The Assembly Members’
Pension Scheme
(Northern Ireland) 2000
Annual Report and Accounts
Period 1 April 2006 to 31 March 2007
Table of Contents
The Trustees’ Report
The Compliance Statement
The Investment Report
Statement of Trustees’ Responsibilities
The Statement on Internal Control
The Certificate and Report of the Comptroller and Auditor General
The Financial Statements
Annex A - Legislative Background to the AMPS (NI) 2000
The Trustees’ Report
Introduction
The Assembly Members’ Pension Scheme (NI) 2000
The Assembly Members’ Pension Scheme (NI) 2000 (AMPS) provides benefits for Members and qualifying office-holders of the NI Assembly. Contributions are paid by Members, qualifying office-holders and the Northern Ireland Assembly into the Fund established under the Scheme, and the assets in the Fund are managed by an external Investment Manager. The Scheme is administered on a day to day basis, on behalf of the Trustees, by the Pensions Unit of the Personnel Office of the Northern Ireland Assembly’s Finance and Personnel Directorate. From 1 April 2006 the Trustees outsourced some routine administrative functions to the Scottish Public Pensions Agency (SPPA).
Both Members’ and office-holders’ 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 legislative background to the AMPS can be found at Annex A.
Aim of this Report
In order to comply with best practice in relation to reporting requirements the Trustees consider it appropriate to disclose actuarial and other accounting details to all members of the Fund, generally 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 2006 to 31 March 2007. 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
The Trustees are Members of the Northern Ireland Assembly, appointed by Resolution of the Assembly in accordance with the Schedule to the Assembly Members’ Pension Determination 2000.
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.
During the current suspension of the Assembly, the Secretary of State will act as the sole Trustee of the Scheme. However, during suspension he may appoint not more than 5 persons to be Trustees of the Scheme on his behalf. As The Northern Ireland Assembly was in suspension for the period of this report the Secretary of State invited the 5 Trustees below to remain in their present role and all 5 Trustees accepted.
Trustees’ Names
- Mr Denis Watson (Chairman)
- Mr Mervyn Carrick
- Mr John Dallat MLA
- Mr John Kelly
- Mr David McClarty MLA
Trustees’ Responsibilities
A statement of Trustees’ responsibilities is set out on page 16.
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
Three regular meetings and one extra-ordinary Trustee meeting were held during the period ending 31 March 2007.
Other Parties Appointed in Connection with the Fund as at 31 March 2007.
Responsibility |
Name |
Appointed By |
|---|---|---|
Actuarial Advice |
The Government Actuary |
Part S1 (2) of the Schedule to the Assembly Members’ Determination 2000 |
External Auditor of Annual Accounts |
Comptroller and Auditor General |
Schedule 1 of the Schedule to the Assembly Members’ Determination |
Investment Management |
Baillie Gifford |
Trustees |
AVC Provider |
Clerical Medical |
Trustees |
Legal Advice |
Senior Legal Assistant at the Northern Ireland Assembly |
|
Scheme Consultant |
Price Waterhouse Coopers |
Trustees |
Pension Administration Service |
Scottish Public Pensions Agency (SPPA) |
Trustees |
Taking into account the size of the scheme’s assets and the scheme’s ability to withstand adverse experience, the Government Actuary’s Department recommended it is no longer essential for the Trustees to insure the death in service lump sum. In light of GAD advice the Trustees agreed that the life insurance policy would no longer be required.
All of the other parties remain in place at the date of the report.
Any queries about pensions or requests for further information 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 |
Income of the Fund
The income of the Fund is derived from four main sources:
1. Contributions: from Members and Holders of Qualifying Office;
2. Investments: See the Investment Report;
3. 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;
4. 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.
Members and Officeholders contribute 6 per cent of their salaries. This rate has been in effect since the commencement of the Scheme. Following a valuation of the scheme by the Government Actuaries Department in March 2005 the Exchequer Contribution was increased from 21.3 per cent to 22.6 per cent of Members and Officeholders salaries, effective from 1 April 2006.
Benefits Payable
The benefits payable were £453,997 and there were no transfers in or out of the Scheme during the year. There were no changes to the benefit regulations during the period. Pensions in payment were increased by 2.7 %.
The main provisions of the scheme are:
a. An immediate pension of one fiftieth of final salary for each year of service on retirement at age 65;
b. An immediate pension before retirement age subject to certain service restrictions;
c. An immediate pension on retirement at any time on the grounds of ill health;
d. An abated pension paid on retirement at any time on attainment of age 50 and completion of not less than 15 years’ service;
e. An actuarially reduced pension paid to most former Members at any time after age 50;
f. A five eighths widow/ers pension;
g. 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);
h. A lump sum death gratuity on death in service equal to three years salary with provision for more than one nominee;
i. The purchase of added years;
j. Transfer of pension rights (into and out of the scheme);
k. The opportunity to contribute to an AVC scheme with an outside provider.
