB objectives are typically framed solely around equity market benchmarks
- DB objectives are typically framed relative to the scheme's liabilitiesCorrect answer
- DB objectives are typically framed without reference to funding position
- DB objectives are typically framed to match DC member-outcome language
ExplanationDB objectives are typically expressed relative to the scheme's liabilities, whether by matching their duration and inflation sensitivity or by targeting a funding-level trajectory, reflecting the scheme's purpose of providing promised benefits. Key takeaway: liability-relative framing distinguishes DB objectives from the member-outcome framing typical of DC schemes.
What is meant by a DB scheme targeting a 'buy-out' as its ultimate funding objective?
- Reaching a funding level at which the scheme merges with another employer's scheme
- Reaching a funding level at which The Pensions Regulator takes over the scheme
- Reaching a funding level sufficient to secure all members' benefits with an insurance companyCorrect answer
- Reaching a funding level at which contributions are suspended permanently
ExplanationA buy-out target is a DB funding objective aimed at reaching a funding level sufficient to secure all members' benefits with an insurance company, transferring the liabilities and associated risk away from the trustees and employer. Key takeaway: buy-out means securing benefits with an insurer, not merger, cash withdrawal, or regulatory takeover.