STATISTICS

 

Administration of the Pension Scheme

The scheme is funded by contributions made by both employees and employers who have been admitted to the Scheme.  Employee contribution rates have been fixed at either 5% or 6% of their pensionable remuneration, while employer contribution rates are determined by the Scheme’s actuary every three years.  A prior surplus position had allowed employer contribution rates to remain at 4.6% up to 31 March 2005, with any employers admitted to the Scheme after 1 April 1999 paying a higher rate dependant on the prevailing employer contribution rate at the time of admission.

 

Following the results of the 2004 actuarial valuation, the Committee introduced a series of stepped employer contribution increases with effect from 1 April 2005.

 

Employers Admitted

1 April 05 –

31 March 06

1 April 06 –

31 march 07

1 April 07 –

March 08

Before 1 April 1999

8.5%

11%

13%

After 1 April 1999 and before 31 March 2002

12%

13%

13%

After 31 March 2002

13%

13%

13%

 

 

Status

 

The Scheme is a statutory public service pension scheme as defined by the Pensions Schemes Act (Northern Ireland) 1993 and is regulated by the Local Government Pension Scheme (Northern Ireland) Regulations 2002.

 

As a public service pension scheme, the Scheme is contracted out of the State Second Pension (S2P) and is a registered public service scheme under Chapter 2 of Part 4 of the Finance Act 2004.  Full tax relief is granted on members’ and employers’ contributions paid to the Fund on all United Kingdom investment income other than dividends arising from UK equities.

 

Membership

 

The scheme continued to grow during 2006/07 both in terms of admitted bodies and individual employees.

 

At 31 March 2007, there were 212 employing authorities contributing to the NILGOSC Scheme.  A full list of these organisations can be found on pages 48 to 50.  Four new bodies were approved for admission to the Scheme during the year ended 31 March 2007:

 

Employing Authority

Effective Date

Ilex URC Ltd

1 April 2006

Drumlins Integrated Primary School

1 October 2006

Portadown Integrated Primary School

1 February 2006

Roe Valley Integrated Primary School

1 February 2006

 

Membership of the scheme also increased during the year and at 31 March 2007 the Scheme consisted of 42,742 contributing members, 22,737 pensioners and 13,032 deferred pensioners.

 

The chart below shows the increase in each category of member over the past 8 years:

 

 

 

Pension Increase

 

During the year, NILGOSC pensions were increased by 2.7%, with effect from 10 April 2006. All pensions (including spouses’ pensions, children’s pensions, age pensions, ill-health pensions, redundancy pensions provided the pensioner is aged 55 or over and preserved benefits) are index-linked and increased each year in line with inflation, as measured by the Retail Price Index.

 

The Government determines this increase each year by way of the Pensions Increase (Review) Order and this year’s figure reflected the annual increase in the Retail Prices Index for the year ending 30 September 2005.

 

New Regulations

 

The following new regulations came into effect during 2006/07.

 

The local Government Pension Scheme (Amendment No. 2) Regulations (Northern Ireland) 2006

 

The above regulations came into operation on 1 April 2006 and provided for financial statements prepared by NILGOSC to be in accordance with guidance issued by the Department of Finance and Personnel.

 

The local Government Pension Scheme (Management and Investment of Funds) (Amendment) Regulations (Northern Ireland) 2006

 

The second set of regulations came into operation on 6 November 2006 and permits the Committee to increase the limit on their investments in securities transferred under stock lending arrangements from 25% to 35% of the total of their pension fund investments. 

 

The Local Government Pension Scheme (Amendment) Regulations (Northern Ireland) 2007

 

The third and most significant set of regulations were made on 9 March 2007.  These regulations removed the 85 year rule from the Scheme from 1 October 2006 and introduced retrospectively from 6 April 2006 Her Majesty’s Revenue and Customs (HMRC) amendments as a consequence of the Finance Act 2004.  NILGOSC had the powers to anticipate these regulations from 6 April 2006.  In summary these Amendment Regulations provided that:

·         The 85 year rule will be removed from the Scheme for new members from 1 October 2006 and for existing members in respect of benefits accruing after 31 March 2008

·         Protection is for all current members at 30 September 2006 who will satisfy the 85 year rule and will be aged 60 or over by 31 March 2016;

·         Those existing members at 30 September 2006 who will be 60 or over and meet the 85 year rule between 1 April 2016 and 31 March 2020 will have tapering reductions applied to their benefits i.e. zero reduction will apply at 31 March 2016 and full reduction will apply at 1 April 2020;

·         Members will be able to join and remain in the scheme until the day before their 75th birthday;

·         The current 15% contribution limit on employees’ contributions is removed and thus up to 100% of taxable pay can be paid into the Scheme with full tax relief (no restrictions on the amount payable to the AVC Fund has been made but a further amendment is expected in due course).  This applies from 6 April 2006;

·         Benefits will have to be paid before a Scheme member’s 75th birthday;

·         Where Scheme members defer drawing benefits beyond the age of 65 their benefits will be actuarially increased i.e. just as benefits drawn before the age of 65 will be subject to an actuarial reduction to reflect the fact that they will be paid for longer, benefits drawn after the age of 65 will be actuarially increased to reflect the fact that they will be paid for a lesser period of time;

·         Flexible retirement is now permitted at or after the age of 50 (55 from 6 April 2010), linked to reduction in hours or grade agreed by the employer and the employer will (at its cost) be able to waive, in whole or in part, any actuarial reduction that will apply to the early payment of those benefits.  The benefits paid will not be subject to any abatement policy that may apply to other re-employed pensioners.  (The committee has currently agreed to have a no abatement policy for the two years to 31 March 2008);

