Minutes of Proceedings

PRESENT: Mr D Watson
Mr M Carrick
Mr J Dallat
Mr D McClarty

APOLOGIES: Mr J Kelly

IN THE CHAIR: Mr D Watson

IN ATTENDANCE: Mr T Evans, Mr E Hobson, Mr G Ballantine (GAD), Mrs K McCartney, and Mr N Burns

1. Minutes of meeting of 7 October and 13 October 2004 were agreed.

The Minutes of the meeting of 7th October 2004 were agreed subject to an amendment to Paragraph 3 to read, “The evaluation panel received an update from Mr Gibson, Head of Procurement on the number of expressions of interest received, the number of tenders returned by the deadline and the Tender evaluation process”.

The Minutes of the meeting of 13th October 2004 were agreed subject to an amendment to Paragraph 2 to read, “The evaluation panel were assured with the clarifications provided by the preferred bidder and agreed that they were more content in awarding the contract to them”.

2. MATTERS ARISING

FROM TRUSTEE MEETING 8 JULY 2004

STATEMENT OF INVESTMENT PRINCIPLES

The Trustees agreed to the Statement of Investment Principles as a substantive document.

TENDER FOR NEW INVESTMENT MANAGER

The Trustees agreed to the amendment at Item 4 line 6 of the minutes dated 8 July 2004.

RATIONALISATION OF ROYAL LONDON POOLED PENSIONS COMPANY FUND RANGE

The Trustees agreed that this matter has now moved on with the appointment of the new Investment Fund Manager.

INDEPENDENT FINANCIAL ADVICE

As agreed at the meeting on 8 July 2004 the Personnel office have ensured that all estimate letters now emphasize that the Pension’s unit is unable to provide financial advice and that Members should seek their own personal financial advice.

FROM TRUSTEE MEETINGS 7 AND 13 OCTOBER

The tender process has now been completed with the appointment of Baillie Gifford as the new Investment Fund Manager.

3. INVESTMENT MANAGER TRANSITION

Mr Ballantine informed the Trustees that the transition from Royal London Asset Management to Baillie Gifford had been straightforward. Mr Ballantine also pointed out that, whilst the Trustees had previously agreed to adopt a reduction in the equity content on a phased basis from its current level of 80% to perhaps 65% (e.g. gradual reduction over a 5-year period) there was no immediate rush as equities are currently performing quite well.

On responding to a request for clarification from Mr Carrick, in relation to the monitoring of performance, Mr Ballantine outlined that responsibility for performance of the fund ultimately lay with the Trustees and that market performance of bonds against equities should be reviewed and discussed during each Trustee meeting.

Mr Ballantine agreed to produce a paper, following discussions with Baillie Gifford, for the Trustees prior to the next meeting outlining a strategy in relation to the investment of future monies.

In response to the requirement for the Trustees to discuss performance on a regular basis the Trustees have agreed to arrange quarterly meetings, to occur on the second Tuesday of March, June, September and December. 

4. COMBINED PENSION FORECASTING

The Trustees agreed that these pension forecasts, which will be issued alongside the Assembly Pension benefit statements, would be useful to members.

5. OUTSOURCING PENSION ADMINISTRATION

The Trustees were provided with a paper relating to the Outsourcing of Pension Administration.

Mr Hobson explained the reasoning behind the idea of outsourcing of pensions administration citing the increase in complexity around pensions and the need for continuity and expertise within the Pension’s unit.
He outlined the options considered including increasing the staff complement, outsourcing to Central Pensions Group (CPG) or outsourcing to the Scottish Public Pensions Agency (SPPA).

Whilst stressing that increasing the staff complement was not feasible and CPG were unable to take on the administration, Mr Hobson stated that SPPA were receptive to the idea and were encouraging at a meeting with Mr Evans and Mr Hobson at which they outlined that there would be no additional costs involved in taking on the administration.

Following on from this Mr Hobson proposed that they should now move to a formal negotiation with SPPA and to draw up a draft Service Level Agreement for discussion at the next meeting of the Trustees.

In considering an SLA with SPPA Mr Ballantine informed the Trustees of the importance of outlining the division of policy and administration work between the NIA and SPPA.

In responding to a query from Mr Carrick relating to the current costs of administration of the scheme, Mr Evans pointed out that costing is not the main issue, more the need to safeguard against the likely loss of expertise whether through changes in staff or Trustees.