Additional Voluntary Contributions (AVCs)
During the 2006 – 2007 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. Following the March 2007 elections, 3 of these members left the Assembly. Three retired members are currently in receipt of AVC benefits.
Investment Details and Performance
The Trustees have decided to produce a “Statement of Investment Principles” in order to comply with best practice for Funded Schemes. The Statement covers items such as how investments are chosen, the balance between asset classes, the Trustees’ attitude to risk and the expected return and review procedures. It has been designed to cover the fundamental aspects of investment policy that are not expected to differ greatly from one year to the next and has been drawn up in consultation with the Government Actuary.
The Trustees delegated responsibility for the investment management of the Fund entirely to Baillie Gifford, who were appointed by the Trustees with effect from 1 November 2004. During the period of this report the Trustees agreed to extend Baillie Gifford’s contract until 31 October 2007.
There was no Investment Income during the year.
The overall effect of the movements in pensions payable, income and investments was an increase of £700,536 in the Net Assets of the Fund during the period.
Report of the Actuary for
Accounting Year ended 31 March 2007
A. Status of Assembly
For the whole of the year 2006/07, the Northern Ireland Assembly was suspended from its normal operations. During the period of suspension, Members of the Assembly are continuing to accrue benefits under the pension scheme. These benefits are based on the level of salary applicable before suspension, rather than the reduced salary actually payable to members during the year. There are no benefits accruing in respect of Office Holders, except for the Speaker and the two Deputy Speakers.
B. Data
At the end of the accounting year 31 March 2007 there were 102 members accruing benefits under the Assembly Members’ Pension Scheme (NI) 2000, including three Office Holders. Pensionable payroll for the financial year 2006/2007 was approximately £3.9 million. There were 25 pensions in payment (including three pensions payable to dependants and one children’s pension) and 41 deferred pensioners as at 31 March 2007.
C. Liabilities
The capitalised value as at 31 March 2007 of expected future payments under the AMPS (NI) 2000, for benefits accrued in respect of employment prior to 31 March 2007, has been assessed using the methodology and assumptions set out in Sections E and F below. The results are as follows:
Value of Liabilities |
£ Million |
|---|---|
Pensions in Payment |
1.9 |
Deferred Pensions |
4.1 |
Active Members (Past Service) |
6.4 |
Total |
12.4 |
D. Accruing Costs
The cost of benefits accruing for each year of service is met partly by a specified contribution from members (6% of pay), with the Consolidated Fund meeting the balance of the cost of the benefits. The total cost of benefits accruing in the year 2006/2007 has been assessed using the methodology and assumptions set out in Sections E and F below. The costs, expressed as a % of pensionable pay available for benefits are as follows:
% of Pensionable Pay |
|
|---|---|
Standard Contribution Rate (excluding expenses) |
37.0% |
Members’ Contribution Rate |
6.0% |
Employer’s share of standard cost |
31.0% |
In addition, a further ½% would be required to cover the expense of running the Scheme. The actual contribution rate paid by the employer, 19% of pensionable salary, plus a further ½% to cover the expense of running the Scheme is lower than the cost of the accruing benefits shown above. This is because the employer’s contributions are based on the accruing cost assessed by reference to the long term view of real investment yields, whereas the accruing annual cost disclosed for accounts purposes is based on current market yields on corporate bonds. At present, the current market yield is lower than the expected long term real yield, which results in a higher contribution rate being disclosed in the Scheme’s accounts.
In addition to meeting the balance of the ongoing cost of accruing benefits, the employer agreed to pay an additional 3.1% of payroll to amortize the deficit disclosed at the 2005 valuation. In relation to the payroll for the financial year, the Consolidated Fund contribution receivable in cash terms was £0.6 million for the financial year 2006/2007.
E. Methodology
The value of the liabilities has been obtained using the projected unit method, with allowance for expected future pay increases in respect of active members. The standard contribution rate for accruing costs has been determined using the projected unit method.
F. Assumptions
The principal financial assumptions adopted for the pension assessments made in relation to this statement are in accordance with the discount rate promulgated by the FRAB for pension purposes in the public sector in Great Britain. At 31 March 2006, the discount rate in excess of price increases was prescribed as 2.8% p.a. However, with effect from 31 March 2007, the discount rate for pension liabilities has fallen to 1.9% p.a. reflecting the fall in real yields experienced in the bond markets. The demographic assumptions adopted for the assessments are derived from other similar public service pension schemes, but adapted to take account of the specific characteristics of this scheme.
