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THE ASSEMBLY MEMBERS' PENSION SCHEME Annual Report Period 1 April 2003 to 31 March 2004 Contents 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 2004 Income of the Fund Actuarial Valuation Membership Preparation and Audit of Annual Accounts Summary of Financial Information Benefits Tax Status of the Fund Funding Standard Investments Investment Manager Basis of Remuneration Investment Policy Investment Performance Objectives and Expected Return Additional Voluntary Contributions (AVCs) 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 for 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 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 2003 to 31 March 2004. 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. During suspension the Secretary of State shall be the sole Trustee of the Scheme and may appoint not more than 5 persons to be Trustees of the Scheme on his behalf. As The Northern Ireland Assembly is currently in suspension the Secretary of State has invited the 5 Trustees below to remain in their present role and all 5 Trustees have accepted. Trustees Names Mr Denis Watson (Chairman) Mr Mervyn Carrick Mr John Dallat MLA Mr John Kelly 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 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 2004, with a number of additional meetings being held for specific purposes. Other Parties Appointed in Connection with the Fund as at 31 March 2004. Actuary: The Government Actuary Investment Manager: Royal London Asset Management Scheme Consultants: Price Waterhouse Coopers Fund Insurance: Swiss Life AVC: Clerical Medical The Government Actuary is appointed on a statutory basis while the Trustees were responsible for the appointment of the Investment Manager, Scheme Consultants and AVC providers. The Government Actuary’s Department advised the Trustees that the Swiss Life premium was still competitive and recommended renewing the policy for a further 12-month period, taking into consideration the size of the AMPS fund and its current funding level. 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 Tel: 028 9052 0954 Income of the Fund The income of the Fund is derived from four main sources: i. Contributions – from Members and Holders of Qualifying Office 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 was carried out at 31 March 2003. The next full valuation of the Scheme will be conducted at the start of the 2005 – 2006 financial year. 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, after taking account of Member contributions at the rate of 6% of pay (as specified in the Rules) the employer’s contributions should increase to 21.3% from 1 April 2003. The Member’s and the employer’s contributions currently remain at this rate. Membership Following the Northern Ireland Assembly elections, held on 26 November 2003, there were 43 new members, three of which opted out of the Scheme, and 1 returned Member opted back into the scheme. The membership of the fund at 31 March 2004 was as follows: Current members 98 With a rise in retired members the draw on the fund has increased and the benefits payable during the year amounted to £ 92,496, which included lump sum on retirement payments of £64,579. There were no changes to the benefit regulations during the period. Pensions in payment were increased by 1.7%. Preparation and Audit of Annual Accounts Summary of Financial Information
What Went Out Of The Fund
Denis Watson 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. YEAR ENDING 31 MARCH 2004 Investment Manager Royal London Asset Management (RLAM) remains the Scheme’s Fund Manager following a 12-month extension to the existing contract, which expired on 15 March 2004. RLAM have since agreed for the contract to be extended on a month-by-month basis. 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. The Trustees are preparing to tender for a new Investment Manager, and expect to appoint the successful applicant during the next reporting period. 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 £18,621. 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 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. Investment Performance Objectives and Expected Return The Trustees have agreed expected performance benchmarks within the SIP against which the performance of the Fund is assessed. Performance Target Balanced Pension Fund
Market Value of fund 31st March 2003: £3.8m Over this period approximately £0.2m cash was added to the fund. The fund is invested in units of the Royal London Pooled Pension Funds, which are held on a buy and hold basis. During the year the fund increased by 21.67% this was primarily due to the strong global equity markets. The best returning market over the period was Japan followed by Far East. European and UK equities also recorded strong returns but the US lagged the rest of the world. The fund lagged the benchmark over the year, largely due to the negative stock selection within equities, particularly UK and US. These areas were underexposed to some of the worst performers of the previous period, which rebounded strongly in the rising equity market. Also as returns from equity markets were much higher than those of bonds, there was a small positive impact from asset selection. Global equities had a strong year due to growing optimism about the global economic recovery. The markets also moved higher and investor pessimism lessened as conviction grew that the world economy is recovering. Growing optimism about the strength of the global economic recovery continued to be the major factor affecting sentiment. In the UK, the housing market showed renewed strength - this, combined with improved global economic prospects, led the Monetary Policy Committee (MPC) to reverse its July interest rate cut of 0.25%. In the third quarter of the year 2003, Gilts registered their first negative return since the first quarter of 2002, and weakest return since the second quarter of 2001. In spite of this, the return achieved over the year was 3.0%, outperforming their benchmark by 0.7%. A combination of improving economic fundamentals and continued strength in the equity market provided a supportive backdrop for global credit markets. Corporate bonds outperformed government bonds for the seventh consecutive quarter by the end of March 2004. Additional Voluntary Contributions (AVCs) During the 2003 – 2004 financial year Clerical Medical continues to act as AVC provider for the scheme. At the start of the reporting period 8 members took advantage of the facility to pay additional voluntary contributions. As a result of the elections 4 members continue to take advantage of the facility to pay additional voluntary contributions at the end of the reporting period. One retired member’s AVC benefits has been brought into payment. 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. |
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