XPS Pensions Group plc (406.F) Earnings Call Transcript & Summary

Welcome to you all. Thank you for finding time to come along to the first XPS Pensions Group Capital Markets Day. Just by way of a very short introduction, I'm Alan Bannatyne, the Chair. in terms of the pension industry, it's been a very interesting year to say the least and headline -- it's not normally on the headline page, but we had pensions, cost of living crisis and the effect on pension funds and pensioners. We had the Liz Truss-induced somewhat fiasco LDI crisis, which was all around the media. And 2 days ago, we had Page 2 of the Financial Times has a big positional piece about infrastructure and what the government might look to do with pension assets. In terms of the industry, it's obviously trillions of pounds of assets under management. Not surprisingly, it's always in the glare of the regulator. And the regulators like to change and shop, and that is an ever-ongoing stream of business for XPS Pensions. So all in all, an exciting backdrop market, an exciting year for XPS Pensions. In particular, the brands and the way the brand is now positioned and aren't -- still too much of the fund of the team to come. But actually, in terms of what that leverage is, most importantly, it's led through to taking additional clients from the competitors, and that's great to see. With that, I'll just hand over to the people that make it all happen. Initially, that's Paul Cuff. Thank you.

Good afternoon, everybody. It is fantastic to see so many familiar faces that have been familiar online actually here in person. I think we're in a fantastic environment here. Stock exchange is quite building. We're all very comfortable in this beautiful air-conditioned room. I want you to imagine that rather than being in this environment, your working environment looks like this. This is a blast furnace in South Wales. It is an incredibly tough environment, I think, to go to work in every day. To survive in this environment and thrive in this environment, you are definitely an expert in what you do. And frankly, it must be unbelievably tough. I want you to imagine that you've worked here for 30, 40 years even. And you're getting to the point at the end of your career. I imagine you are really rather looking forward to a well-earned pension and a rest. I want you to imagine though that literally weeks before you retire, the company you work for goes bust. And it's a hammer blow, you lose your job overnight and not just you but so do all of your colleagues and friends and your community. But at least you console yourself with the silver lining that I'll get my pension there, right? That's fine. And then the second hammer blow, no, you won't. There's not enough money in your pension scheme. Actually, you might get borderline nothing at all. And that's a true story. That did happen to ASW Steel in South Wales in 2002. I think it's an absolute scandal that it did. And that 20 years later, those people are still campaigning for some form of justice. That's a photo taken just a couple of years ago with people campaigning in Brussels to be put right. Now it's not the first time that something like that's happened. It's not sadly been the last time either. You could roll the clock back before I talk about Maxwell and the robbing of the Mirror Group pension scheme many, many years ago. Of course, I could talk about corporate events more recently, whether at Carillion, where a pension scheme was left in a challenging place; [ Antoine Bill ] and Philip Green, of course, taking huge amounts of money out of BHS. And ultimately then, when the company went bust, the pension scheme at least immediately did not have adequate assets in it. A lot's changed since 2002. There's a Pension Protection Fund to help. But sadly, people in these pension schemes still face a huge amount of risk of losing an awful lot of their savings if these things happen. And it's not just big corporate events, it's individual events, too. There are scammers in the world. There are people out there trying to rob members of pension schemes and rip them off. That's why we exist fundamentally is to stop this stuff to make sure that our clients are protected and they are safe. And that's why we write down our purpose in life as this. We exist to shape and support safe, robust and well-understood pension schemes for the benefit of people and society. So what we do really, really matters, matters to everyone. Now over the years since 2002, longer before that, there's been wave upon wave of regulation in our industry. The Pensions Regulator was set up after that event, Pension Protection Fund, the lifeboat safety mechanism came into being. Other things happened, the so-called tax simplification. It's been fiddled with ever since, so things are by no means simplified. They're vastly more complicated instead. In 2015, George Osborne drove the coach and horses through the way that defined contribution schemes work with an unexpected change in his budget. And there's lots of techie stuff that doesn't always make the headlines, but things like equal treatment of men and women in pension schemes around something called GMP, huge implications in our industry. And it hasn't stopped, even most recently, the pension schemes at 2021. If you're a director of a company now where the pension scheme gets left high and dry, your conduct will get looked at very closely. You are potentially even exposed to a prison sentence if you haven't behaved in the right way. Regulation is good for business. Here is a chart of the revenues of our company going all the way back to 2010. And what you can see is our revenues have grown every single year, bar none, year in, year out. And that is in no small part because looking after pension schemes and serving our purpose is a difficult thing to do as regulations evolve around us and there's market turmoil around us. There was austerity in here. There was Brexit in here. There's a pandemic in here. There's a war in Ukraine in here. And you see we grow year in, year out, no matter what. Of course, big leap when we came together with Punter Southall and made XPS, but year-on-year before and after every year growth. This morning, we announced 20% growth. So we are really thriving and we'll unpack that a little bit for you today. When we talk about defined benefit and defined contribution schemes, we do all workplace pension schemes, but there's a bit about DB. So I just want to pause and just go back over a little reminder of how they work and why there's so much of it. If you're lucky enough to be in one of these schemes or were, you built up a pension based on a simple formula, so called accrual rate, often 60 years. If you're in a scheme for 30 years, you get 30 60ths. At final salary scheme, you leave on GBP 30,000 at your retirement. Then that simple formula means that you can get half of GBP 30,000, GBP 15,000 a year. If you live for 20 years in retirement, you're going to ultimately receive GBP 300,000. I've mega simplified this, inflation protection, all sorts of things, but you get the picture. Now GBP 300,000 is quite a lot of money. Now a lot of companies have got a lot of this stuff. Take a simple example, quite a famous example of having big pension schemes, British Airways. That formula that I just showed you for a pilot. Pilots earn a little bit more than the average. This is again all a bit conservative. But you apply the simple formula, if a pilot enlists for 25 years in retirement, they get well over GBP 1 million out of the pension scheme they were in. And the thing is, this goes back a long way, and there have been a lot of pilots. And there've been a lot of ground staff, and there have been a lot of baggage collectors and everybody else. And across the whole piece, BA's obligations add up to GBP 20 billion, fairly eye-watering sum of money. BA aren't the only ones across the whole of the U.K. private sector. Over 10 million people are members of defined benefit schemes, and the total aggregate obligation is GBP 1.5 trillion. When you write it down with all the zeroes like that, it really does bring home just how big that is. That's about 68% of U.K. GDP. That's private sector only. If you added public sector in, you'd be vastly more than that. So what do we do in this giant industry? Well, let me break it down and keep it really simple. There are 3 pillars in our business. And in plain English, the first thing that we do is we advise to make sure there is enough money in the pension schemes to avoid future ASWs or Carillions. The second thing we do is give advice about where the money that's in these pension schemes should be invested. And the third thing that we do is deal with the actual human beings in these pension schemes. So we do all the record keeping, we communicate with people, we ultimately physically pay the pensions as well. And that's the plain English version of the 3 pillars of our business: actuarial consulting, pension scheme investment consulting, and pension scheme administration. And our SIP business is effectively administration services as well. So the 3 bars on here capture the things that we do, both for defined benefit and also for defined contribution pension schemes. We'll come back to these 3 pillars as we go on with the day. In terms of the clients that we serve, pension scheme system has members, yes. But 2 fundamental stakeholders that need a lot of support: the companies whose pension scheme it is and the trustees who are responsible to be independent of the company and make sure the pension schemes are run properly and well. They both need loads of support. The trustees need the 3 pillars I talked about. They need an actuary. They need some advice about where to invest the money. They need an administrator. They need lots of other support too, and we'll unpack this. If you're good at any of those things, you get to do other things, too, scheme secretarial work, advice to the trustees on the strength of the company, I could have put way more boxes on the bottom here. The company has lots of advice as well, with its own independent actuarial advice, risk management support. If a company is buying something that's got a pension scheme, then it will need M&A advice. They need to account for the pension scheme on their own balance sheet and P&L. So there's masses of different jobs that we do. The key is this is all done against a highly regulated backdrop. And for us, we would do any of the things on the top and bottom here. Our clients can be corporates, they can be trustees. We aim to provide every service that you need in the U.K. occupational pensions market and to be the best at it. You can capture that on one slide, our strategy, to be the best provider of services in the U.K. pensions market as a one-stop shop to do everything that trustees and employers need. And note, if you're brilliant at any one thing on that previous page, it opens up opportunities to do the other things. So a coherent strategy to be brilliant at all of this opens up all sorts of opportunities to cross-sell. It's a fragmented market. This is what it looks like. We've got 3 very big firms in our market who are global insurance broking firms at heart, with large U.K. pensions businesses. These bars are like-for-like. They're their revenues for doing the stuff that I'm describing. GBP 2.5 billion is the size of the market. And there we are, we're the largest independent firm, i.e., the largest firm that isn't one of these big global players doing all sorts of other things. We're in an incredibly interesting position. We have a really strong brand in the market. We're big enough to be able to win anything, and you'll hear of some of the great blue-chip client wins that we've had over the last few years during the course of the afternoon. But we're not like the big 3 and this shift of clients wanting really high-quality true independent advice is very real. And that shift from the left into firms like ours is a real feature of the market. With under 10% market share, we've got a great opportunity to take more market share and to grow. We're good at what we do. Three bars again. We're the first firm ever to win the awards at Professional Pensions Awards last year's Firm Of The Year in all 3 of those key lines of business that the industry thinks about. We win awards for our culture, and we'll talk a lot about our people and our culture today as well. As a firm, we've got great clients. We could have filled multiple slides. All of these clients, big blue-chip names, all of them won really very recently. All of them have been won in the last few years. And we have a very highly diversified client base. We are not dependent on any particular client. I think our biggest client is around 3% of our revenues. Our top 10 clients, you're at about 15% of our revenue. And you can see for yourselves on the chart, with the hundreds of clients we have, we have a hugely diversified base that is not dependent on any specific contract. Key features of our business that we think make us very, very attractive as an investment. First, we're noncyclical. You've seen that. We've grown absolutely come what may. Second, we benefit from regulatory and market change. Turmoil in the market is good for us, whether that's investment markets or lots of new regulations. All of our clients need huge amounts of advice and support when that happens. Our revenues, at their heart, are very repeat recurring, very visible. There are things that pension scheme trustees and corporates just have to do every year, year in, year out, and we do them. And critically, as an investment in these times, we're inflation-proof in terms of our revenues. We have contractual pass-throughs in lots of our contracts for certain services. Where we do not, we control our charge-out rates that we use and again can pass on inflation in those ways. So we're very well protected. We have extremely high cash conversions. Snehal will talk about that later. And we're capital-light. We don't need a lot of capital to run our business. Almost everything we make turns into cash. We have a really strong competitive position. I've already given you a flavor of that, but you'll hear a lot more about that as we go through. And critically, operational gearing is emerging in our business. And this is something you'll hear us talk about a lot today. But we feel like we are a business that's been in something of an investment phase for the last few years. And we are essentially at the end of that investment phase and seeing gearing come through. And there will be gearing in this year's very healthy results of 20% revenue, and we are very confident about further operational gearing emerging into the future. So before I show you the agenda, I just want to sort of state a little bit of an ambition, and you'll hear us mention this a couple of times. We feel like, I say, at the end of an investment phase that it's a brilliant time to be us. There's opportunities all over the place. Our business has more than doubled in the last 5 years. We are seeing operational gearing come through. Where will we be in 5 years' time? Will we be double again? I think that is highly likely that we will be. Will we be a more profitable business? Will operational gearing come through over that period? I think that's highly likely too. So to explain how and the ambition and all the opportunities around us is our agenda for the day. Patrick is going to take us through the Pensions Actuarial Consulting business in some more detail, Ben on investment and Dave on admin, and that covers our 3 core pillars. And we'll be talking about the opportunities that are in each of those businesses. Take a quick break. And then when we come back, we'll talk about defined contribution and our master trust in that area, National Pension Trust with Sophia. People are at the heart of everything we do. We'll unpack that, talk about our culture. And then Snehal will talk about some of the numbers and the excitement that we've got for the future, and Ben will talk about some of the thought leadership stuff that we're doing, a little bit to Alan's point, about the debate about the use of all these assets, and maybe we could just use them as a great force for good and some closing remarks on XPS too. In terms of questions, we've got loads of time at the end. This won't run close to 5 if we do a good job. There will be plenty of time for Q&A. We'd really welcome that. If you have a burning question, then please put your hand up and we'll try and take it as we go. But we will get to all the questions that we've got at the end there. We've got a few little things to break it up too, a couple of videos to show you here and there as well to keep the energy up. So I hope you really enjoy the day. Thanks again for coming. I'm going to hand over to Patrick now to take us through pensions.