G. Notes
1. Sections C and D of this Statement are based on the results of the actuarial valuation carried out as at 31 March 2005, recalculated on a real yield of 1.9%. Approximate updating has been used for the subsequent financial years to reflect known changes that have occurred within the period up to 31 March 2007, based on the available data. The results should be viewed as a reasonable indication of the order of magnitude of the liabilities rather than a full actuarial assessment. The next detailed assessment of the liabilities will be made at the subsequent full actuarial valuation due as at 31 March 2008.
2. The pension benefits taken into account in this assessment are those normally provided from the rules of the scheme, including normal retirement benefits, ill-health retirement benefits, and benefits applicable following the death of the member.
D G Ballantine 14 May 2007
Government Actuary’s Department
Northern Ireland Assembly Members’
Pension Scheme - 31 March 2007
Funding Level as at 31 March 2007
| Actuarial Liability | Value at 31 March 2007 (£ million) |
|
|---|---|---|
| (1) | Current Members – service up to 31 March 2006 | 6.4 |
| (2) | Members with Deferred Benefits | 4.1 |
| (3) | Pensions in Payment: | 1.9 |
| (4) | Total liabilities for benefits = (1) to (3) | 12.4 |
| Overall Result | ||
| (5) | Actuarial Liability = (5) | 12.4 |
| (6) | Market Value of Assets | 9.4 |
| Surplus/(Deficiency) | ||
| (7) | Shortfall of Assets to Liabilities = (6) – (5) | (3.0) |
| (8) | Funding Level = (6) / (5) | 75.8% |
Notes
This statement is based on the results of the actuarial valuation carried out as at 31 March 2005, recalculated on a real yield of 1.9%. Approximate updating has been used for the subsequent financial years to reflect known changes that have occurred within the period up to 31 March 2007, based on the available data. The results should be viewed as a reasonable indication of the order of magnitude of the liabilities rather than a full actuarial assessment. The next detailed assessment of the liabilities will be made at the subsequent full actuarial valuation due as at 31 March 2008.
Membership Statistics
The membership of the fund at 31 March 2007 was as follows:
| Active Members | Number in Category |
|---|---|
| Members (at 1 April 2006) | 99 |
| Add New Entrants | 31 |
| Less Retirements in the Period | 6 |
| Less Deferred Awards | 19 |
| Less Deaths in the Period | 2 |
| Less Refund of contributions | 1 |
| Total Active Members as at 31 March 2007 | 102 |
| Deferred Members | Number in Category |
|---|---|
| Deferred Members (as at 1 April 2006) | 25 |
| Add New Deferred Members | 19 |
| Less Transfers Out | 0 |
| Less Deferred Awards Coming into Payment | 2 |
| Less Deaths in the Period | 0 |
| Less Deferred Members re-elected | 1 |
| Total Deferred Members as at 31 March 2007 | 41 |
| Pensioners in Payment (Beneficiaries of the Fund) | Number in Category |
|---|---|
| Pensioners in Payment 1 April 2006 - Members | 13 |
| Pensioners in Payment 1 April 2006 - Dependants | 2 |
| Members Retiring in the Period | 8 |
| Deaths in the Period | 0 |
| New Dependants | 2 |
| Pensioners in Payment as at 31 March 2007 | 25 |
The benefits payable during the year amounted to £453,997, including 2 lump sum death gratuities following the deaths in service of Mr Michael Ferguson MLA and Mr David Ervine MLA. There were no changes to the benefit regulations during the period. Pensions in payment were increased by 2.7%.