·         The option for members to take up to 25% of the capital value of their pension fund (including any AVC fund) as a tax-free lump sum is introduced.  Any amount taken above the current three times the annual pension limit will be paid for by the scheme member commuting part of his/ her final pension at a commutation rate of £12 lump sum for £1 of pension;

·         In addition to commuting pension by the 12:1 factor, members are able to take up to 100% of the value of their accrued AVC/ SCAVC fund as tax free cash, subject to this sum, when aggregated with the lump sum retirement grant payable under the LGPS, not exceeding 25% of the capital value of the member’s accrued rights;

·         The ability for retirees to convert some or all of their scheme lump sum into additional pension is removed;

·         The facility for employers to be able to reduce or waive the contributions of employees who have been in pensionable local government employment for at least 40 years is removed (Regulation 14) and so from 6 April 2006, any members who have their contributions reduced or waived will pay full contributions again.

·         The ability for a member to provide a survivor benefit over and above the standard spouse’s, civil partner’s or children’s pensions by surrendering part of his/ her pension in favour of a spouse, civil partner or dependant (payable should they survive the member) is removed;

·         Children’s pensions coming into payment after 5 April 2006 will cease by age 23;

·         The maximum number of added years that a scheme member will be able to purchase is limited to 6 2/3rd years;

·         The earnings cap of £105,600 for those who joined on or after 1 June 1989 is removed.  From 6 April 2006 such members pay pension contributions on their uncapped pensionable pay.  A service adjustment is performed in respect of their local government membership between 1 June 1989 and 5 April 2006;

·         The committee is required to prepare, maintain and publish a statement by 1 April 2008, setting out its policy on communicating with members, members’ representatives, prospective members and employers participating in the fund.

·         The committee is required after consulting with such persons as it considers appropriate, to prepare, maintain and publish by 1 April 2008, a governance policy setting out whether it delegates any function in relation to the maintenance of the pension fund to a committee, sub-committee or an officer.

 

Local Government (Early Termination of Employment) (Discretionary Compensation) Regulations (Northern Ireland) 2007

 

These regulations came into operation on 12 March 2007 and revoked the Local Government (Early Termination of Employment) (Discretionary Compensation) Regulations (NI) 2003 (removing the facility to award compensatory added years under these regulations) but did not affect anyone whose termination date was before 1 October 2006.  Transitional arrangements enabled payment of compensatory added years to those in employment before 1 October 2006 and whose termination date was between 1 October and 31 March 2007.  These new regulations give all scheme employers the discretion to increase statutory redundancy payments and award compensation as a lump sum, which may not exceed 104 weeks pay.  Employing authorities must formulate, publish and keep under review the policies which they apply when exercising these discretionary powers.

 

Satisfaction Survey

 

A stakeholder satisfaction survey was carried out in February 2007.  This year 1,225 questionnaires were issued to a random sample of employers, pensioners, deferred pensioners and members of the scheme.  The survey focused on quality of performance in several key areas, quality of publications, preferred methods of communication and the response to queries.  Despite a low response rate of only 27%, satisfaction levels ranged from 85% of deferred members to 98% of pensioners being satisfied or very satisfied with the service they received.  Overall, the survey returned an average satisfaction rating of 95% (2005/2006 95%).  The Committee was pleased with the results of the survey, which demonstrated that a high level of satisfaction continued to be maintained throughout 2006/07.

 

 

Performance Standards

 

In May 1997 the Management Committee approved a set of service standards for the activities carried out by the Committee. These standards are reviewed annually and monitored by the Committee. Compliance with the performance standards for 2006/07 was tested by the internal auditor, McClure Watters, on a random sample basis.

 

Below is a summary of the standards achieved during 2006/07.

 

 

  Task

Standard

Within

 

 

Standard %

 Lump sum retirement payments

5 days

65%

 

 Death grant payments

5 days

78%

 

 Leaver options notifications

20 days

40%

 

 Refund payments

10 days

99%

 

 Provisional transfer out quotations

20 days

44%

 

 Transfer out payments

10 days

62%

 

 Inward transfer quotation requests

10 days

63%

 

 Inward transfer credit notifications

20 days

100%

 

 New entrants certificates

20 days

88%

 

 Letters answered or acknowledged

10 days

82%

 

 Issue members' annual report

by 30 November

100%

 

 Issue members' annual benefit statement

by 31 October

62%

 

 Benefit quotation requests

10 days

60%

 

 Pensions paid each month

Last banking day of month

100%

 

 P60s issued to all pensioners

By 31 May

100%

 

 

 

 

Cost per Member

 

Despite a continuing increase in scheme membership, NILGSOC has managed to keep a constant cost per member in real terms. The table below shows administration expenses per scheme member, together with the ratio of members to staff.

 

 

Year ended

Total

Number

Members/

Admin Expenses

Cost/

Member

Cost adjusted for

31 March

Members

Of Staff

Staff

£’000

£

Inflation £

1998

52,934

26

2036

993

18.75

23.83

1999

54,315

28

1940

977

17.98

22.40

2000

55,983

28

2000

993

17.74

21.53

2001

63,872

30

2129

1,227

19.21

22.80

2002

66,643

33

2019

1,288

19.32

22.63

2003

68,936

36

1915

1,495

21.69

24.64

2004

71,399

40.5

1763

1,685

23.60

26.13

2005

73,995

41

1805

1,835

24.80

26.61

2006

74,688

43

1737

1,771

23.71

24.85

2007

78,511

41

1915

2,032

25.87

25.87