Assembly Members' Pension Scheme (Northern Ireland) Annual Report - Period 1 April 2002 to 31 March 2003

The Assembly Members’
Pension Scheme (Northern Ireland) 2000

Annual Report

Period 1 April 2002 to 31 March 2003

Contents

THE TRUSTEES’ REPORT

The Assembly Members Pension Scheme (NI) 2000

Aim of this Report

How the Trustees of the Fund are Appointed

Trustees Names

Information about the Trustees

Trustee Meetings

Other Parties Appointed in Connection with the Fund as at 31 March 2003

Income of the Fund

Actuarial Valuation

Membership

Preparation and Audit of Annual Accounts

Summary of Financial Information

THE COMPLIANCE STATEMENT

Benefits

Tax Status of the Fund

Funding Standard

Investments

THE INVESTMENT REPORT

Investment Manager

Basis of Remuneration

Investment Policy

Investment Performance Objectives and Expected Return

Additional Voluntary Contributions (AVCs)

THE TRUSTEES’ REPORT

INTRODUCTION

The Assembly Members’ Pension Scheme (NI) 2000

The Assembly Members’ Pension Scheme (NI) 2000 (AMPS) provides benefits for Members of the NI Assembly through the basic scheme and Ministers and Office Holders through the Supplementary Scheme. Both schemes are operated on an ‘opt out’ basis, meaning that all Members, Ministers and Office Holders are members of the scheme from the date they become MLAs unless they make a specific option not to be.

The main benefits of the scheme are:

• an immediate pension of one fiftieth of final salary for each year of service on retirement at age 65;
• an immediate pension before retirement age subject to certain service restrictions;
• an immediate pension on retirement at any time on the grounds of ill health;
• an abated pension paid on retirement at any time on attainment of age 50 and completion of not less than 15 years service;
• an actuarially reduced pension paid to most former Members at any time after age 50;
• a five eighths widow/ers pension;
• children’s pensions (at the rate of one quarter of the basic or prospective pension of the Member if there is one child or three eighths if there are two or more children OR if there is no surviving spouse at the rate of five-sixteenths of the basic or prospective pension of the Member for each eligible child not exceeding two);
• a lump sum death gratuity on death in service equal to three years salary with provision for more than one nominee;
• the purchase of added years;
• transfer of pension rights (into and out of the scheme);
• the opportunity to contribute to an AVC scheme with an outside provider.

The legislative background to the AMPS can be found at Annex A.

Aim of this Report

In order to conform to best practice in relation to reporting requirements the Trustees must disclose actuarial and other accounting details to all members of the Fund, within seven months of the end of the accounting year (i.e. by 31 October each year).

The Trustees are pleased to present this report, which has been prepared in accordance with best practice and covers the period from 1 April 2002 to 31 March 2003. The purpose of the report is to describe how the Fund and its investments have been managed during the year.

How the Trustees of the Fund are Appointed

Part B, Section B2 of the Assembly Members’ Pension Scheme (NI) 2000 states that the Assembly shall by resolution appoint not more than five members of the Assembly to be the Trustees of this Scheme.

A person appointed as a Trustee –

a) may resign from office by notice in writing to the Presiding Officer;

b) may be removed from office by a resolution of the Assembly;

c) shall, without prejudice to sub-paragraph (b), cease to hold office on the expiry of six months from the date on which he ceases to be a member of the Assembly.

Trustees Names

Mr Denis Watson MLA (Chairman)

Mr Mervyn Carrick MLA

Mr John Dallat MLA

Mr John Kelly MLA

Mr David McClarty MLA

Information about the Trustees

The Northern Ireland Assembly Members’ Pension Fund shall be vested in and administered by the Trustees. The Trustees shall hold the assets comprised in the Fund upon trust in accordance with the provisions of the AMPS.

The procedure of the Trustees shall be such as the Trustees may determine.

The quorum for any meeting of the Trustees shall be three.

The Trustees may act by a majority of those present at any meeting.

The Trustees may employ such staff and obtain such professional advice and services
as they think necessary in connection with the performance of their functions under this Scheme.