Preparation and Audit of Annual Accounts
Summary of Financial Information
| Total Fund at 1 April 2006 | £8,738,771 | |
|---|---|---|
| What Went Into the Fund | 2006 - 2007 | 2005 - 2006 |
| Consolidated Fund Contributions | £ 626,697 | £ 622,538 |
| Contributions from Members/Office Holders | £ 166,384 | £ 175,369 |
| Transfers in from other schemes | £ NIL | £ NIL |
| Additional Voluntary Contributions | £ 14,400 | £ 14,877 |
| Investment Income | £ NIL | £ NIL |
| Change in Market Value of Investments | £ 424,762 | £ 2,061,248 |
| Total | £1,232,243 | £ 2,874,032 |
| What Went Out of the Fund | ||
|---|---|---|
| Benefits Payable | £ 453,997 | £ 52,689 |
| Transfers out of the Scheme | £ NIL | £ NIL |
| Administrative Expenses | £ 12,000 | £ NIL |
| Life Assurance | £ NIL | £ 22,417 |
| Consultancy | £ NIL | £ NIL |
| Actuarial Expenses | £ 26,447 | £ 42,455 |
| Investment Management Expenses | £ 38,942 | £ 31,966 |
| Interest Payable | £ NIL | £ NIL |
| Miscellaneous | £ 321 | £ 440 |
| Total | £ 531,707 | £ 149,967 |
| Total Fund at 31 March 2007 | £9,439,307 |
The summary above is not the financial statements but a summary of information relating to both the Fund Account and the Net Assets Statement. The Report for the period ended 31 March 2007 including the attached Investment Report and Compliance statement is approved on behalf of all the Trustees by:
David McClarty
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 2007
Investment Manager
Baillie Gifford remains the Scheme’s Fund Manager. The contract expiry date was 31 October 2006, with an optional one year extension. In September 2006 the Trustees opted to extend Baillie Gifford’s contract to 31 October 2007. Baillie Gifford operates in accordance with guidelines and restrictions set out in the Life Policy Agreement and with instructions given by the Trustees from time to time. Their 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
Baillie Gifford is paid an annual management fee of 0.45% based on the value of the portfolio. The fee paid to BG for the period from 1 April 2006 to 31 March 2007 was £38,942.
Investment Policy
The Investment Policy of the Trustees of the Assembly Members’ Pension Fund is detailed in the Statement of Investment Principles, which was reviewed and updated by the Trustees during this reporting period. This is available on request from the Secretariat.
The size of the Scheme’s assets, remain insufficient 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.
The Trustees have prepared a Statement of Investment Principles which sets out their policies on investment and their strategy for achieving them, a copy of which is available on request.
Day to day responsibility for the management of investments has been delegated to Baillie Gifford & Co, who operate in accordance with guidelines and restrictions set out in the Life Policy Agreement and with instructions given by the Trustees from time to time.
Investment Target
The Trustees have set a performance objective for the investment managers which takes account of the liability profile of the Scheme and the level of risk that the Trustees believe appropriate. The present target of the Baillie Gifford Managed Pension Fund is to outperform the CAPS Median Balanced Pooled Fund over rolling 3 year periods.
Distribution of Assets
The valuation and distribution of assets in the Baillie Gifford Managed Pension Fund at 31st March was as follows:
| 2006 % |
2007 % |
|
|---|---|---|
UK Equities |
49.6 |
48.4 |
Overseas Equities |
||
| North America | 9.6 |
10.6 |
| Europe | 15.4 |
16.8 |
| Japan | 7.5 |
5.4 |
| Pacific (ex Japan) | 4.8 |
5.1 |
| Emerging Markets | 5.5 |
6.4 |
42.8 |
44.3 |
|
Fixed Interest |
||
| UK Bonds | 3.9 |
3.5 |
| Overseas Bonds | 1.2 |
1.2 |
5.1 |
4.7 |
|
Cash & Deposits |
2.5 |
2.6 |
Total |
100.0 |
100.0 |
Economic and Market Background – 12 Months to 31 March 2007
Despite occasional bouts of volatility, stock markets finished the twelve month period ending 31st March 2007 on a positive note. The FTSE All-World Index rose by 12.8%, as robust corporate profits and plentiful liquidity offset concerns about the US economy slowing and underpinned a surge in merger and acquisition activity.
The UK equity market provided a total return of 11.2% over the twelve month period. Sterling’s strength reduced returns from overseas markets for UK investors, but strong positive returns were still evident in some markets, even in sterling terms, with the European equity market up by 12.4%, Asia Pacific up by 20.3% and Emerging Markets up by 7.6%. Returns from US equities were slightly negative in sterling terms (-0.9%), however, the worst performing market was Japan with a return of -9.9% for UK investors. The performance of the Japanese economy was the disappointing factor as the return of inflation was not followed by the expected improvement in levels of private consumption. Japan was also unique among the developed markets in not experiencing a surge in merger and acquisition activity, although there were some signs of an improved focus on shareholder return in the corporate sector.
Baillie Gifford’s view was that equity markets remained attractive through the period and this was reflected in an overweight position in equities in the portfolio relative to bonds. This positive view of equities seemed to be shared by the corporate sector and private equity investors, with the rise of merger and acquisition activity a particularly notable feature of the period. Utilities and retailers were in particular focus. The value embedded in many companies’ assets, their high levels of profitability, and the plentiful supply of liquidity suggests that corporate and private equity deals may be a feature of the market for a while yet.
