Minutes of Proceedings

Session: 2011/2012

Date: 24 January 2012

In the Chair: Mr T Lunn

1. MINUTES OF PREVIOUS TRUSTEES MEETING

The minutes of the Trustee meeting held on 20 September 2011 were agreed.

Action required:

Agreed minutes to be put on the Assembly website (Pensions Team).

2. STANDING ITEMS

Risk Register

The Trustees reviewed and agreed the updated version of the risk register.

3. MATTERS ARISING

Pension Increase RPI/CPI issues

Trustees were reminded that they had agreed to recommend to the Assembly Commission that the Scheme Rules be amended in relation to pension increases. A paper was submitted to the Commission recommending that pension benefits accrued up to the date the rules are changed would continue to be revalued in line with the Retail Price Index (RPI) with pension benefits accrued after the date of change revalued in line with the Consumer Price Index (CPI).

The Trustees noted that this paper, along with additional information from the Department of Finance and Personnel (DFP) is due to be considered by the Assembly Commission at their meeting later today.

The Commission decision is awaited.

Scheme Rules Review – update

The Trustees noted that the recommendation to close the ‘Rule of 80’ (Favourable Early Retirement Provision) in the Scheme is due for consideration by the Assembly Commission later today.

The Commission decision is awaited.

Scheme Annual Report and Accounts 2010 - 2011 & NIAO Annual Audit

The Trustees were advised that the 2010 – 11 Annual Report and Accounts has been laid before the Assembly and a copy distributed to all Scheme Members.

The Trustees noted the contents of the NIAO ‘Report to those charged with Governance’.

Administration Agreement - Update

The Trustees were advised that the formal administration agreement covering the services provided to the Trustees by the Assembly Secretariat has been amended following the appointment of the Independent Financial Review Panel. Legal advice indicated that the agreement should reflect the tri-partite relationship which has been created between the Commission, the Trustees and the Independent Financial Review Panel.

The Trustees noted that the administration agreement has been submitted to the Commission for consideration at their February meeting.

The Commission decision is awaited.

GAD Service Level Agreement

The Trustees were advised that the signed SLA has been forwarded to GAD.

Letter of Thanks

The Trustees were advised that a letter of thanks was issued to Grant Ballantine (through GAD) as previously agreed and that Grant has responded.

Independent Financial Review Panel - update

The Trustees were informed that the Director of Corporate Services is due to present a paper to the Commission at their meeting later today. The purpose of the paper is to clarify the relationships between the Commission, the Panel and the Trustees and agree a procedure that will be used to ensure that the Trustee’s submissions in relation to the Scheme are directed to the appropriate decision makers.

The Trustees will be informed of the Commission’s decision.

The Chairman informed the Trustees that he had attended meetings of the Panel on two occasions to discuss the pension scheme and that further discussions will follow.

October Newsletter update

The Trustees were advised that the October newsletter has been issued.

Trustee Training update

The Trustees were reminded that a Trustee Training course had taken place in Parliament Buildings on Friday 11 November 2011 and that 3 Trustees had attended.

The Trustees were reminded of the online Trustee Toolkit provided by the Pensions Regulator and noted that there are no plans for further formal training at this stage.

4. Pension Scheme Provision – comparison with other schemes

In light of the recent press attention, the Trustees considered and compared the main provisions of the AMPS against the other Parliamentary pension schemes. Details of the Northern Ireland Civil Service Pension schemes were provided for information purposes.

The Trustees noted that the contribution rates, accrual rates and benefits provided by the AMPS were broadly similar to those provided at the House of Commons, the Scottish Parliament and the Welsh Assembly.

5. GAD Triennial Valuation 2008 – 2011

Daniel Selby, Government Actuary’s Department, briefed the Trustees on a paper on the Triennial Valuation of the AMPS as at 31 March 2011.

Mr Selby outlined the proposed assumptions for the 2011 valuation including assumptions in relation to longevity, financial return, election turnover and expenses. These assumptions are consistent with those used in the valuations of the other parliamentary schemes. The Trustees agreed the proposed assumptions be accepted.

The Trustees discussed the illustrative results provided by GAD, which were based on the assumptions outlined by Mr Selby. The Trustees noted that applying a CPI increase for past as well as future service, would have a positive effect on the funding position of the Scheme.

