STATISTICS

Administration of the Pension Scheme

Background

NILGOSC was set up by the Government in April 1950 to operate a pension scheme for the local councils and other similar bodies in Northern Ireland. The pension scheme is known as the Local Government Pension Scheme (Northern Ireland), the ‘Scheme’, and is a defined benefit scheme, which provides retirement benefits on a ‘final salary’ basis.

A member of the Scheme accrued retirement benefits at the rate of 1/80^th (pension) and 3/80^ths (tax-free lump sum) of their pensionable salary for each year of membership up to 31 March 2009. Any membership after 31 March 2009 provides for a retirement pension calculated at the rate of 1/60^th of pensionable salary for each year of membership. At retirement, members may give up some pension for additional lump sum, subject to HM Revenue and Customs (HMRC) limits. The conversion rate is £12 additional lump sum for every £1 of pension given up.

The Scheme is funded by contributions made by both employees and employers who have been designated as employing authorities or admitted to the Scheme. Prior to 1April 2009, employees’ contribution rates were fixed at 6% of their pensionable remuneration (except for those who were entitled to contribute to the scheme at 5% before 1 February 2003 and have remained in continuous employment). Tiered employee contribution rates, determined by the whole-time equivalent rate of pay, were introduced from 1 April 2009.

Employer contribution rates are determined by the Scheme’s actuary every three years. Following the results of the 2007 actuarial valuation, the Committee had agreed with its actuary a series of stepped employer contribution increases, for the majority of employers, effective from 1 April 2008.

Year	Employer Contribution Rate
1 April 2008 – 31 March 2009	15%
1 April 2009 – 31 March 2010	16%
1 April 2010 – 31 March 2011	17%

The triennial valuation was carried out as at 31 March 2010 and the Committee agreed a series of further stepped employer contribution rate increases of 1% per year for the majority of employers. These increases are effective from 1 April 2011 to 31 March 2014.

Status

The Scheme is a statutory public service pension scheme as defined by the Pensions Schemes Act (Northern Ireland) 1993. The Superannuation (Northern Ireland) Order 1972 gave the power to the Department of the Environment to make regulations providing for pensions, allowances and other gratuities for persons employed by local authorities and other bodies. Since the 1972 Order, various regulations have been issued detailing the provisions governing the Local Government Pension Scheme in Northern Ireland. The current provisions covering the Scheme, which came into effect on 1 April 2009, are contained in the following three sets of regulations:

· Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations (Northern Ireland) 2009 (SRNI 2009/32);

· Local Government Pension Scheme (Administration) Regulations (Northern Ireland) 2009 (SRNI 2009/33); and

· Local Government Pension Scheme (Amendment and Transitional Provisions) Regulations (Northern Ireland) 2009 (SRNI 2009/34).

NILGOSC is also governed by:

· Local Government Pension Scheme (Management and Investment of Funds) Regulations (Northern Ireland) 2000 (SR 2000/178); and

· Local Government (Early Termination of Employment) (Discretionary Compensation) Regulations (Northern Ireland) 2007 (SR 2007/93).

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. Automatic registration was achieved by virtue of Part 1 of Schedule 36 of that Act. Full tax relief is granted on members’ and employers’ contributions paid to the Fund and on all United Kingdom investment income other than dividends arising from UK equities.

Membership

The Scheme continued to grow during 2010/11 both in terms of admitted bodies and individual employees.

Employing Authorities

At 31 March 2011, there were 202 employing authorities contributing to the Scheme. These employing authorities were composed of 26 councils, 5 education and library boards, 1 Library Authority, 77 associated bodies, 84 schools and 9 further and higher education colleges and universities.

The following employing authorities were admitted during 2010/11.

Employing Authority	Date of Admission
Rowandale Integrated Primary School	1 January 2010
City of Derry Airport (Operations) Limited	1 April 2010

Ballynafeigh Housing Association and Belfast Community Housing Association became part of Trinity Housing with merger dates of 30 November 2010 and 1 April 2011 respectively.

Woodvale and Shankill Housing Association changed its name to Harmony Homes (NI) Limited with effect from 1 September 2010.

North and West Housing Association changed its name to Apex Housing with effect from 4 October 2010.

The following employing authorities ceased participation in the Scheme during 2010/11:

Employing Authority	Cessation Date
Dungannon and District Housing Association	31 March 2009
St MacNissi's College	31 March 2010

Members

Membership of the scheme increased during the year to 90,667 members. At 31 March 2011, the Scheme consisted of 44,148 contributing members, 26,291 pensioners and 20,228 deferred members.