The US economy was also in focus over the period as signs of a slowdown emerged in consumer demand. The emergence of a crisis in the American sub-prime mortgage market earlier this year highlighted problems in the housing market, but the amounts of money involved are not thought to be big enough to cause problems in the whole financial system. The full extent of the slowdown in US consumption is not yet apparent and remains a concern, however, markets are likely to be positively influenced by the continuation of robust economic growth elsewhere in the world, most notably in China and parts of Europe.
Over the period, global bond yields were little changed. Corporate defaults have been running at very low levels which has provided support for the corporate bond market. There was continued strong demand from institutions such as pension funds and life assurance companies for longer-dated bonds to match liabilities.
In conclusion the outlook for equities is good, although markets may remain nervous and investors have more reason to be selective than has been the case for a number of years. We expect corporate profits to continue to grow, albeit at a slower pace, and companies are generally in good financial health which should lead to higher dividends and continuing share buybacks as well as further merger and acquisition activity, all of which should help to underpin share prices. We expect equity markets to continue to provide higher returns than bond markets.
Performance
The Managed Pension Fund provided a total return of 3.9% during the year ended 31st March 2007 compared with a median return for funds included in the CAPS Balanced Pooled Fund survey of 6.0%.
The annualised investment return over the last three years to 31st March 2007 of 15.1% compares to a CAPS Balanced Pooled Fund survey median return of 14.6% per annum. The returns for the five years are 7.8% and 7.8% respectively.
Marketability
Investments comprise units in a collective investment vehicle managed by Baillie Gifford, the holdings of which are regarded as being readily marketable.
Largest Holdings
As of 31st March 2007 the ten largest holdings, which accounted for 22.5% of the total value of the portfolio, were:
% of Portfolio |
|
|---|---|
Royal Bank of Scotland |
3.6 |
GlaxoSmithKline |
3.5 |
Baillie Gifford British Smaller Cos Fund |
2.6 |
BG Group |
2.3 |
Man Group |
2.0 |
Barclays |
2.0 |
HSBC |
1.8 |
Royal Dutch Shell B Shares |
1.7 |
Diageo |
1.5 |
Reed Elsevier |
1.5 |
22.5 |
Statement of Trustees’ Responsibilities
The Schedule to the Assembly Members’ Pension Determination 2000 requires the Trustees of the Assembly Members’ Pension Scheme (Northern Ireland) 2000 to prepare accounts in such a form and in such a manner as the Comptroller and Auditor General may direct.
The financial statements for the year ended 31 March 2007 were prepared on an accruals basis to give a true and fair view of the financial transactions of the Fund during the year then ended, and of the disposition at 31 March 2007 of its assets and liabilities, other than liabilities to pay benefits after the end of the Fund period.
In preparing those financial statements, the Trustees were required to:
- Observe the accounts direction issued by the Comptroller and Auditor General, including the relevant accounting and disclosure requirements and apply suitable accounting policies on a consistent basis;
- Make judgements and estimates that were reasonable and prudent;
- State whether applicable accounting standards were followed, subject to any material departures disclosed and explained in the financial statements; and
- Prepare the financial statements on a going concern basis, on the presumption that the Assembly Members’ Pension Scheme (Northern Ireland) 2000 will continue in operation.
The Trustees are responsible for the keeping of proper accounting records, for ensuring that proper financial procedures are followed and for ensuring that the accounting records are capable of producing statements which comply with the requirements of the Schedule to the Assembly Members’ Pension Determination 2000.
The Trustees are also responsible for the regularity and propriety of public finances provided by the Exchequer Contribution, for safeguarding the assets of the Fund and for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Statement on Internal Control
Scope of Responsibility
We acknowledge our responsibility as Trustees for maintaining a sound system of internal control to safeguard the public funds and assets connected with the Assembly Members’ Pension Scheme (NI) 2000 (AMPS (NI) 2000).
The AMPS (NI) 2000 is a statutory scheme and operates within a legislative framework. Officials from the Pensions Unit of the Personnel Office of the Northern Ireland Assembly’s Finance and Personnel Directorate provide a full secretarial and administrative service to the Trustees.
The Purpose of the System of Internal Control
The system of internal control is designed to manage risk to a reasonable level rather than to eliminate all risk of failure to achieve policies, aims and objectives; it can therefore only provide reasonable and not absolute assurance of effectiveness.
The system of internal control is based on an ongoing process designed to identify the principal risks to the achievement of the AMPS (NI) 2000 aims and objectives, to evaluate the nature and extent of those risks and to manage them efficiently, effectively and economically. It is based on a framework of regular management information, financial regulations, administrative procedures including the segregation of duties, and a system of delegation and accountability. This system of internal control has been in place in AMPS (NI) 2000 for the year ended 31 March 2007 and up to the date of approval of the annual report and accounts.