Good afternoon. My name is Patrick McCoy. I lead the Pensions and Actuarial Consulting business. Before I joined XPS, I was a partner at KPMG, where I built and grew the investment advisory business. It was in that role that I met our Co-Chief Executives, Ben and Paul. And they approached me with a vision to build an agile and ambitious firm to challenge the traditional large 3 providers in the market. And 5 years on, we're really proud of the business we've created. And I'm going to take you on the journey of what we've achieved over those 5 years. And the reason I'm taking you on that journey is that, that will show you why I believe we're really well placed to benefit to grow revenues going forward, to deliver that operational gearing and to create real shareholder value. So a bit of context. This is pillar one that Paul was talking about. This is about making sure there's enough money in pension schemes to pay all the members what they're due. The key role we perform in the pensions business is acting as the scheme actuary to U.K. defined benefit pension schemes. It's a role where every U.K. defined benefit pension scheme needs, a scheme actuary. And we act at the center of that delivery model as a trusted adviser. If you think back to all the scandals Paul was talking about, our role is to make sure that they don't happen going forward, and that creates a lot of trust with our clients. It's very similar to the role of an auditor that sits at the center of that trusted adviser role. And if you think of what the big 4 audit firms did and extending their audit services to create really large multidisciplinary firms, that's what we've done in terms of taking that trusted actuarial role and extending to those wider services, and I'll touch on that in a minute. So back to the journey. So 5 years ago, we were the merger of Xafinity and Punter Southall. We were eighth and ninth in the market, and putting the businesses together created real scale. We had really great people, but they mainly only delivered those core actuarial services. We didn't extend them into the wider and higher-value services, and we didn't have a really great market presence. So we created the new brand, XPS, and we set about creating a really great business. And on the pension side, we really have 2 pillars to that growth. Firstly, creating really brilliant actuarial services and then extending through that trusted actuarial role into higher-margin additional services. In terms of the actuarial services, the first thing we did was create really great content. By content, I mean advice to our clients. So for example, when the Pensions Regulator issues new funding guidance, we interpret what that means for our clients. In terms of great content, I mean advice that's really easy to digest for both our people and our clients. So it's bright, it's clear and actionable. And we really transformed the way we did things and interacted with our clients. We also have invested really heavily in technology. At the core of that is Radar. So Radar is our interactive funding investment tool. It's award-winning. And you might have seen the demo in the foyer. I'll be there at the breakout and afterwards. I'd advise you to take a look. It's really great. And what that does, it transforms the way we deliver our advice to our clients. So we no longer deliver turgid reports. We do things interactively with our clients to make things really fast decision-making. Note, our competitors don't have this type of technology. So we've really and reinvigorated our core actuarial services, and we're winning great clients. The other half of our strategy is to extend those services into the higher-margin additional services. So that changes the mix of the service delivery, and so it means that we move to a higher-margin business overall. So just to give you a flavor of some of the things we've done in the wider service provision, what we're trying to do is make sure that we are that one-stop shop Paul was talking about, so that a client can come to us for all the services they need. If you take risk settlement as an example, when pension funds get to a level of funding that they can afford to purchase annuities with an insurance company, we perform that broking role. And if you roll back a few years, we probably didn't have scale and credibility to win in the market, so we hired Stephen Purves from Aon. We've hired a team around him. We've taken our revenues from about GBP 1 million to GBP 6 million over a couple of years. And we're now really credible in the market and go toe to toe with the best providers. Very similar in terms of DC. We lack scale and credibility. We hired Sophia, who's here with us today. I'm not going to steal her thunder. She'll talk to you about what we've done on the DC in terms of the DC market, but we're now winning and working with clients like Microsoft. We've come a really long way. As well as building propositions, we acquire them when it's right. So in terms of the covenant advisory market, so covenant advice is where pension schemes need to take -- have an assessment of the strength of the employer supporting the DB pension scheme. We've had a covenant team for a number of years, but we lacked scale. The regulator is really binding the covenant advice into the funding negotiation, so this is a core part of what we offer. So we acquired Penfida. Penfida are the market leaders in terms of covenant advice at the high end of the market, advising the big clients. And we've integrated that with our existing team and therefore could deliver a completely rounded advice to our clients as a one-stop shop. So that's really completed the picture in terms of building out those core elements, moving the mix towards those higher-margin services. Having done that, we can then move to increase our market presence. So last year, we commented in the national press on average once a week. We pump our content and propositions into the market through LinkedIn and other means. So we're raising our profile with existing clients and potential investors. We run seminars on average every other week. So we're really engaging with clients and the market. And as Paul said, we've won some really great awards. These are the benchmark awards for our industry. The pensions advisory team have won Actuarial Firm of the Year in the last 2 years. It's a real statement as to where we've got to as a business. What that means is we can then get out and really win clients at the larger end of the market. Our market is dominated by professional trustees. So those independent trustees work across multiple schemes, so they'll be working with all of our competitor firms but across a multiple of our schemes. And what that means is to be able to win work for their new clients, you needed to be doing really great work for existing clients. So everything I've talked about, about upgrading our services and proposition, puts us in a really great position to win work. And then we get out and win those new clients. And again, I'll let some of our clients explain how we've done that. And we've had some really great wins over the last few years. A few of them are on the screen here, really proud to be working with some of the biggest schemes in the market. Not only have we developed our content and propositions, we've really enhanced our operating model. So if you go back a few years, we operated in silos across the business. Nationally, we've moved to one national operating model. It means that we can deliver really consistent advice. It means we can move work around where we've got peaks and troughs. We can avoid all those issues. And then we've developed a national -- a centralized team that delivers process-delivering work -- process-delivered work in a centralized team resourced by school leavers on apprenticeships. And that's a really great thing we've done. So just some numbers for you in terms of where we've got to. You can see we've increased our client numbers. Staff numbers have gone up. But you see the mix in terms of the large schemes we advice, we have gone up significantly as we've moved up in market scale. But the question you're probably asking is, that's really clear, but what does that mean going forward? So how do we grow going forward? Well, we're in a really great position to win further actuarial appointments. We're now being invited to pitch for the largest schemes in the market. We've got a few going on at the moment in terms of actuarial tenders. Those larger schemes generate significant amounts of work. We're also winning full-service appointments because we are award-winning across all of our service lines, so getting great opportunities. And then the volume of work out there to do on the actuarial side is huge. Regulatory change keeps benefiting our business. There's that fallout from the LDI crisis. There's a huge pipeline of work backed up for us to do for many years to come. And in terms of the high-value additional services I talked about, we've made a massive investment into most of these service lines already. So we've built the Risk Settlement Team. We expect that to double from where we are today going forward. DC and covenant now stand on their own 2 feet as service lines people appoint us independently for. You probably heard about GMP equalization. It's a horrendous calculation that most pension schemes have to go through, equalizing benefits for men and women. We've done about GBP 12 million worth of work for GMP equalization. We've got at least double of that again to do. We're doing a massive amount of work for insurers. We've built a centralized team and processes so they can price. And those annuity transactions, we help them with the data. And we're also -- we've also built a team in terms of trustee governance where the schemes outsource their in-house pensions team, so we do the sector and then governance. And I think that will double again over the next few years. So huge investment made in lots of areas that we'll benefit from over the next few years. I think that makes us a really exciting provider, and we're refreshing in the market. And in terms of the numbers, just to finish, we've seen steady and consistent growth over a number of years. But all that hard work we put in to really reinvigorate our content propositions, revitalize -- revamp the operational efficiency, has driven a really significant growth in FY '23, which we're really proud of. But importantly, I believe, because of all those things, we will deliver going forward significant revenue growth, continued operational efficiency and shareholder value. I will pass to Ben.