Actuarial Valuation 2010

The Scheme’s actuary, Hymans Robertson, carried out an actuarial valuation of the Scheme as at 31 March 2010. The results were provided in the valuation report but are briefly summarised below.

The funding level has fallen from 89% at the previous valuation at 31 March 2007 to 82% at this valuation. This resulted in the deficit increasing to £783m.

The average employer contribution rate that would be required to achieve full funding in 20 years, based on this triennial valuation is 23.8% of pay. This contribution rate is known as the common contribution rate and comprises the anticipated cost of new benefits being earned by members in the future (17.7%) plus the additional contributions required to repay the deficit over a 20 year period (6.1%).

The common contribution rate is a theoretical average figure across the whole fund. An adjustment to the common rate has been determined for each employer in line with the Funding Strategy Statement.

The majority of employers will be paying the following minimum contribution rates for the next three years.

Year	Employer Contribution Rate
1 April 2011 – 31 March 2012	18%
1 April 2012 – 31 March 2013	19%
1 April 2013 – 31 March 2014	20%

Pensions Increase

The Pensions (Increase) Act (Northern Ireland) 1971 and the Social Security Pensions (Northern Ireland) Order 1975 are the primary legislation that governs the increase to public sector pensions. Up until April 2010 the increase in any April was the percentage rise in the Retail Prices Index (all items) in the 12 months leading up to the preceding September. Therefore the rate of increase in April 2010 was decided by the rate of inflation in the year up to September 2009. The Retail Prices Index figure for September 2009 was 215.3 and this meant that the index had dropped by 1.4% from the previous September‟s figure of 218.4, i.e. a change of -1.4%. The legislation does not allow for percentage decrease in the rate of a public service pension and therefore HM Treasury confirmed that for the year ending 5 April 2011 there would be no increase to public sector pensions.

The Chancellor of the Exchequer announced in his June 2010 Budget that the method by which public sector pensions are increased, will change from 2011. From April 2011, pensions will be increased in line with the Consumer Prices Index (CPI) rather than the Retail Prices Index (RPI).

New Regulations

Three sets of amending regulations were made during 2010/11. The first set of regulations protected the benefits of classroom assistants following the Collective Agreement dated 30 November 2007. The second set of amending regulations primarily clarified employers‟ pension liabilities as well as making many minor technical amendments to the principal regulations. Finally the third set of regulations introduced a new local government pension scheme for councillors. Each of these sets of amending regulations is described in more detail below.

Local Government Pension Scheme (Amendment) Regulations (Northern Ireland) 2010

These regulations were made on 22 April 2010 and were effective from 31 May 2010.

The purpose of these regulations is to protect classroom assistants‟ pensions by changing the denominator of the fraction used to calculate their pension entitlement from a whole-time equivalent of 32.5 hours per week to 36 hours per week. Classroom assistants employed by the Education and Library Boards who accrued pension rights on a whole-time equivalent of 32.5 hours per week during the period from 1 January 1995 to 30 November 2007 (inclusive) will have those rights protected. Thereafter pension rights are accrued on the basis of the whole-time equivalent of 36 hours per week.

Classroom assistants employed by voluntary grammar and grant maintained integrated schools have a protected period from 1 January 1995 to 6 February 2009 (inclusive).

Thereafter their pension rights are accrued on the basis of the whole-time equivalent of 36 hours per week.

Local Government Pension Scheme (Amendment No. 2) Regulations (Northern Ireland) 2010

These regulations were made on 8 December 2010 and were effective from 17 January 2010.

While these regulations make several minor amendments they also retrospectively amend both the 2002 regulations and the 2009 regulations to clarify the arrangements for employer‟s pension liabilities and the actions that must be taken on an employer ceasing to have any active members or its admission agreement ceasing to have effect.

A new regulation is introduced to allow apportionment of pension liabilities when an employer leaves the Scheme or merges with another employer while remaining in the Scheme. This regulation enables the transfer of pension liabilities from one ceasing employing authority to another continuing employer, subject to agreement.

Provision is made for certain members to make additional survivor benefits contributions to provide a pension based on pre-April 1988 membership for a surviving cohabiting partner.

Local Government Pension Scheme (Councillors) Regulations (Northern Ireland) 2011

These regulations allowing councillors to participate in the Local Government Pension Scheme were made on 18 March 2011 and came into operation on 9 May 2011. The Scheme for councillors is a career average revalued earnings (CARE) scheme based on 1/60th accrual and revaluation of pay in line with increases in the Consumer Price Index (CPI).