Capacity to Handle Risk
The Scheme’s day-to-day administration and accounting responsibility is administered on behalf of the Trustees by the executive managers within the Pensions Unit of the Personnel Office of the Northern Ireland Assembly’s Finance and Personnel Directorate, who have responsibility for the development and maintenance of the control framework.
The Risk and Control Framework
During the period of this report the risk register for the Scheme was reviewed, updated and agreed with the Trustees. Each risk has been evaluated to assess potential impact, likelihood etc. and the controls currently in place to manage each identified risk. The resulting register was used to identify any additional measures considered necessary to effectively manage the risks. The following are examples of the risks that have been identified and the measures put in place to minimise their impact:
- Investment: The pension fund is invested in line with the Statement of Investment Principles and responsibility has been delegated to the investment managers, Baillie Gifford, administrative staff and PricewaterhouseCoopers;
- Professional Advisors: Suitable professional advisors have been appointed;
- Pension Scheme Records: Accurate records have been maintained of past and present members, transactions into and out of the Scheme and of Trustees meetings;
- Pension Trustee Meetings are held regularly to monitor the steps taken by the administrative staff to manage risks in their areas of responsibility;
- Members: It is ensured that the Trustees appointed meet the member-nominated Trustee requirements. There is a procedure in place to resolve disputes about the Scheme with members. Information is provided to scheme members;
- Registration and Collecting the Levy: The registrar of Pensions is provided with information required by law and informed of any changes to Scheme information.
Review of effectiveness
The Northern Ireland Assembly is subject to review by Internal Audit units, which operate to standards defined in the Government Internal Audit Manual. The work of the Internal Audit units is informed by an analysis of the risk to which the Northern Ireland Assembly is exposed and annual Internal Audit plans are based on this analysis.
Our review of the effectiveness of the system of internal control is informed by the work of the Internal Auditors and the senior managers within the Northern Ireland Assembly who have responsibility for the development and maintenance of the internal control framework, and comments made by the external auditors in their management letter and other reports.
An Internal Audit review of the Pension Scheme was carried out during the 2002/2003 financial year and no irregularities or improprieties were discovered. Internal Audit concluded that the system of internal control was operating effectively. The next review by Internal Audit is planned for October 2007.
Approved on behalf of the Trustees on 24 September 2007 by:
David McClarty Trevor Lunn
Chairman of the Trustees Trustee
The Certificate and Report of the
Comptroller and Auditor General
to the Northern Ireland Assembly
I certify that I have audited the financial statements of the Assembly Members’ Pension Scheme (Northern Ireland) 2000 for the year ended 31 March 2007 under the Assembly Members’ Pension Determination 2000. These comprise the Fund Account, the Net Assets Statement and the related notes. These financial statements have been prepared under the accounting policies set out within them.
Respective responsibilities of the Trustees and auditor
The Trustees are responsible for the preparation of the Annual Report and the financial statements in accordance with the Assembly Members’ Pensions Determination 2000 and the Comptroller and Auditor General’s directions made thereunder and for ensuring the regularity of financial transactions. These responsibilities are set out in the Statement of Trustees’ Responsibilities.
My responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements, and with International Standards on Auditing (UK and Ireland).
I report to you my opinion as to whether the financial statements give a true and fair view and have been properly prepared in accordance with the Comptroller and Auditor General’s directions issued under the Assembly Members’ Pensions Determination 2000. I also report whether in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. I report whether the contributions payable to the scheme have been paid in accordance with the Scheme rules and the recommendations of the Actuary.
In addition, I report to you if the Fund has not kept proper accounting records, if I have not received all the information and explanations I require for my audit, or if information specified by relevant authorities regarding transactions is not disclosed.
I review whether the Statement on Internal Control reflects the Fund’s compliance with the Department of Finance and Personnel’s guidance, and I report if it does not. I am not required to consider whether this statement covers all risks and controls, or form an opinion on the effectiveness of the Fund’s corporate governance procedures or its risk and control procedures.
I read the other information contained in the Annual Report, which consists of The Trustees’ Report, The Compliance Statement, The Investment Report and Annex A – Legislative Background to the AMPS (NI) 2000, and consider whether it is consistent with the audited financial statements. I consider the implications for my certificate if I become aware of any apparent misstatements or material inconsistencies with the financial statements. My responsibilities do not extend to any other information.