Hi, everyone. So my name is Ben Gold. I'm the head of the investment advisory practice at XPS. I've been advising pension schemes for 25 years now. I've been at XPS for over 8 years following a spell at KPMG, and I love the job because I feel like we're making a real difference, a difference to our people, our clients and we can challenge the industry to try and drive up standards. So Paul talked about our 3 pillars. I'm going to talk about my business, pillar 2, the investment advisory business, where we advise both DB and DC schemes. Now underpinning the need for our services is the structure of pension provision in the U.K., which Paul talked about. Fundamentally, trustees have the legal responsibility for making investment decisions, and they have a legal duty to take investment advice. And what we do is we help them decide where to invest the money. We don't make any decisions on behalf of schemes. Our role is purely advisory. And we cover the whole of market in terms of investment managers and funds. So we're truly independent, and that's really important because it means we can focus on advising our clients on the best solutions for them. But not everyone is like that. If I take you back to 2018, there was a huge issue in our industry. We had the Competition and Markets Authority investigating investment consultants because they had real concerns that there was a big conflict of interest with them advising on -- advising pension schemes but also selling their own funds and fiduciary management solutions. Pension schemes needed clear independent advice, which is what we were already giving. And so we decided that we were going to really play quite heavily on that. And that's why schemes choose XPS ahead of the big 3 advisory firms because as the slide says, we're independent and we don't sell our own funds. But back in 2018, we were fairly small. We had 45 people. We had around 250 clients. We advised schemes with total assets of about GBP 30 billion, and we had 10 larger schemes with assets of GBP 0.5 billion or more. But our plan has really paid off. We've grown significantly, and I'll cover that a bit more in a few minutes. So what is it that we actually do? Well, I show on the slide here a cash flow profile of a typical pension scheme. These are the payments that the scheme needs to pay out to its members over the next 60 years or so. And as you heard from Patrick, actuary is valued at cash flows. We help schemes set and implement an investment strategy that's designed to achieve the level of returns that are needed but also control volatility so that the scheme can meet all those long-term payments, which are managed by Dave and his team, and he'll cover that shortly. Our focus is on asset allocation and the impact on its interaction between the assets and liabilities. What we're not doing at all is trying to call the markets. So in simple terms, our job is trying to help schemes implement more efficient portfolios. Can they target a higher level of returns without increasing risk? Or can they reduce risk for a given level of investment returns? I'm bringing this to life a little bit more. And this is a picture from Radar. And we use Radar all the time to perform our analysis and present our results to clients. And Radar is absolutely brilliant because whilst it's really sophisticated under the bonnet, the output is simple and intuitive. And so it really helps our clients make informed decisions. So let's look at a specific example. Now if you imagine a large Knightsbridge department store might have previously been owned by a flamboyant football-loving Egyptian. We were appointed in 2018 to help them. And at that point in time, they were running quite high levels of risk. As you can see on the screen, the risk was in lots of different areas, as shown by this risk waterfall chart. And risk was quite high. That means that there was a wide dispersion of potential future outcomes, and we particularly worry about the downside risk. So that's the kind of green line down here at the bottom. We're looking to try and push that up. So we found that they could afford to reduce risk to try and close in those lines, bring them closer together. And since then, their position has improved significantly. With our advice, they've moved from a deficit into a surplus, and they've been able to reduce risk significantly by about 60% or so. So we're giving sensible advice to help schemes build all-weather portfolios and deliver stable investment returns. But just to be clear, we don't think it's right that the direction of travel for all pension schemes is to just continuously de-risk, and that's something that Ben is going to talk about for a little more later. So we then help schemes implement their strategy. We recommend funds based on our detailed manager research, and we help them monitor performance on an ongoing basis. And we also do a similar job to all of this for DC schemes as well, which Sophia is going to cover. And our clients get the maximum benefit from XPS when we combine admin, actuarial, and investment services because it means we can give more holistic advice and be really agile. So of course, we need to be paid for providing our advice. And if you take a typical GBP 250 million pension scheme, we'll charge them something like GBP 100,000 a year as a retainer for recurring services like ongoing performance monitoring. And we'll charge them on a time cost basis for project work, things like the strategy reviews, manager selections, helping them deal with market events like the gilts crisis of last year. And on average, that might be around GBP 100,000 to GBP 150,000 a year. But because of the portfolio effect across all of our clients, our income is actually really quite stable and consistent. And on the back of all the great things that we've been doing, as you've heard already in other areas, we won the Investment Consultancy of the Year for both 2021 and 2022, and that's a bit like winning the Oscar for Best Actor or Actress 2 years in a row. And that's something that's only been achieved by 3 people, Spencer Tracy, Katharine Hepburn and Tom Hanks, in nearly 100 years at the Oscars. And so I like to think of myself as one of these people maybe. And we'll also be delivering a huge societal need and to fundamentally ensuring that people have a well-funded retirement, which is fundamentally, our purpose, as Paul covered. We also have been using our influence to try and drive up ESG standards in investment. And with GBP 1.5 trillion of assets in pension schemes, we can really make a difference. We signed up to a number of ESG and sustainability bodies, as demonstrated on the slide. And if I pick one out as an example, as signatories to the Principles for Responsible Investment, we're committed to promoting responsible investment to our clients. So we're making a difference, and we absolutely intend to continue doing that. Further, our ideas influence our clients and the pensions world more generally. We produce lots of thought pieces. We're doing that to help shape the industry, to enhance our brand recognition and also build on our reputation for being ahead of the curve. And these are available to all of our clients and non-clients alike. A great example of that is our paper from June 2022 on the increase we were seeing in gilt yields. And that included our advice to schemes that they should review their plans for meeting collateral calls and prepare themselves for the possibility of future gilt yield increases. And whilst we highlighted that gilt yields could increase further, we didn't have a crystal ball. It was actually these 2 that made it happen in practice. But during the gilts crisis, our people really came to the fore. They worked long hours to help our clients navigate that crisis. And in October 2022, we saw revenues 130% higher than the same month in the previous year. We also got fantastic feedback from our clients. You guys have been amazing. Your insight proved invaluable. There's loads more examples, but it gives a real sense of our performance and the fantastic culture and team spirit we have. Now the outcome of all of that is significant revenue growth. We've seen revenues grow by 22% a year over the past 4 years and over 30% in this year. So it's really clear that our approach is working. And behind that growth, the team is doing absolutely brilliantly. I'm massively proud of them. We've won schemes like Greene King, like Canon, like a large Knightsbridge department store. And we've won these schemes from different sources. We've won them because they're existing actuarial clients, as Patrick highlighted. And in some cases, they're new clients to XPS that have come to us partly because of our growing reputation. We now have 100 people in the investment advisory practice, and they operate as one national team in exactly the same way as Patrick described for pensions. We have 400 clients. And before the crisis, our assets under advice had grown to GBP 140 billion with 35 schemes having assets of GBP 0.5 billion or more. So again, it's really clear that our approach is resonating because more schemes and, in particular, bigger schemes want us, XPS, as their adviser. So all of that makes me really excited for the future. Over the past 4 years, we've grown by 120%. And I think there's a huge opportunity for us to double in size again over the next 3, 4, 5 years. We're going to do that by continuing to tap into our actuarial and administration clients, by carrying on helping schemes react to regulatory change and helping them deal with market turbulence. And as we grow, I think we will also provide an increasing opportunity to provide clients for both pensions and administration as well. So it feels like 2018 and the world is shifting all over again. The blurring of roles with consultants selling their own funds creates huge conflicts of interests, which are really concerning to pension schemes when you get situations like a gilts crisis in practice. I'm certain that our independent approach remains absolutely the right one. It will enable us to continue growing strongly and benefiting from the huge opportunity there is in our market, which will ultimately drive more shareholder value. Okay. Thank you. I'm going to now hand over to Dave, and he's going to talk about the administration business.