The expenses of the Trustees in the exercise of their functions shall be defrayed out of the Fund.

Trustee Meetings

Six regular Trustee meetings were held during the period ending 31 March 2003, with a number of additional meetings being held for specific purposes.

Other Parties Appointed in Connection with the Fund as at 31 March 2003.

The Government Actuary is appointed on a statutory basis while the Trustees were responsible for the appointment of the Investment Manager. All parties remain in place at the date of the report.

Any queries about pensions or any further information required regarding the day to day administration of the Scheme should be sent to the Secretariat at the following address:

Members Pensions Unit
Assembly Personnel Office
Annexe C
Dundonald House
Stormont Estate
Belfast
BT4 3SF

Tel: 028 9052 0954
Fax: 028 9052 0871
E-mail: evan.hobson@niassembly.gov.uk
           alison.whitaker@niassembly.gov.uk
           kathryn.mccartney@niassembly.gov.uk
           roy.mcneilly@niassembly.gov.uk

Income of the Fund

The income of the Fund is derived from four main sources:

i. Contributions – from Members and Holders of Qualifying Office
ii. Investments – see the Investment Report
iii. Transfers In – Members who have pension benefits in the scheme of a former employer or in a personal pension plan may be able to transfer in the benefits to the Scheme
iv. Consolidated Fund – a Consolidated Fund contribution, calculated in accordance with the recommendations contained in the Actuary’s report under article S2 (4b), shall be paid into the Fund out of money appropriated by Act of the Assembly for that purpose.

Actuarial Valuation

The Government Actuary is required to make a report on the general financial position of the Scheme as at each subsequent reporting date, not more than three years after the date last agreed or fixed, and to recommend to the Assembly the future rate of the Consolidated Fund contribution. The first valuation of the Scheme was conducted at the start of the 2002 –2003 financial year and was based on the standing of the Scheme as at 31 March 2002. The Government Actuary is also required to provide the Trustees with an indicative funding position at regular intervals between full triennial actuarial valuations on an annual basis, on the 31 March between the dates of the formal actuarial valuation. The first indicative assessment will be carried out as at 31 March 2003.

The Trustees have no authority to change this recommendation.

The Government Actuary’s “Actuarial Valuation”, which detailed the financial position of the Fund as at 31 March 2002, concluded that the scheme’s assets were not quite sufficient to cover the liabilities at the valuation date, but should be sufficient in the near future if contributions are paid at the recommended rate. The Government Actuary recommended that the Member’s contributions would remain as at present i.e. 6% and that the employer’s contributions would increase to 21.3% from 1 April 2003 until the results of the next valuation are available. 

Copies of the Actuarial Valuation are available from the Secretariat.

Membership

The membership of the fund at 31 March 2003 was as follows:

Current members       98
Deferred members      0
Retired members        1
Widows                     2
Widowers                  0
Children                    0

The benefits payable during the year amounted to £ 9,729, which included a lump sum on retirement payment of £6,370. There were no changes to the benefit regulations during the period or increases to pensions in payment. Pensions in payment were increased by 1.7%.

Preparation and Audit of Annual Accounts

Summary of Financial Information

What Went Out Of The Fund

The Report for the period ended 31 March 2003 including the attached Investment Report and Compliance statement is approved on behalf of all the Trustees by:

Denis Watson 
Chairman of Trustees

THE COMPLIANCE STATEMENT

Benefits

All pensions paid in the year were authorised under the appropriate Act and thus made in accordance with the regulations of the Fund. No alterations were made to regulations governing the payment of pensions during the year.

Tax Status of the Fund

The Northern Ireland Assembly Members’ Pension Fund is a statutory pension scheme within the meaning of Chapter 1 Part XIV of the Income and Corporation Taxes Act 1988 and is an ‘approved scheme’ for the purposes of accepting transfer values.

Funding Standard

The Northern Ireland Assembly Members’ Pension Scheme is not subject to
the Minimum Funding Requirement of the Pensions Act 1995. Accordingly, it is not appropriate for the “MFR” actuarial statement, which is set out in regulations and used by schemes that are subject to MFR provisions, to be adopted for the Northern Ireland Scheme.