6. ANNUAL ACCOUNTS/ ANNUAL REPORT

Mr Hobson gave details of a number of suggestions which had been raised by the Northern Ireland Audit Office during their audit of the Annual Accounts.

1. Accounts Page 9 – It was recommended that the Trustees put in place a formal Risk Assessment for the fund.

2. To check the internal control of Baillie Gifford, the Trustees have agreed that this will be carried out on a quarterly basis.

3. Accounts Page 17 Number 12 – The Trustees, Mr Evans and Mr Hobson have signed a statement indicating that neither has undertaken any material transactions with the Fund during the year.

4. That a Service Level Agreement is drawn up with GAD.

5. To ensure that a number of companies are approached at the time of the Swiss Life Insurance renewal. Mr Ballantine informed the Trustees that GAD had carried this out.

6. That a form of Audit Committee is used to scrutinise the Scheme. Mr Ballantine felt that this was unusual stating that neither the Scottish Parliament nor the Welsh Assembly have such a control in place.

Overall it was noted that the fund was in a more favourable position than it was in the previous year. Mr Carrick asked for clarification at the next meeting regarding the Administrative expenses outlined on pages 16 and 17 of the Accounts.

7. ACTUARIAL VALUATION

The Trustees were provided with a paper from GAD relating to the valuation to be carried out on 31 March 2005.

Mr Ballantine elaborated on the paper stating that the purpose of this second full valuation was to consider the current funding level of the scheme and to make a recommendation as to the contribution rate payable by the employer in future.

Mr Ballantine stated that the main development since the last valuation in March 2002 was the suspension of the Assembly from 14 October 2002 and that since this time member contributions have been paid on a lower rate of pay but benefits continue to accrue at the full rate of salary therefore leaving a greater gap for the employer to cover.

Mr Ballantine also outlined to the Trustees that the “Project Method Unit” will once again be used for this valuation whereby the value of the benefits accrued for service up to the valuation date is assessed separately from benefits accruing after the valuation date, and this value of past service liabilities is compared with the value of the assets to determine the funding level.

Mr Ballantine stated that he intends to use the “Traditional Value” method for continuity at the 2005 valuation as it is an average projected unit estimate method and is appropriate for assessing future contributions.

Mr Ballantine also wished to inform the Trustees of the increasing longevity in terms of mortality among UK pensioners, which has a negative impact upon fund valuation.

8. PROPOSED CHANGES TO WESTMINSTER SCHEME

Mr Ballantine updated the Trustees on a change that has been made to the Parliamentary Contributory Pension Fund (PCPF – the scheme for Westminster MPs) concerning an increase in the pension accrual rate, on an optional basis, from 1/50th to 1/40th of final salary per year of service.

The Trustees were also informed of a package of reforms to the PCPF that were agreed including: the adoption of a straightforward normal retirement age of 65 for MPs, and the introduction of survivor pensions for unmarried partners.

In addition to these, the PCPF proposes to modify its rules in order to comply with the tax simplification measures introduced by the 2004 Finance Act (which will be implemented from April 2006), and with new legislation against age discrimination.

With regards other legislatures Mr Ballantine informed the Trustees that the Welsh Assembly have already implemented both the 1/40th accrual rate and the partners pension and that the Scottish Parliament are implementing a Pensions Bill in April 2006 to consider the changes.

As a result Mr Ballantine pointed out that the Trustees may wish to consider these changes following restoration of the Assembly. 

9. ANY OTHER BUSINESS

TRANSFERS

The Trustees approved two applications to transfer pension benefits out of the Assembly Members’ Pension Scheme.

PENSION PAYMENT

The Trustees approved the payment of a former members’ pension from 4 March 2005.

TRUSTESS TRAINING

The Trustees agreed to investigate the nature of Trustee training being offered by Baillie Gifford and to discuss the specific requirements at the next meeting. It was also agreed that the NI Audit Office should be invited to the next training event organised for the Trustees.

SERVICE LEVEL AGREEMENT

The Trustees agreed to sign off the Service Level Agreement with GAD.

FREEDOM OF INFORMATION

Following Mr Dallat’s query regarding Freedom of Information it was agreed that the Trustee’s approach to FOI requests would be covered in the agenda for the next meeting.