Good afternoon, everybody. I'm Dave Watkins. I lead the administration business at XPS. Patrick and Ben have spoken to you about pillars 1 and 2, and my focus is going to be on pillar 3. Paul referenced this a little bit earlier today, but our basic core objectives are to keep records, to communicate with members and to pay pensions, all of which sound incredibly simple. But I say as an industry, I think there are -- some of our competitors have made a very difficult job of doing that well. I think we stand apart due to our consistency and consistent delivery and growth in recent years. I've been in the admin since 1989. I can say with confidence that the most important component with the administration service is our interaction with members of pension schemes, which is something that pillars 1 and 2 really are involved in. It's the administration that front to members in the industry. So I'm going to try to kind of bring to life a little bit about the services that we provide from an admin point of view by going through effectively the life cycle of a member journey through a pension scheme, which obviously starts when they get their first job, and they're offered membership of a pension scheme. That's when we become involved. We show all the welcome letters and the initial communications and all the education content to explain to them what a pension scheme is and why it's important and why in fact they should actually be saving more than the standard minimum pension contribution that the company will be offering. Throughout their lifetime, there's various life events will happen. They get married. They may have children. These things all generate additional administration. We have to make sure that we're tracking those changes. We're keeping the records up-to-date, nomination forms, beneficiary information. For instance, it's very easy for mistakes to be made at this point that manifest in significant problems much further down the road. They may, at some point, choose to change job. I mean it's very rare these days, I think, for people to be in the same job for 20, 30, 40 years as they were perhaps in the past. But they leave the job, they will always leave the scheme. They may choose to transfer at that point, but many people choose not to. So we have to make sure that we keep track of them when they move out. So there's that continued relationship with connectivity with members on the administration side is usually important. Some people do some of these things multiple times, so that clearly adds to the level of complexity and the additional administration tasks that sit behind it. Eventually, over a number of years, people will start to think about retiring. I think these days, people will often work either to normal or even beyond and take late retirement. But many members will be contacting us several years out from their projected retirement date. So there'll be a number of interactions, potential early retirement conversations. People will think about what their options are, not just a year out, but 2, 3, 4, 5, 6 years out. So there's lots of interactions to keep track of, lots of information to provide. We don't provide advice. We provide all the guidance that sits behind all of that. Eventually, the member will retire. They become a pensioner from our perspective, so we set them up on the pension of payroll records. We take on the responsibility of making sure those pensions are paid month in and month out, as we did all the way through the pandemic without missing a single payment, which is something we're particularly proud of. But sadly, eventually, that duty of care that we've carried for all those years will pass to that member's spouse and to their children. And we establish their pension payments so that it continues, that journey continues beyond even the lifetime of that individual member. And this is something we take hugely seriously. These are significant life events. Everything that I've just gone through there adds up, as you can see on the screen. In a standard year, over the last 12 months, 1.6 million pieces of work has been processed by the administration business. Almost 400,000 phone calls have been taken, 4.8 million pension payments are issued every year across 38,000 payrolls. And in addition, we also seek to protect members against pension scams that Paul mentioned at the very beginning of the presentation. So in the last financial year, we had almost 3,500 transfers go through our member hub anti-scamming process. 4% of those raised regulatory red flags, so I think the risks in this area are very real and we take our responsibilities incredibly seriously. And we believe we have generally a market-leading offering in this particular space and have been doing it for a lot longer than many of the other providers have. It's not all about the member events. The member events take up, I think, the vast majority of the work that we do. But we're also supporting a significant number of scheme events. This is just a few of them. This is by no means the sort of full gambit. I mentioned communications briefly because that's a service that's beginning to grow arms and legs. We're over GBP 1 million worth of revenue now, seeking to grow that in the next few years. That could easily become a business in its own right, but it's something that every pension scheme administration client accesses. We also do project work. I think Patrick referenced the importance of GMP reconciliation and equalization, where we work very closely with actuarial clients. These are very complex projects. We've been very busy on them for the last 2 or so years. I think we all expect to be on the other side of this by now, but I actually think it will keep on going for at least the next 3, and there are significant revenues attached to them. Ben referenced the movement in the market over the last year or so. That has created significant opportunities for trustee boards to de-risk. Eventually, after all the clever mathematics are done, they've been done by pillars 1 and 2, it will end up back with administration to try to implement whatever solution has been agreed. So we're particularly busy in that space as well. McCloud is something that you may not be familiar with. McCloud resides within our public sector client base. It's a litigation-driven benefit remediation process covering police, fire, local government, and the Ministry of Justice pension schemes that we administer. It's a huge endeavor. It will kick off and gather pace over the course of the summer. We'll drive even faster beyond October. But in the next 2 to 3 years, revenues around McCloud could easily exceed GBP 10 million, just looking at the clients that we have. But they also represent a significant opportunity to actually make connections with the wider public sector market as well, not just the clients that we currently look after. So who are our clients? I'm going to generalize a little bit here for you. So our clients are in 2 buckets predominantly. So full services, where they buy more than one service. In this instance, they're buying all 3. Or administration only, where they only appoint us for administration. The generalization comes in when I say that the administration-only contracts tend to be the larger of these 3 buckets, so these tend to be the larger corporations. But that isn't always the case. You heard from, I think, the trustee chair of M&B earlier. As a full services client, that's a very large administration contract that we now look after by virtue of the relationship that Ben and Patrick created ahead of us being introduced. When I joined XPS or as PS as it was back in 2009, revenues were a little under GBP 8 million, only GBP 0.5 million related to administration-only contracts. As I stand here today, revenues of GBP 57 million, more than half of that relates to administration-only contracts. So you can see the importance that, that has brought in terms of our growth. And I'm going to talk a little bit more as we go through as to where those revenues and what types of opportunities exist within that particular market. It's also worth, I think, just restressing something that Paul mentioned earlier on. We do look after all workplace pensions, contracts, defined benefit, defined contribution, hybrid, master trust, care, cash balance, and Andy Bowsher in the audience looks after SIP and SSAS administration. So it's not simply one product type that we're doing these 1.6 million pieces of work on. There are a number of different products, and that introduces significant complication. I think you've seen a couple of slides like this, so I won't spend too long on this. IBM are the most recent first-time outsourced that we have delivered. PSA are the most recent to appoint. First-time outsourcing, I'll talk to you about in a bit more detail in a moment. Aviva's the largest one that we did. That was up in Scotland with, I think, transfer of about 43 staff, the creation of a new office. Prudential was a second or third-generation transfer from competitors. A number of the other clients referenced on here are in the same category, so that remains an important market for us. Kent Police, a public sector first-time outsourced. They made that decision only recently, and we found out a couple of days ago that Essex have now joined them to come across and work with XPS. How do we deliver all of this, I think, is a constant theme, I think, through the presentations that you've heard so far. But it's all about our highly skilled and qualified people. You can see [ Claire ] here from our Belfast office receiving her VIP award for doing the right thing. It's this kind of recognition of staff for the work that they do to look after members of pension schemes that makes us generally different than our competitors. You can see here, we have a PASA accreditation. That's something that we've just achieved. It's an additional independent verification of the quality of the work that the teams deliver up and down the country. So our competitors, what you have here is a table that's ordered by the number of members administered. So you'll see we've passed the 1 million members under administration mark now. So that's a significant milestone for us. But perhaps more importantly, you'll see above that line, there's a significant amount of opportunity that remains to go and get some more. I think what's quite important, I was listing to see, I think it was Paul talking a little earlier today, that actually when we get the opportunity to tender for clients that are looked after by Capita, Mercer, Equiniti and occasionally WTW, they are often not a part of that process, so not even invited to re-tender for the work they have at the moment. Our competitors in that regard sit further down this lead table. And I think our track record and our capability and the things that we've delivered over recent years means we are incredibly well placed to continue to take second and third generation of transfers and market share from those providers. Our USPs are listed down here. I won't go through all of them. Award winning, that's been referenced a few times, so I'm pleased to be able to compete with my colleagues by saying that we, too, are award-winning, and that has underpinned our success, I think, in terms of new business in recent years. So I talked about first-time outsourcing. I think I've just illustrated the substantial opportunity there is in terms of second and third generation wins from competitors. But these are clients that will be choosing who -- at some point in the past, have chosen to administer their pension schemes within their own organizations. They're often large corporations, but I'm generalizing. They're not always, but they are often very large corporations. They are often almost always paternal organizations. They took the view that at some point in the past, that it was important for them to own it, to own that member experience, own the tech and all the service delivery that goes as a part of that. But at some point along that journey, it all becomes a little bit difficult and a little bit complex and a little bit costly. The constant regulatory change that Paul referenced earlier on, the continued need to invest in systems, the need to try to support a pensions team while you're busy running a catering company or an IT company, it's not the sort of thing that they naturally think of first. So what you tend to find? As I said, I do like to deal with generalizations, but this is generally the sort of picture that you find, older IT systems, tired working environments, and staff that generally feel quite unloved and not really looked after. That is generally the case. We obviously come along and we're offering brand new tech, new offices and exciting careers and pensions admin, believe it or not. We are offering that every day of the week. And we are very successful in doing it as well. We're talking about -- to sort of demonstrate for you. Importantly, on the commercial side, big corps, that in-house pensions team is an inconvenient cost. To us, it's a potential revenue stream. And because of the fact that we're doing these things for almost 600 clients now, we can offer value back to big corps. So the revenue they're paying us often represents value versus what they're paying in-house. And you'd be surprised how many clients in this big corp column have no idea how much it costs them in-house either. So back in 2014, by our estimation, by the records that we keep, there were 280 schemes that were chosen to be administered in-house. That's back in 2014. Since then, 28 of them have elected to outsource to the TPA market. 16 of those have appointed XPS as a result of an external market-driven process. That's a 57% success rate, which is, I think, fantastic by anyone's measure. Those 16 clients equate to GBP 18 million worth of revenue annually. So I'll tell you that -- I'm sure you've done the math, I know the actuaries have, 252 clients yet to outsource. That is a huge opportunity for us. So we have the second to third generation transfers from providers that perhaps aren't doing as well as we are at the moment. And then we have this opportunity as well as a second strand. We've also grown through acquisitions. I think Patrick referenced during his presentation. Back in 2018, we created a really significant footprint in the public sector market from which to grow. So back in 2018, 32 clients, 235,000 members, and just a little under GBP 5 million worth of revenue. That's now grown to almost GBP 8 million worth of revenue, 290,000 members and 38 clients. But for me, it's what comes next potentially that's the real exciting bit. So of those 252 clients that are currently administered in-house, almost 90 of them are in the public sector. We have the McCloud projects as well to run, so GBP 10 million plus worth of revenue. Lots of connections and opportunities to make in terms of other clients we currently don't work with at the moment. There's an [ EZO-led ] review of the police administration sector, where we believe that the recommendation would be to move to a single provider. We look after more than 80% of the constabularies in England and Wales. So we are very well placed to pick that up should that decision and recommendation be made. So this is potentially a really exciting area for us. We've also invested in technology. I think you'll be aware that we currently use 4 systems across our business. We've built our own proprietary platform, Aurora. Our ambition is to move to a single platform for administration. It's brand new tech, it's cloud native. It generally represents something that I don't believe sits anywhere else in our market space. It's coupled with a digital first process which will drive some of the operational gearing that we hope to achieve in the next few years. So the key sort of headlines, really, I think, around Aurora is we believe it will enable faster client onboarding. So what I mean by that is, we'll be able to bring more clients in, in a standard year than we've been able to do up until now. We'll be able to make them more automated, both existing clients and future clients. And that makes it more efficient for members that are accessing things online and more efficient for the administration staff that are using systems in the back office. It will be a genuine USP for new business. I would say it's the one thing technology that perhaps we've not had up until now. So this is a hugely important step for us. And I think we will start to see payback on this within a relatively short period of time. Some of the numbers. You can see here, GBP 57.4 million. I kind of referenced that earlier, growing from GBP 37.5 million in 2019. Headcount now is in excess of 800, so it's a big business. The revenue -- the strength of the revenue growth --I think you've seen versions of this slide a few times. You can see that, I think, easier on this slide. The split of our revenues between project work and inflation linked retainer or recurrent revenues is 20:80 and that's been consistent all the way going back. I think we can expect in the next couple of years, project work might nudge up by 2 or 3 percentage points because we are so busy as an industry in that space. But broadly, this split of revenues will remain. I think Paul referenced earlier when he listed the whole bunch of different things that happened in this window, but from my perspective, pandemic happened in this window. I think the administration business was the one, arguably guys, was most impacted by that change. I'm incredibly proud of the delivery of the teams in admin to continue this level of growth. What sits behind this is all of the SLAs and KPIs and deliverables that the teams also maintained every pension paid month in, month out, all the way through that pandemic period, a huge spike of work, a lot more phone calls. We kept tracking all of that and delivered these levels of performance as a consequence. So in terms of our key opportunities for further growth, I've referenced some of these already. First time outsourcing is a really big one. Second and third-generation appointments absolutely remain key to us. You may read in the press that it's a shrinking market. I wouldn't listen to that. It's absolutely not from our perspective. We want to be able to convert our administration only clients across 2 full services clients. So Ben gave a couple of examples of where he's introduced administration opportunities. We hope to do the same for him through some of these larger administration-only appointments. And finally, there's a genuine opportunity for operational gearing in the next 3 years through people and through tech and through process change. And that's me.