Basis of audit opinions
I conducted my audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. My audit includes examination, on a test basis, of evidence relevant to the amounts, disclosures and regularity of financial transactions included in the financial statements. It also includes an assessment of the significant estimates and judgments made by the Trustees in the preparation of the financial statements, and of whether the accounting policies are most appropriate to the scheme’s circumstances, consistently applied and adequately disclosed.
I planned and performed my audit so as to obtain all the information and explanations which I considered necessary in order to provide me with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error and that in all material respects the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them. In forming my opinion I have also evaluated the overall adequacy of the presentation of information in the financial statements.
Opinions
Audit Opinion
In my opinion:
- the financial statements give a true and fair view, in accordance with the Scheme for the year ended 31 March 2007, the net returns on investments and of the amount and disposition at that date of its assets and liabilities, other than liabilities to pay benefits after the year end of the Fund year; and
- the financial statements have been properly prepared in accordance with the Comptroller and Auditor General’s directions issued under the Assembly Members’ Pensions Determination 2000.
Audit Opinion on Regularity
In my opinion, in all material respects, the expenditure and income have been applied to the purposes intended by Parliament and the financial transactions conform to the authorities which govern them.
The contributions payable to the scheme during the year ended 31 March 2007 have been paid in accordance with the Scheme rules and the recommendations of the Actuary.
Report
I have no observations to make on these financial statements.
J M Dowdall CB
Comptroller and Auditor General
Northern Ireland Audit Office
106 University Street
Belfast BT7 1EU
September 2007
Fund Account for the year to 31 March 2007
| Note | 2006-07 | 2005-06 | |
|---|---|---|---|
| Contributions and Benefits | |||
| Contributions receivable | 3 |
807,481 |
812,784 |
| Individual transfers in from other schemes | - |
||
807,481 |
812,784 |
||
| Benefits payable | 4 |
(453,997) |
(52,689) |
| Other Payments | 5 |
(321) |
(22,857) |
| Administrative expenses | 6 |
(38,447) |
(42,455) |
(492,765) |
(118,001) |
||
| Net additions from dealings with members | 314,716 |
694,783 |
|
Returns on Investments |
|||
| Change in market value of investments | 7 |
424,762 |
2,061,248 |
| Investment management expenses | 9 |
(38,942) |
(31,966) |
Net returns on Investments |
385,820 |
2,029,282 |
|
| Net Increase/(decrease) in the Fund During the period | 700,536 |
2,724,065 |
|
| Net Assets of the Fund at 1 April | 8,738,771 |
6,014,706 |
|
| At 31 March | 9,439,307 |
8,738,771 |
Net Assets Statement as at 31 March 2007
| Note | 2007 £ |
2006 £ |
|
|---|---|---|---|
| Investments | |||
| Managed Fund | 7 |
9,363,105 |
8,533,835 |
| AVC Investment | 7 |
154,459 |
131,731 |
| Net current assets /(liabilities) | 10 |
(78,257) |
73,205 |
| Net Assets of the Fund as at 31 March | 9,439,307 |
8,738,771 |
The notes on pages 22 to 24 form part of these accounts.
These financial statements were approved on behalf of the Trustees
On 24 September 2007 by:
David McClarty Trevor Lunn
Chairman of the Trustees Trustee
Notes to the Financial Statements
Basis of preparation
1 The accounts meet the accounting and disclosure requirements of the Statement of Recommended Practice (SORP) (revised November 2002) Financial Reports of Pension Schemes issued in July 1996, as far as appropriate.
The financial statements summarise the transactions of the Fund and deal with the net assets at the disposal of the Trustees. They do not take account of obligations to pay pensions and benefits, which fall due after the end of the year. The actuarial position of the Fund, which does take account of such obligations, is dealt with in the Government Actuary’s valuation report on the position of the Fund as at 31 March 2007 and these financial statements should be read in conjunction with that report.
Accounting policies
2 The principal accounting policies are:
- Normal pension contributions are accounted for on an accruals basis;
- Pension benefits are accounted for on an accruals basis;
- Transfer values from and to other pension schemes represent the amounts received and paid during the year for members who either joined or left the Fund; and
- All other expenditure is accounted for in the period to which it relates.