The pensionable pay for councillors is the total of basic allowance and special responsibility allowance only. Career average pay is calculated by totalling the revalued pensionable pay for each year of active membership and dividing the total by the number of years or part years of membership.

Satisfaction Survey

A stakeholder satisfaction survey was carried out in May 2011. Over 700 questionnaires were distributed to all employers and a sample of active members, deferred members and pensioners. As well as a random sample of members a sample was also taken from all those who had contacted NILGOSC during 2010-11 in person, in writing, by email and by telephone. This sampling method allowed us to target the members who had used our services in the last year and therefore receive a more informed response to our question.

Respondents were asked to rank each element on a scale of 1 to 5, with 1 being very poor or very dissatisfied and 5 being excellent or very satisfied. Level of courtesy and professionalism was ranked highest across all groups surveyed with an average rating of 4.73 out of 5.

Key focuses were:

The relevance of information contained, presentation and layout and ease of understanding our publications; and
Staff knowledge and ability, time taken and the level of courtesy and professionalism shown in contacts with our staff.

In addition, respondents made comments on our services and suggestions for future contact, whilst employers have noted an interest in attending training on pension scheme administration and meeting with NILGOSC more often.

The response rate for 2010-11 was 41%, a vast improvement on the 2009-10 response rate of 31%.

Satisfaction levels ranged from 89% of active members to 100% of deferred members being satisfied or very satisfied with the service they received. Overall, 92% of respondents were either satisfied or very satisfied; an increase from the rating of 91% the previous year. Only 1% of respondents ranked their overall satisfaction as less than three out of five, again an improvement on the 2009-10 figure.

Performance Standards

In May 1997, the Management Committee first approved a set of service standards for the activities carried out by the Committee. Since then, these standards have been reviewed annually and are monitored by the Committee. Compliance with the performance standards for 2010/11 and the reporting system was tested by the internal auditor, ASM Horwarth, on a random sample basis.

The following is a summary of the standards achieved during 2010/11.

Task	Standard	Within Standard %	Number of tasks
Lump sum retirement payments	10 days	88%	1465
Death grant payments	10 days	76%	85
Leaver options notifications	20 days	43%	2240
Refund payments	10 days	87%	167
Provisional transfer out quotations	20 days	43%	230
Transfer out payments	10 days	84%	168
Inward transfer quotation requests	10 days	14%	298
Inward transfer credit notifications	20 days	22%	245
New entrants certificates	20 days	86%	4683
Letters answered or acknowledged	10 days	95%	12486
Benefit quotation requests	10 days	51%	2753
Issue members' annual report	by 30 November	100%	Approx. 90000
Issue members' annual benefit statement	Within two months of receipt of valid data	100%	Approx. 62000
Pensions paid each month	Last banking day of month	100%	Approx. 26000
P60s issued to all pensioners	By 31 May	100%	Approx. 26000

During the 2009/10 year there was a 34% increase in total incoming work with a consequent impact on achievement of performance standards. In March 2010, the Committee agreed anincrease in the staffing level of the Pensions Administration Department to deal with the increased workloads and a recruitment exercise was undertaken in April / May 2010. Following training of the new staff there has been improved performance standards across all areas.

Transfer factors were suspended by HM Treasury on 6 July 2010 as the basis used for setting the discount rate needed revised as pension indexation had changed to the Consumer Prices Index. All transfer and divorce quotations were suspended and work could not resume until the Government Actuary’s Department(GAD) issued new factors effective from 1 October 2010.These new factors were implemented and transfer and divorce calculations resumed. This four month suspension had a negative impact on the performance standards achieved for transfers and some benefit quotations as this work could not be processed until the newfactors were provided by GAD.

Cost per Member

Despite a continuing increase in scheme membership, NILGOSC 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 £
2002	66,643	33	2019	1,288	19.32	19.92
2003	68,936	36	1915	1,495	21.69	22.26
2004	71,399	40.5	1763	1,685	23.60	24.35
2005	73,995	41	1805	1,835	24.80	25.39
2006	74,688	43	1737	1,771	23.71	24.85
2007	78,511	41	1915	2,032	25.87	26.84
2008	82,716	41	2017	2,062	24.94	24.84
2009	86,612	46	1887	2,353	27.10	28.31
2010	88,568	50	1771	2,659	30.02	31.62
2011	90,667	50	1813	1,950	21.51*	21.51*

* In accordance with IAS19, Admin Expenses include a negative Past Service Cost of £868,000 arising from the change from RPI to CPI in uprating index-linked features of post employment benefits.The Cost per member excluding the negative Past Service Cost of £868,000 is £31.08.