Great. Thanks, Dave. Thank you to all of our presenters. We've done the 3 pillars. Lots and lots of time for Q&A. And of course, people will be available at break and afterwards, do come over and say a lot to everybody individually, that would be fantastic. We're almost at our first break. We're going to play you a very quick video about the super important topic of sustainability. After that, we'll pop out for a coffee next door. [Presentation]

We're here to shape and support safe, robust and well-understood pension schemes for the benefit of people and society. We do this by following our values and embedding sustainability into everything we do. Our sustainability framework consists of 5 focus areas where we set ambitious targets and made good progress. Strong governance is central to our purpose. It underpins how we serve all our stakeholders and is the foundation for all our sustainability efforts. Sustainability at XPS is overseen by our Board level committee. We operated a high standard of corporate governance through an inclusive culture, a comprehensive information security program and conducting business in a way that values and respects the human rights of all our stakeholders. Our people are our greatest asset and we want to provide them with a positive and collaborative working environment. We are committed to creating a supportive environment where employees can thrive. We promote inclusion and diversity. We publish both our gender and ethnicity pay gaps and are making continuous positive improvement. We offer a comprehensive training and development program for all our colleagues and we support a range of employee networks championing diversity. Through our role as trusted advisers, we aim to develop partnerships with our clients, always ensuring that we do the right thing for them in the long term. In particular, we help our clients invest in a responsible way, led by our ESG research process. We carry out independent research of available funds and have designated a number of these to be sustainable funds that target environmental and social outcomes alongside their financial objectives, including, for example, net zero target. Our pension scams protection service continues to support our client schemes and their members to identify and manage suspicious activity. Our people regularly engage in many events supporting charities across the U.K. We are proud to have had the opportunity to support charities close to our people's hearts through the matched fundraising. We have set ourselves the target to become a net zero business in line with the Paris agreement. We have pledged to halve operational emissions and source 100% renewable electricity by 2030. Our strong societal purpose is central to our growth as a business. We will continue to shape and support safe, robust and well-understood pension schemes while remaining accountable for progress and further achievement in line with our sustainability framework.

Right. Very proud of that. It's 3:00, we are on the money. That's quite a remarkable thing. We'd love if everybody could come back at 3:15. So we've got quite a lot of things to cover, a lot of really exciting content, some of the numbers and all sorts of other things as well. So if we get back by 3:15, that would be greatly appreciated. If you're online, that's when we'll be going live again. Thank you. [Break]

Sophia, I think you're going to talk to us about the big opportunities in the Defined Contribution market.