Contributions Receivable
3
| 2006-07 £ |
2005-06 £ |
|
|---|---|---|
| Exchequer contributions: | ||
normal |
626,697 |
622,538 |
| Members’ contributions: | ||
normal |
166,384 |
175,369 |
| Additional Voluntary contributions (AVCs) | 14,400 |
14,877 |
807,481 |
812,784 |
|
| Exchequer contributions are paid out of money appropriated by Act of the Assembly | ||
Benefits payable
4
| 2006-07 £ |
2005-06 £ |
|
|---|---|---|
| Pensions | 92,518 |
52,689 |
| AVC Benefits | - |
|
| Lump sum payable on retirement | 96,136 |
- |
| Lump sum payable at age 75 | 17,417 |
- |
| Lump sum payable on death | 247,926 |
- |
453,997 |
52,689 |
Other payments
5
| 2006-07 £ |
2005-06 £ |
|
|---|---|---|
| Premium on life assurance policy | - |
22,417 |
| Miscellaneous | 321 |
440 |
321 |
22,857 |
During the 05/06 financial year, in light of advice from the Government Actuary the Trustees agreed that the Life Assurance policy would no longer be required as it was felt that the current size of the pension fund was sufficient to self insure the scheme. Consequently the policy was cancelled in October 2005.
Administrative expenses
6
| 2006-07 £ |
2005-06 £ |
|
|---|---|---|
| Actuarial fees | 26,447 |
42,455 |
| Administration Costs | 12,000 |
- |
38,447 |
42,455 |
The Pensions unit of the Northern Ireland Assembly provides administration support to the pension scheme and these costs are borne by the Northern Ireland Assembly. During the period of this report the Scottish Public Pensions Agency were appointed to provide additional administration support.
Investments
7
| Value at 31 March 2006 £ |
Purchases at cost £ |
Sales£ | Change in Market Value £ |
Management Charges £ |
Value at 31 March 2007 £ |
|
|---|---|---|---|---|---|---|
| BG Managed Fund | 8,533,835 |
575,264 |
(123,963) |
416,911 |
(38,942) |
9,363,105 |
| AVC Investments | 131,731 |
14,877 |
- |
7,851 |
- |
154,459 |
8,665,566 |
590,141 |
(123,963) |
424,762 |
(38,942) |
9,517,564 |
The change in market value of investments during the year comprises all increases and decreases in the market value of investments held any time during the year, including profits and losses realised on sales of investments during the year.
Additional Voluntary Contributions (AVCs)
8 The Trustees are responsible for administering an AVC scheme whereby participants in the Assembly Members’ Pension Scheme may make contributions to secure additional benefits to those provided by the Pension Scheme. At 31 March 2007 these contributions were invested separately from the Pension Fund, in a variety of Investment Funds, with an outside provider Clerical Medical. These investments secure additional benefits on a money purchase basis for those members electing to pay AVCs. Members participating in this arrangement will receive an annual statement confirming the amounts held to their account and the movements in the year.
Investment Management Expenses
9 The management fee paid to Baillie Gifford was £38,942. The management fee is a percentage rate fee based on the value of the portfolio and is deducted on a monthly basis within the price of units held by the Members’ Pension Scheme.
Net Current Assets
10
| Current assets | 2006-07 £ |
2005-06 £ |
|---|---|---|
Contributions and benefits: |
||
| Contributions due | - |
- |
| Balance at bank | 10,235 |
13,727 |
| Prepayments | - |
- |
| Sundry debtors | 32,271 |
67,592 |
42,506 |
81,319 |
|
| Current liabilities | ||
| Administrative expenses: | ||
| Pension Arrears due | (8,631) |
- |
| Lump Sum on Retirement | (96,136) |
- |
| Actuarial fees | (14,159) |
(7,190) |
| Other Expenses | (1,837) |
(924) |
(120,763) |
(8,114) |
|
| Net current assets | (78,257) |
73,205 |
Related party transactions
12 None of the Trustees, key management staff or any other related party has undertaken any material transactions with the Fund during the year.
Annex A
Legislative Background to the Amps (Ni) 2000
General
The Assembly Members Pension Scheme (Northern Ireland) 2000 (AMPS (NI) 2000) was set up from 13 May 2000 under the Assembly Members’ Pensions Determination 2000, made by the Secretary of State under section 48 of the Northern Ireland Act 1998, by virtue of paragraph 9 of the Schedule of the Northern Ireland Act 2000. The scheme provides benefits for Members and qualifying office-holders of the Northern Ireland Assembly.
Preparation of Annual Accounts
Paragraph 5 of Schedule 1 to the Schedule to the Assembly Members Determination 2000 requires that annual accounts are prepared in accordance with a direction given by the Comptroller and Auditor General. The accounts have been prepared, as far as appropriate, in accordance with the Statement of Recommended Practice (SORP) Financial Reports of Pension Schemes, issued in July 1996 (revised November 2002), in order to conform to best practice reporting requirements. A statement of the Trustees’ responsibilities with regard to the preparation of the accounts is on Page 16.