Statement of Investment Principles

(Revised Version 2 – July 2007)  


1. Section 35 of the Pensions Act 1995 (as amended by the Pensions Act 2004) requires that the Trustees of pension funds prepare and maintain a ‘Statement of Investment Principles’. Whilst the Assembly Members’ Pension Scheme (Northern Ireland) 2000 is statutorily exempt from this requirement, the Trustees have decided to produce this document in order to comply with best practice. This document will be made available on request to members of the Scheme.

2. Annual Reports by the Trustees of the Assembly Members’ Pension Scheme (Northern Ireland) 2000 will include a review of the investment performance and policy for the year in question. The annual accounts will also be published.

3. The investment powers of the Scheme are set out in the Assembly Members’ Pension Determination 2000. The Trustees have a fiduciary duty to invest the assets of the fund for the benefit of fund members.

4. The Trustees are responsible for ensuring that the assets are likely to be sufficient to meet the Scheme’s liabilities. The Scheme’s actuary (in this case, the Government Actuary’s Department) advises it on the adequacy of the Fund’s assets by carrying out a full actuarial review (a valuation) every three years.

Investment Policy

5. The size of the Scheme’s assets, as a relatively small Scheme, is not sufficient to allow a widely diversified portfolio of investments were the assets to be invested directly in bonds, stocks and shares. Therefore, until the assets have become sufficiently large, the Trustees believe that the most effective way of investing, with suitable diversification and at a reasonable cost, is to use pooled fund vehicles run by an independent investment management company.

6. The Trustees’ first Statement of Investment Principles specified that the Scheme’s assets should contain a high equity content, taking account of the facts that:

  • the bulk of the liabilities are attributable to active members and
  • the expected out performance of equities relative to other asset classes.

7. Since that time, and following the 2003 and 2007 Assembly Elections, the Scheme’s liabilities have become a little more mature. At the date of this SIP, the active liabilities have fallen to around 60% of the Scheme’s total liabilities, with 25% of the liability relating to deferred pensions and 15% to pensions in payment. Over the period to the next election, the proportion of active liabilities would be expected to increase, as the members accrue further service.

8. As the Scheme is still a relatively new Scheme, it is expected that contribution income will exceed benefit outgo for many years. Accordingly, it should not be necessary to sell assets in order to pay benefits in the medium term, and this enables the Trustees, if they so wish, to adopt an investment strategy with a significant equity content, in order to increase the probability of achieving a higher investment return on the fund’s assets over the long term.

9. In view of the Scheme’s maturing liabilities, the cash-flow position, the funding level and current market developments, the Trustees had decided to make a modest increase in the proportion of the Scheme’s assets held in bonds. This was to be achieved by retaining the Scheme’s existing assets in a ‘balanced’ or managed pooled fund and by directing new monies into a bond portfolio for the following two years. However, this change in policy has not yet been implemented, because bond yields have fallen to unattractive levels.

10. Although the Scheme’s asset allocation will depend on the relative performance of the asset classes, it is expected that the benchmark position will be for the proportion of assets held in equities to remain at about 80%, and for the proportion of assets held in other investments (bonds, cash etc) to remain at about 20%.

11. The Assembly Members’ Pension Scheme (Northern Ireland) 2000 will have its own bank accounts in order to process financial transactions relating to the pension Scheme. Cash may be held on deposit in these bank accounts, if awaiting investment with the investment manager, or awaiting payment of benefits to beneficiaries or for expenses or other services.

Performance Objectives and Expected Return

12. The Trustees aim is to achieve above average returns over the long term. The Trustees will review the performance of the Fund from time to time against the stated objectives. In addition, the Trustees will consider the performance of the Fund against a suitable peer group of similar vehicles, for example by using surveys of managed funds measuring comparative performance over rolling three year periods.


13. A scheme can minimise the risk of a deficit occurring by following a matched investment policy. This involves investing in the asset classes which are most likely to change in value in a way which is closely linked to the changes in the value of the liabilities. However, while a matched investment strategy minimises risk, it also minimises the opportunity for enhancing returns.

14. After taking into account the profile of the membership and the age of the active members, the Trustees consider that the proposed allocation between equities and bonds represents a reasonable balance of risk and reward. They recognise that in some circumstances (e.g. low equity returns), the financial position of the scheme could be adversely affected, requiring higher contributions to be made for a period.

Other Matters

15. The Trustees will receive regular written reports as required from the Fund Manager and advisers. These reports will summarise the recent performance of the Fund’s investments, and advise on future market expectations and investment prospects.

Socially Responsible Investment

16. The Trustees cannot direct the investment strategy of the pooled fund (or funds) in which the Assembly Members’ Pension Scheme (Northern Ireland) 2000 invests. However, high priority will be given to the availability of Socially Responsible Investment funds, and the attitude of the investment manager to such assets, when selecting an investment provider.

Corporate Governance

17. The Trustees will monitor the investment manager’s policy on Corporate Governance issues on a regular basis.


18. The Trustees are responsible for ensuring that appropriate systems of control are in place to safeguard the Fund’s assets and to prevent and detect fraud and other irregularities.

Consultation and Advice

19. The Trustees have consulted the Commission on the appropriateness of the investment strategy adopted, and have taken investment advice from the Scheme’s actuary. The Trustees will review investment policy (and this Statement of Investment Principles) not less frequently than every 3 years.

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