Thank you very much. Yes. I'm Sophia Singleton. I head up our Defined Contribution or what I'll call DC business here at XPS. I've been in the industry for 27 years or so, but I've been with XPS for just under 3 years. I joined here from Aon. So I was at Aon prior to that, where I helped build their DC consulting business and helped launch their DC master trust. And I think there was 2 reasons why I chose to come to XPS. The first one was, from the outside, I could see a company that had a huge amount of ambition and innovation and was really nimble. And all of that really lets me feel that I can make an impact here. And that's certainly what I have found having been here now for the last 3 years. The other thing was that, as you've heard a lot about today, it's the DB business, a huge fantastic reputation in the DB space. But our DC business is quite small. And so for me, personally, it was a good challenge to come and build a DC business here and a DC brand. And I'm really proud of where we've got to so far with that journey and I'll tell you a little bit more about that as I go through. But before I do, Paul started out earlier today with sort of a little sort of intro to what defined benefits pension looks like. So I thought I would do the same for defined contribution. So we're really clear what I'm talking about. So I know we're terrible with our jargon here in pensions. So what is a defined contribution pension? Well, a defined contribution pension is where employer and employees sets a percentage of their salary into the pension scheme. It will earn some investment return over time. And when they get to retirement, they'll be able to use the pot they've collected to fund their future income, so whatever they want from their retirement. Everything sits pretty much with the individuals. So the investment risk, how they use their pot, et cetera, sits with the individual saver. So the employers are much less -- it doesn't sit with the employer like it does with defined benefits. What does this look like for an average U.K. worker? Well, an average worker, let's say, on GBP 30,000 a year now. Over a 40-year career, paying the minimum contributions, which is 8% by legislation, into a pension scheme, may end up with something just over GBP 200,000 in today's money, which actually for the average worker is a lot of money and will be one of, if not their biggest assets over time. So DC pensions are really important for workers across the U.K. The DB industry is very well established. DC, we're the new kid on the block in a sense. So it is a growing space. Many of you, I suspect, are or have been in a DC pension scheme. And since auto-enrollment was introduced in 2012, the number of people saving into DC pensions, employees saving to DC pensions has grown to over 11 million people. They are saving GBP 25 billion a year, which now equates to about over GBP 0.5 trillion of assets in DC pension funds, and that is expected to grow to over GBP 1 trillion in the next 10 years or so depending on which steps you take. So it's a significant industry. It's growing rapidly and it will only continue to grow. And 3/4 of the DC assets are invested in equities. So it is a huge participant in the U.K. market. Unlike DB pensions, where you are very much de-risking, DC is very much about investing in growth assets and growing people's funds. But it's a bit harder than you might think managing a DC savings account, because it is essentially a savings account for individuals. And that's what brings me to Paul's 3 pillars, because you've got to think about -- make sure you save enough into your pension. You've got to make sure your assets work hard enough for you. And then you as individuals have to make a decision when you get to retirement of what to do with those assets and how you want to use them. So if I think about saving enough, we help our clients because we help them understand -- whether they're -- do you want to -- let's think about you, do you want to spend your retirement going on holiday in Saint Lucia or places like that? Or do you want to be in a caravan in the rain in Skegness? Maybe there's a simple answer to that one. But we help our clients understand their employees, what they might need from their retirement and therefore, how much they should be saving into their schemes. And that will help drive contribution benefit design, and also help -- we had some conversations here just in the break about how to maximize tax efficiencies and what all the tax rules mean for people as well saving into their pensions. The second pillar, for those 11 million people, most of them are not like us here in the room today. Most are working in the industry or factories or shop floors or wherever else. They know nothing about investments. Even though they invest, they take all the investment risk, they know very little about investments and they don't really want to. So we help our clients design investment strategies that meet the needs of their employees using the tools and techniques that Ben talked about earlier. And actually, quite importantly, we also help them explain those risks and these sort of ways of investing to their people. And then finally, the last pillar. So we look after the members, and that's really important as we said before. So we look after them, we keep their records, and we help them make decisions throughout their careers. And one of the most important decisions which I've already mentioned is what to do with their benefits at retirement, how to use their pot of retirement. And George Osborne made that a lot harder for people back in 2015 with his freedom and choice budget. Do you cash in all your funds at retirement and put it under your mattress? Do you lock it away and buy a guaranteed annuity? Or do you stay invested and draw down on your funds over time and hope they last for your lifetime? They're really, really difficult decisions for everyone, for all of us to make. So we help our clients support their employees and we help their members make those decisions. But to do all of this, you need really good governance and efficient delivery and that is getting harder for our clients. With a huge amount of scrutiny from regulators, both the pensions regulator and the FCA, they're really looking for schemes to deliver, DC schemes to deliver value for members. And there's a huge amount of, I think, rightly, in a sense, focus on that. But that is leading employers to think about whether they're going to get busy or get out. So those who are going to get busy are going to keep running their pension scheme, but they've got to put more time and resources into them and we'll help them do that. Those who want to get out will be looking to using sort of outsourced professionally commercially managed solutions for them and often that's in the guise of a master trust. And I mentioned the master trust before. So what is a master trust? I liken a master trust to maybe when you -- think about when you were getting your first place, did you buy a flat, do it up, put lots of work into it and make it your own and keep it -- manage it yourself? Or did you think about getting a fully furnished, fully serviced apartment that everything was done for you, all the upkeep, the maintenance, everything set, you can get on and live your life. And that's kind of what a master trust is. It's provided by a provider. They look after the investments, the administration, the governance, the member support for you as an employer. And the employer, you can go off and run your business and do the stuff that you're good at. So we are doing a lot of work at the moment now supporting our clients and deciding whether to get busy or get out. And we've got a large number of clients who want to get busy. And so what are we doing to help them? We're helping them set up new DC schemes. And we're designing benefit structures, we're designing investment strategies with them. And we're also using our DC analytics service to help them understand their employees and their behaviors. And this is a great example where our nimbleness and innovation has really come to the forefront. So we use a marketeer's approach to data analytics to identify -- help employers understand what their employees need from their pension scheme. And that's totally different to what any of our competitors do. And I have to say when I first came here and I found out about it and really got under the bonnet, I got really excited about it because it's something I've wanted for years and just we weren't able to create within Aon and here it was already. So we work with some fantastic clients, some really big names we've won more recently. One of them is DXC Technology. We're doing a really fantastic big project with them. But we've got a large number of clients that we have been winning in recent times. We also have a large number of clients who want to get out. So they want someone to do it for them. And that's where National Pension Trust or we call NPT comes into play. NPT is our sort of outsourced solution where we do the heavy lifting for the clients and it's a master trust, and it has grown significantly over the last 4 years as new clients have come on board. So it's gone from less than GBP 0.5 billion to, I think it's now over GBP 1.4 billion in assets, which is quite a significant growth. So the master trust market is a competitive market and it has been consolidating. Four years ago, in 2019, there were 92 master trusts in the market. Now there's just over 30 master trusts in the market. And some of the biggest household names are competing like Legal & General, Scottish Widows, Aviva. NPT gives us a fantastic foothold in that market. But given the evolution of the market, we might need to partner with someone to maintain that foothold in the future. And so that's certainly something we keep a watching eye on. But it is a really exciting market, the master trust market, and a really fantastic growth opportunity for us. So how do we get paid? You've seen this slide for few others before me. For our clients who want to do it themselves or we support them, we get paid on a time materials basis for project work and strategic work and we have retainers for ongoing maintenance. That's very similar to what we've heard before. But NPT is a little bit different. For NPT, we get paid as a percentage of the assets. So as the assets grow and clients come on, that leads directly to our revenue line. So I hope -- I suppose what I was trying to talk about today was that we're at exciting turning point in the industry, in the DC industry as clients decide whether to get busy or get out. But we've also been to sort of a pricing journey, I guess, as a DC team. Three years ago, when I joined, we had a few people working in DC dispersed around the country, not very joined up. We now have almost 50 people working on DC. We're advising schemes of assets of over GBP 15 billion, and we've more than doubled our revenue in just over 2 years, actually. And we've taken on some -- what really makes me proud is that we've been able to win some really big client names. We've grown our client base significantly, but actually some really big names amongst those, including, as Patrick mentioned, Microsoft and BT as well. I'm also really proud that we have achieved our ambition of building our brand. So I can't say we've won the award yet, because it's only been the first few years, but we have been shortlisted for this year's Professional Pensions Awards. The ceremony is next week and we'll be keeping our fingers crossed. But no matter what happens, I have to say we couldn't have actually achieved that 3 years ago, even 2 years ago. So I'm really proud of where we've got to and that actually we are a brand now within the DC market. And if I look ahead to the next 5 years, our clients are going to be deciding, as I said, between this get busy or get out. And we're now in a fantastic place to really support them and to win new clients. And my ambition is to continue to win those new big name clients in what is a thriving market and I think this market will help really drive shareholder value going forward. Thank you.

Good afternoon. My name is Rachel Gillion and I'm the Head of People at XPS. I'm going to tell you a little bit about some of the things you've seen on the video already today and I'm going to put a bit more meat on the bones for you, so you can really see the great things we're doing at XPS. I've been with this firm for over 20 years. And in that time, I've seen so much fantastic positive change. It's incredible. I'm responsible for the whole of the employee life cycle, so when somebody applies for a job, for their career progression, their reward, and then their exit. I also have responsibility for employee engagement and learning and development. So if we go back to 2018, around then we had around 850 full-time equivalent heads. And that was just when we brought Xafinity and Punter Southall together. Both had fantastic relationships with their clients, had fantastic people and we wanted to bring those together and really sort of make the most of that fantastic culture that we had. Fast forward to now and we have 1,550 full-time equivalent heads. But what changes that. As you already heard, we are award-winning, and we have people who are engaged and they really want us to succeed, which makes such a difference. So we had really a blank sheet of paper, but we knew we wanted to be the best for our people and the best for our clients. And we did that through making sure that we could attract top talent, as you've seen today. We're able to retain those people that are really making a difference. And we introduced a performance-based culture where people were absolutely recognized for their individual performance and that made them keen to succeed. The first thing we did, which I'm most proud of, is we introduced a set of values, which you've already seen on the previous video. We did this by talking to our people. We set up focus groups and we listened to what they had to say. We wanted to understand exactly what it felt like working at XPS and what they wanted it to be like and it was a brilliant, brilliant time. We rolled these out by separate roadshows at each and every office. And we did this by really embedding the purpose that Paul talked about earlier and making sure that people understood why these values are so important. We since introduced Values in Practice Awards and these are an annual event where people can nominate anybody in the firm who's gone above and beyond what you'd expect them to do for their job. So it could be they've created a new innovation for a process that's been manual, or it could be that they've gone above and beyond and made that fantastic member service and it's been consistent throughout, or it could be that they've had fantastic feedback from a client. And it's incredible to see all those nominations that come through. The judging panel that we have consists of Paul; one of our non-executive directors, Sarah; myself; and our Head of Employee Engagement. And we also bring back previous winners to sit on that judging panel and we're able to really review those nominations that are sent through anonymously and we make sure that we really read all those and then we get together as a committee to work out who should win. These are some of the photos of last year's winners. This year, I'm delighted to say we had over 130 nominations and it was no mean feat working out who should be the winners. But underneath what that is building this community and our networks is so important. We have just under 300 people who form these networks and they really help us shape policy at XPS. We listen to them and they tell us things that we could do better, things that we need to improve upon. But also, we work collaboratively with our central functions. We also have our employee engagement group, which is chaired by one of our non-executive directors, Margaret Snowdon. And this group meets formally and represents every office location that we have and they tell us things that are going well. We liaise with them very closely when we have our employee survey results and they tell us what we should, so part of the action plan. So as you can see, this is a fine example of a new policy that we've recently introduced through collaborating with our networks and through making sure we understand and listen what's important to our people, what do they want from XPS. I'm also delighted to tell you that we've achieved our disability confident committed status at Level 1 and we're striving for our Level 2 this year. And we're also committed to being a menopause-friendly employer and we're seeking accreditation in time for Menopause Day on the 18th of October. These are all things that help us create a more diverse workforce and it makes us attractive to people, which is so important in such a fierce market for talent. Last year, one of our multicultural network, during Black History Month we had a speaker event, which was with David Olusoga, who came to talk to us about his writing and his experiences. This was a really well-attended event, which really sort of put spotlight on this particular network. But probably for me, the best event that we put on was our personal stories event. And this is where our people talked about their own lived experience in the U.K. of being black and how that impacted on their careers, on their families and how they came to be at XPS. These people really made themselves vulnerable, and how fantastic that at XPS we gave that platform and we embraced that and we really, really appreciated their vulnerability at that session. Of course, underpinning all that is our inclusion and diversity framework and this is where we really want to have that sense of belonging, making sure people understand how we're going to strive to be the best from an R&D perspective with our culture of fair processes, attraction and how in society we need to behave. Of course, amongst all that is the communication and how we speak to our people and how we communicate and how we deliver messages. Throughout the pandemic, we introduced the Friday audio, and this is where Ben and Paul take in turns each week and give us a rundown on various things that are going on within the business. It can be anything from a new business win or some general housekeeping or perhaps it's about an award. Here's a bit of a snapshot. [Presentation]