Nevertheless, the Trustees have asked the Government Actuary to provide periodical reassurances that this level of funding would be met.

Investments

All investments are in holdings that are permitted by the regulations of the Fund. Although the Trustees cannot direct the investment strategy of the Fund in which the Assembly Members’ Pension Scheme (NI) 2000 invests, nevertheless, it will consider Socially Responsible Investment policy issues when comparing two providers who are otherwise of equal preference.

THE INVESTMENT REPORT

YEAR ENDING 31 MARCH 2003

Investment Manager

Royal London Asset Management (RLAM) remains the Scheme’s Fund Manager following a 12 month extension to the existing contract, which will now expire on 15 March 2004. RLAM is an investment management subsidiary of the Royal London Group which was founded in 1861. RLAM was launched in 1989 as a dedicated investment company to provide investment management services to both internal and external clients, with particular focus on the UK pension fund market. Following the acquisition of Scottish Life, Royal London Pooled Pensions Company introduced a portfolio of new funds in December 2002. The Schemes assets were invested following acknowledgement of authorisation documentation relating to acquisition notification by the Trustees. RLAM responsibilities include:

(i) carrying out all the day-to-day functions relating to the management of the Fund;

(ii) the allocations of the balanced portfolio between categories of investments and for the selection of individual stocks within each category of investment;

(iii) deciding whether it is appropriate to retain or realise individual investments within the portfolio;

(iv) exercising the investment powers in such a way that will give effect to the principles contained in the Statement of Investment Principles (SIP), so far as is reasonably practicable, and in particular will have regard to the suitability and diversification of the investments within the guidelines set by the Trustees.

Basis of Remuneration

Royal London Asset Management is paid an annual management fee based on the value of the portfolio. The fee paid over for this accounting period was 
£16,734.

Investment Policy

The Investment Policy of the Trustees of the Assembly Members’ Pension Fund is detailed in the Statement of Investment Principles which, is under review by the Trustees. This is available on request from the Secretariat.

The size of the Scheme’s assets, remain sufficient to allow a widely diversified portfolio of investments were these assets to be invested directly in bonds, stocks and shares. Therefore, the fund continues to be invested in a single pooled fund run by an independent investment management company.

Investment Performance Objectives and Expected Return

The Trustees have agreed expected under performance benchmarks within the SIP against which the performance of the Fund is assessed.

Performance Target

• To return upper quartile performance within the CAPS Pooled Balanced Pension Fund Universe on a rolling three year basis.

Fund performance remained below the specified target throughout this accounting period although the poor performances of the previous year did show some improvement towards the end of the third and fourth quarters where the Balanced Pooled Fund slightly outperformed the CAPS Balanced Median.

This failure to achieve the objectives set by the Trustees together with a second year of negative equity returns lead the Trustees to initiate an in depth investigation into the performance of the Investment Manager and Investment options reflected in the SIP. Particular attention was focused on the balance of equities and bonds in the investment portfolio. The value of an active management approach was also brought into question with ongoing investigation and revision that will be reflected in the next accounting period.

Performance:
Over this 12-month period the Pooled Balanced Pension Fund returned –24.0%. 
The upper quartile return for the CAPS Pooled Balanced Pension Fund Universe was 
–21.9%.

Additional Voluntary Contributions (AVCs)

During the 2002 – 2003 financial year Clerical Medical continues to act as AVC provider for the scheme.

During the period of this report 6 members have taken advantage of the facility to pay additional voluntary contributions.

LEGISLATIVE BACKGROUND TO THE AMPS (NI) 2000

ANNEX A

The Assembly Members’ Pension Scheme (NI) 2000 was set up on 13 May 2000 by Determination made by the Secretary of State under Section 48 of the Northern Ireland Act 1998 by virtue of paragraph 9 of the Schedule to the Northern Ireland Act 2000.

The Fund provides for pensions and gratuities to be payable to, or in respect of, persons who have ceased to be members of the Northern Ireland Assembly.