Mr Brady left the meeting at 10.20am

6. Statement of Investment Principles (SIP)

The current SIP was agreed in 2007 and is due for review. Mr Selby briefed the Trustees on the revised SIP which had been drafted by GAD.

The Trustees were advised that due to the size of the fund, a widely diversified portfolio of investment would not be achieved if the assets were invested directly. The most cost effective way of investing is to continue to use pooled investment products.

The Trustees discussed the possibility of investing a portion of the fund (eg 10%) in a separate ethical investment fund, and agreed that there was nothing to prevent this in principle if there was sufficient interest from scheme members.

The Trustees agreed to explore this idea further during the investment manager tender process.

The Trustees agreed that further consideration is required prior to agreeing the draft SIP.

Action required:

Further consideration of the SIP (Trustees)

7. Review of Investment Manager performance

Mr Selby briefed the Trustees on a paper reviewing the performance of the Investment Manager.

The Trustees considered the performance against the performance targets set for the Investment Manager and concluded that M&G has outperformed the benchmark over the 3 year period. The Trustees noted that in particular the actively managed Recovery (UK Equity) fund has outperformed the benchmark significantly.

Mr Selby suggested that once the full valuation results are received the Trustees may wish to consider the strategic asset allocation (bond / equity split) in light of the changing liabilities of the Scheme.

Action required:

Consideration of asset allocation (Trustees)

8. Investment Manager Tender

Michael Baird, Assembly Procurement Office, briefed the Trustees on the procurement process options that they may wish to consider when appointing an Investment Fund Manager.

The Trustees are not subject to the public procurement requirements, but have followed best practice in awarding this contract in the past and wish to continue to do so.

Mr Baird outlined three options: -

i. A negotiated process where the Trustees could simple negotiate with three or four investment companies at the top of the BNY Mellon CAPS Index or similar benchmarked Index of Pooled Funds.

ii. A competitive Procurement Process where the opportunity would be advertised as widely as possible inviting tenders to be submitted. The Trustees would then make an appointment, based on pre-agreed evaluation criteria.

iii. A two stage process with the opportunity being advertised as widely as possible inviting suppliers to complete a supplier questionnaire. The Trustees would short-list 5 – 6 suppliers with the professional, technical capacity to carry out the contract who would then be invited to submit a detailed proposal for evaluation. The Trustees would then make an appointment, based on pre-agreed evaluation criteria.

The Trustees discussed the three potential procurement processes along with the options of directly negotiating a new contract with M & G, and the possibility of considering a future joint venture with the Welsh and Scottish Parliaments.

The Trustees agreed to option (iii) with the contract awarded for an initial period of five years with the option to extend for a further two years.

As part of the tender process suppliers will be asked to provide information in relation to ethical and socially responsible investment options.

The Trustees appointed a sub-group to be responsible for managing the tender process and appointing the Investment Manager. The members appointed to the sub-group were Trevor Lunn, Jim Wells and Ross Hussey (subject to agreement with Mickey Brady).

Action required:

Contact Mr Brady re sub group membership (Pensions Team)
Liaise with the Assembly Procurement Office (Pensions Team)
Manage the tender process and appoint the Investment Manager (Sub-group).

9. Expiry of contract with the Scottish Public Pensions Agency

The Trustees were advised that the outsourced administration services with SPPA are due to expire in March 2012 and that a review of the administration of the AMPS has been completed (pending adoption of the formal administration agreement with the Commission and Independent Financial Review Panel to cover the services provided by the Assembly Secretariat).

The Trustees considered and approved the draft Terms of Reference for a tender exercise for the appointment of an outsourced administrator to complement the service provided in house.

Action required:

Manage the tender process (Pensions Team)
Appoint an outsourced administrator (Trustees).

10. Any other business

Approval of new pensions

The Trustees approved the payment of pensions in respect of two former members.

Transfer In

The Trustees accepted a further transfer payment in respect of one Member.

Opt out of the Pension Scheme

The Trustees noted that one Member has chosen to opt out of the pension scheme with effect from 1st February 2012.

Legal Advice

The Trustees were advised that legal advice had been sought and received in relation to the payment of contributions to the pension scheme when a member does not draw the full salary available to them.

The Trustees noted that the advice confirmed that the shortfall in both the member’s own contribution and the consolidated fund contribution is to be made up by the Assembly.

The Trustees also noted that member’s pension benefits are not affected by the voluntary reduction in salary.