It's a really simple gesture, but it's so powerful. And then every employee engagement step that we've had over the last few years since the pandemic, people have said how much they enjoy these updates because it's a really good way of people learning more about the business. And it's not reading another email, it's just a 2-minute audio. Now we've been put forward for an award as well for our diversity and inclusion. And we've also got our fingers crossed for next week at the Professional Pensions Diversity and Inclusion Award. And that's all about that sense of belonging and the majority of our staff at last year's survey said that they felt people could thrive at XPS from any background. How fantastic is that to be able to have that. I'm so proud of that. We also do the right thing. And one of our values have been to do the right thing. And last year, when we had the cost of living crisis, we knew that we wanted to do something to help our staff. Our staff was struggling and we knew it was a really big problem. So we introduced a midyear salary increase and this was just not up to our senior grade. This meant that people unprompted weren't expecting to get this increase last October. And here's some of the unprompted feedback that Ben and Paul received over that period. Just take a second to have a read of these because they're incredible. And there are many, many more. People genuinely were so surprised by this and it was the right thing for us to do at that time. So I've mentioned a few times about our employee engagement survey. This runs every year, every autumn. And here's a snapshot of some of the fantastic feedback we've had over the years. So you can see that trajectory, that progression of how people feel about working at XPS. This is my favorite one. "Working here makes me want to do the best that I can." That's incredible. Not sure what we're going to do this year. We run our engagement survey through the Happiness Index, which is an engagement platform that you may have heard of. The benchmarks they tell us for our employee Net Promoter Score, where we ask people, would they recommend XPS to a family member or a friend, is 5. We hit it with 33 last year, which is transformational for us. And it's just -- we obviously need to increase it this year. But we're still incredibly proud of that. We also were listed in the Sunday Times Best Places to Work a couple of weeks ago and of the big company section. This was run by a survey by a third party for the Sunday Times and colleagues were asked to complete that survey. We had no influence over the questions whatsoever and we came listed in that section, which again is a fantastic achievement. So I think from what I've said, you can understand that we've got this fantastic culture. We've created an environment where people feel safe, people know they can thrive, people know what to expect. We know how to behave, and we're delivering that fantastic client service. How we treat our people is so key to our success. I'm going to hand over to Snehal.

Just to manage expectations, I might be the only one that hasn't been listed for an award. But hopefully, the numbers do speak for themselves. So good afternoon, everyone, and it's great to be back in person and so good to see so many of you here today. I've been in the world of finance for over 25 years now. And I have to say this, the last 4 years have been the best of my professional career. Now those of you old enough to remember the infamous Steve Ballmer at the Microsoft event. I'm not going to go that far, but I do love this company, and it's natural to be proud and excited about a firm that is delivering for its people, its clients and shareholders. My colleagues have told you about the strong societal purpose, the operational achievements, the phenomenal growth year in, year out. You've heard what our clients have to say, you've heard what our people think of us. Now let me take you through how all of that translates into our strong and sustainable financials. So whilst the roots of the business can be traced back to more than 40 years, life as a public company began in 2017. The core strategy for growth since then has remained unchanged and it has delivered revenue growth year in, year out, through Brexit, through pandemic, through the war in Ukraine, and various other political and economic turmoils. We've grown organically as well as through M&A, including the transformational acquisition of the Punter Southall business in 2018. Including this morning's announcement of a 20% growth year-on-year, that sets us a CAGR of 11% in revenue growth since 2019, which was the first full year after the Punter Southall acquisition. Now consensus for the out years will adjust on the back of this morning's announcement, but as of yesterday, the consensus CAGR for revenue growth between 22% to 25% is 12%. Now it's important to remember this number when we come to talk about the EBITDA progression expected in the same period. On the next chart, you see the revenue mix and how that's changed over the years. You can see that the Punter Southall acquisition in 2018 led to a significant increase in the revenue from the administration business, which tends to be lower margin than consulting, but strategically a very important part of our journey. The final thing to say here is that we have a high degree of visibility on our revenues and more than 90% of our revenues in any given year are repeat or recurring. So revenue growth has been profitable with adjusted EBITDA also growing every year. The change in the mix of business is primarily responsible for the decrease in margins between 2018 and 2020. In the last 4 years, I've also been about investing in creating a long-term sustainable business and those investments are paying off. Now we are a people business. And whilst the 25% EBITDA margin in a professional services people-focused business is considered healthy, but we've been working to improve the operational gearing in the business even further. And whilst the consensus margin improvements in the future may seem modest, we are, of course, ambitious, as you know, and we will always err on the side of under-promising and over-delivering. Before this morning's announcement, the consensus EBITDA CAGR from 22% to 25% is 13%. And if you remember that the equivalent revenue CAGR in the same period is 12%, which means EBITDA is going to grow faster than the revenue growth. Now we've been building a long-term sustainable business with steady, if not spectacular, earnings growth. However, we are at an inflection point in our earnings delivery. You can see the step-up in consensus diluted EPS this year. On a like-for-like basis, the '24 and '25 consensus EPS would be 13.1p and 14.2p, which creates to a CAGR of 12% between 22% and 25%, i.e., in line with revenue growth. I say like-for-like there because, of course, corporation tax goes up this year, but the underlying trend is strong. Alongside growing the earnings per share, we have paid GBP 73 million in dividends since listing. We have adhered to a progressive policy since listing and at times paid up to 2/3 of our adjusted profit after tax. We continue to pay dividends even through the pandemic when most companies either cut or cancel their dividends. Now the Board reviews the dividends each year, but we expect to continue on a progressive policy. Over the past 4 years, we have been successfully implementing a strong commercial focus on our billing and collection. And that has resulted in our OCF conversion being on average at least 95%, and we expect to continue delivering at least 90% to 95% conversion in the future, even with the phenomenal growth which we expect in revenues. And we have a very diversified portfolio, as Paul has mentioned, and we hardly have any bad debt write-offs. And more often than not, our fees are paid from the pension scheme assets. So we're not at the mercy of a finance director trying to manage his or her working capital, or worst still, any client corporate failures. Net debt as a proportion of revenue has been coming down from 74% in 2018, down to 39% at the end of '22. This includes the earnings enhancing M&A that we have been carrying out since 2018. Covenant leverage at the end of each reporting period has been either 2x or below. And you can see that the market -- the consensus has us deleveraging further and we should be around about the 1x or lower in a couple of years' time. We have a syndicate of very supportive banks and who provide a RCF of GBP 100 million plus an accordion of GBP 50 million. And the facilities are in place until October 2026. So with this context, our capital allocation priorities over the short to medium term are: continue on the organic growth, whether it be in core or tangential markets; continue with our progressive dividend policy; embed the best-in-class administration platform, which will not only give us commercial opportunities, but it will also increase further efficiencies. And if the opportunity presents, then engage in an earnings enhancing M&A. So let's look at our approach to M&A. It remains a core part of our strategy. And since listing or since the transformational deal with Punter Southall, we've completed 5 further bolt-on acquisitions. They've all been earnings enhancing and been funded from debt. So many opportunities across our desks on a regular basis, but we are very disciplined in how we approach any opportunities available. We will not engage in M&A at all costs and we've certainly walked away from deals. And those are some of the criteria that we look for when we're assessing potential M&A opportunities. So since 2018, we've deployed just over GBP 26 million of capital with a return on capital employed of at least 19%. So ultimately, these deals have been good for our clients, our people and shareholders. We think that the market will continue to consolidate and we remain open to further bolt-on all transformation opportunities. But as you've heard from Patrick, Ben, Dave, that the organic opportunity in front of us is enormous and we have all the capabilities under one roof to capitalize on those opportunities. So the bar for M&A will be that much higher. Now I mentioned that we are extremely driven and ambitious and hopefully, that has come through in spades from other speakers. XPS as a brand came together in 2018. So in 5 years, we've won market share, we've won blue-chip clients. We've won awards, we're the employer of choice in our industry. And having delivered GBP 166 million of revenues this year, we are now the fourth largest in our industry and a firm alternative to the big 3, but we're not done. I started the presentation by telling you about how the last 4 years have been best of my professional career. And I think the next 4 years are poised to be even more exciting and rewarding for everyone. Now to impact the bigger picture in our industry and potentially something quite unique and exciting, I'd like to hand over to Ben.

Thanks, Snehal. So over the last few decades, the big challenge for the industry has been rightly protecting the benefits that members have been promised and make sure they get paid. And XPS has played a key role in helping trustees and sponsors in achieving this. But the journey ahead looks different. And there's a growing debate about the potential for DB schemes to play a more active role in helping U.K. address some of the challenges it faces today. And we're at the forefront of this debate. So I wanted to share with you how we see the future and then wrap up by summarizing what all of this means for XPS. Now if we step back, over the last 20 years or so, DB schemes have been a real thorn in the side for U.K. corporates. They've sucked up huge amounts of resources and bucket loads of cash, over GBP 500 billion in the last 20 years alone. And they've also been moving large quantities of capital out of growth assets and particularly U.K. equities into gilts and bonds. And as it stands, this trend is going to continue and this is why. So this chart shows the aggregate funding position for all U.K. private sector DB schemes on a low-risk basis. And this is something that we track on radar. And the chart shows how the aggregate position has changed over the last 4 years. And what you can see is we start with a deficit of GBP 300 billion to GBP 400 billion and that's now moved into surplus. And most of that improvement has happened during 2022, of course, because of the large rise in long-dated government bonds. Now when pension schemes get better funded, they generally do one of two things. They either de-risk the assets to protect the improved position or they look to transfer part or all of the scheme to an insurer through a pension scheme buy-in or buy-out. And whilst both of those actions are positive for member security, they do lead to further capital flows out of growth assets into gilts and bonds. And actually potentially over the coming decades, we could see almost all of that GBP 1.5 trillion in DB schemes end up in low risk type investments. We could also see a handful of insurers handling vast amounts of assets and liabilities. And this is something that the Bank of England is now starting to pick up on. So in light of all of this, the government recently commissioned a review of the future of DB schemes and whether there should be changes to the regulatory regime to provide schemes with a bit more flexibility to do something different. Now we were asked to participate in this review and it was actually something we were already talking to some of our clients about. So I'm going to tell you what we said in our response. And whilst we don't yet know the outcome of the review, these ideas are definitely getting more and more traction in the industry. So let's start by looking at some of the key issues facing the U.K. We've got low economic growth and I think the IMF is forecasting the U.K. to have the lowest growth across all G7 countries. We've had great retirement and we now have a tight labor market and broader cross pressures, too. And thirdly, people just aren't saving enough. Around 90% of middle earning private sector workers aren't even saving the amount recommended by the government's pensions commission to secure account for retirement. So the workers of today aren't going to get anything like the levels of income in retirement that the previous generations might have enjoyed. So how can DB schemes help? Well, just imagine that you're the finance director of a company with a defined benefit scheme that's got GBP 1.1 billion of assets. The cost of ensuring the scheme would be around GBP 1 billion. So in effect, you've got more than enough money to fully insure the scheme and buy it out. And that would probably be seen as a good result for the company. It would remove the scheme off the company's balance sheet and ensure that it didn't become a drag again in the future. And actually, from an XPS perspective, it would generate a huge amount of work. There'd be loads of data cleansing, would have to sort out these GMPs, big broking exercise and loads of investment and broader pensions consulting support and it would take decades -- sorry, it would take years to get this all done. And actually, if all schemes go down this route, even with the projected increase in insurance volumes, it would take decades and create a colossal amount of work for us along the way. But let's look at how the assets and liabilities are projected to grow over time. So the dark blue bars here are the assets and I've assumed that they grow in line with 1.5% above gilt yields. The light blue bars are how the insurance cost would evolve over time. And what this shows is that by running the scheme on, the surface grows and we'd expect an additional surplus of around GBP 0.25 billion in 10 years' time, and clearly, further surplus would then be expected to arise after that. And under the scheme buyout scenario, this additional surplus effectively becomes the insurer's profit. Now what if instead of moving the scheme to an insurer, we kept it running. We keep a buffer, but use the additional surplus built up each year, which is around GBP 25 million or so, to fund the future DC pension benefits for the company's current employees. This could work in one of two ways. It could simply reduce the cost to the employer of providing the current level of DC benefits, so just generating a decent cash flow saving; or it could be used to provide more generous benefits to current employees, which would aid recruitment and help resolve the pensions divide. Now DC pots are also generally invested in growth assets rather than gilts and bonds. So this would lead to capital being reinvested to drive economic growth as well. Now we can't forget about member security, not after all of the history here. But providing this is only done when the scheme has got more than enough money to fully insure whatever needed to and it retains a risk buffer, so 10% in this example, members should remain very well protected. And we also think there's a small change that could be made to the pensions protection fund that would really enhance this protection. Now this is actually based on a real life example. So it's one of my own clients. They're a big global technology firm who employ 100,000 people worldwide. In the U.K., the company contributions to their DC plans is GBP 25 million a year. So they're going to use a DB surplus to fund all of their DC employer contributions over the coming years. And I think they will be one of the first companies to do that. Now I should say that this approach might not be right for all schemes. And for some schemes, particularly smaller ones, it may make complete sense to insure and then buy out. But we don't need all schemes to do this to make a really big difference. Even if this was something that just 1/4 schemes did, it could provide a real boost to U.K. corporates or boost the amount of money being paid into DC pots by the tune of GBP 10 billion a year. And it would also put large amounts of money potentially back into growth assets protect even into the U.K. economy with the right incentives. So these are the key messages in our response to the government's review. And what we were asking for was additional flexibilities to be built into the regulatory system to enable sponsors and trustees to pursue this type of approach if they want to. So as I said, there's a lot of debate in our industry about the future and I'm very proud of the firm that we're right at the forefront of these conversations and we're showing real leadership on these big picture issues. So before I finish, I want to bring this back to XPS. And when we formed XPS, we said we wanted to create the best firm in our market and that may be the best place for people in our industry to work and the best place for clients where they get relationship-led, high-quality services and access to everything they need under one roof. And we've made huge progress towards this over the last 5 years. So I'm really proud of everything that we've achieved. And however, the future unfolds, the opportunities for us are terrific. So for pensions consulting, there's loads of work to be done to help clients with all of the regulatory and market change across DB and DC, and we've now got the full suite of solutions to deploy. For investment consulting, we had this, like 2018, again, the LDI crisis is going to generate opportunities for years to come. And in administration, we are brilliant of what we do and our new technology can only boost our strong track record. And by being prudent on all of these things at the same time, we get a strong reputation and great opportunities to win new clients, whether through cross-selling, through taking market share from the bigger firms in the market, all 3 first-time outsourcing. And if we can win at the likes of BT, Microsoft, IBM, we can win absolutely anywhere. And all of this has created a real sense of confidence in the firm, a real sense that the world really needs what we've made and we can continue delivering great outcomes for our clients. And where might this take us? Well, as we said, we doubled our revenue in the last 5 years through both the organic and inorganic growth. Will we double in the next 5 years? I genuinely think we will. We also have a great opportunity for operational gearing as the business tilts slightly more towards higher-margin services, we start getting a benefit of the new administration platform, and we continue to focus on the broader operational efficiency. So I think we'll be a bigger business with an increasing margin driving strong shareholder returns as the investment we've made over the last 5 years really starts to pay off. Finally, we're also a business that cares about our broader contribution to society. And we think there's a great opportunity for DB schemes to be a real force for good over the next couple of decades. And that's definitely something that we'll be fighting for. So I hope you get a sense, we're very excited about the future and we're already getting started on the next stage of our journey. So thank you for listening and I'll hand you back to Alan.

Thanks, Ben, and thanks to all the speakers today, who I really hope have brought the pension industry to life, but much more importantly, XPS to life to you all in a way you hadn't really seen before and people that you wouldn't have met before. So just to wrap up before we go to Q&A, and I've been asked, please, please could you ask your question into the microphone. Otherwise, the people online won't be able to hear the question. But in terms of wrapping up, the strategy, opportunity, execution. Simple strategy, be the best across the multifaceted layers of the U.K. pension industry and all the facets that they are. The opportunity, growth of assets under management, growth of number of pensioners, cross-sell, upsell into the big 3 clients, which is still half of the industry, and potential for M&A keeps ongoing. Execution, I think bringing together the 2 similar-sized businesses, Xafinity and Punter Southall, that's always harder and takes longer than people appreciate to embed, I think that's done. I think there's an on-track record of infill acquisition that's been done well and executed well. And I think in terms of we started just to see internal dynamism of the way that thought leadership and the ideation and getting stuff out to market, to clients that's really market leading. And then on top of that, industry recognition with the brand award winning, more to come, hopefully. And then actually, 95% enjoyment with working, actually 99% wants to do the best work. That's even more important. But where people are the assets of the business, actually the brand and the retention, that translates to new wins for clients and delivery of service to clients. I think that is the real, real opportunity. We saw the first half of this year reported results showing the first improvement in operational gearing. That's encouraging. Actually our 13% revenue growth, the full year outcome was 20%. So that's an even bigger acceleration through the second half. And you've heard operational gearing as a repetitive mindset and I think that is the real opportunity for the group going forward.