University of Glasgow Pension Scheme

Transcription

1 Registration No University of Glasgow Pension Scheme Trustees Report and Financial Statements for the year ended 31 March 2017

2 Contents Section Page Trustees and Advisers... 1 Trustees Report... 2 Compliance Report Actuarial Certificates Independent Auditor s Report Fund Account Statement of Net Assets (available for benefits) Notes to the Financial Statements Independent Auditor s Statement about Contributions Summary of Contributions... 41

3 Trustees and Advisers Principal Employer Trustees Secretary to the Trustees The University Court of the University of Glasgow Moat Pensions Limited, (represented by June Crombie) Independent Chairperson of Trustee Board Mr George Gillespie* Mr Robert H Harkins* Ms Margaret A McParland* Mr David Newall, Secretary of Court (retired 30 April 2017) Mr James Ross, Head of Pay & Pensions Mr John Speirs* Mr Neal Juster Ms Lesley Cummings Dr David Duncan (appointed 30 April 2017) * Member Nominated Mr James Ross, Head of Pay & Pensions Scheme Actuary Independent Auditor Investment Managers Investment Custodians AVC Provider Legal Advisers Scheme Administrator Eddie McAuley, Hymans Robertson LLP Ernst & Young LLP BlackRock Investment Management Limited Newton Investment Management Limited Pyrford International Insight Investment JPMorgan Asset Management (appointed 24 March 2017) The Bank of New York Europe Limited Northern Trust State Street Ireland BNY Mellon JPMorgan Chase Bank Prudential Life Assurance Company CMS Xafinity Consulting Limited Investment Consultants KPMG LLP (appointed 22 September 2016) Bank Bank of Scotland Plc Life Assurance Company Unum (until 18 July 2016) MetLife (from 19 July 2016) Contact for further information & complaints about the Scheme Mr James Ross Secretary to the Trustees Finance Office (Tay House) University of Glasgow Glasgow G12 8QQ Page 1

4 Trustees Report for the year ended 31 March 2017 Introduction The Trustees of the University of Glasgow Pension Scheme have pleasure in presenting the Annual Report and audited Financial Statements for the year ended 31 March This Report relates to the operation of the University of Glasgow Pension Scheme ( the Scheme ) during the year ended 31 March The University pays a substantial proportion of the cost of providing the benefits and of running the Scheme. This Report is addressed primarily to the Scheme s members. The Scheme closed to new members with effect from 1 April Constitution The Scheme is a defined benefit scheme governed by a Definitive Trust Deed dated 26 July 1965, which was supplemented by a Definitive Trust Deed and Rules effective from 1 April 1985 and a Replacement Definitive Deed and Rules dated 18 May 2000, along with subsequent amendments. The Management of the Scheme The Occupational Pension Schemes (Member-nominated Trustees & Directors) Regulations 2006 came into force on 6 April 2006 and prescribe the composition of trustee boards. The existing arrangements are that four of the Trustees are nominated by the members under the rules notified to the members of the Scheme, to serve for a period of five years. The Trustees, as listed on page 1, are responsible for the administration and investment policy of the Scheme. A Member-nominated Trustee can only be removed from office with the agreement of all of the other Trustees. The power to appoint and remove University appointed Trustees is vested in the University Court. Trustee appointments however will cease if the Trustee ceases to be a member of the Scheme or resigns from the University. Appointment and removal of Trustees must be exercised by Deed. The Trustee body includes membership representative Trustees nominated by the main unions represented within the membership and one elected by the pensioner members. Trustees are invited to attend Trustees meetings at which the majority must be present for valid decisions to be taken. Decisions require the majority support of those Trustees present. During the year, the Trustees held three scheduled meetings during the year. Four investment subcommittee-meetings were also held during the year. Page 2

5 Trustees Report for the year ended 31 March 2017 Governance & Risk Management The Trustees have in place policies and procedures that set out their objectives in areas such as administration, investment, funding and communication. This, together with a list of the main priorities and timetable for completion, helps the Trustees run the Scheme efficiently and serves as useful reference documentation. A Risk Register is in place which sets out the key risks to which the Scheme is subject along with the controls in place to mitigate these. Trustee Knowledge & Understanding The Pensions Act 2004 requires Trustees to have sufficient knowledge and understanding of pensions and trust law and be conversant with the Scheme documentation. The Pensions Regulator has published a Code of Practice on Trustee Knowledge and Understanding to assist Trustees on this matter which became effective from 6 April The Risk Register highlights areas on which the Trustees should focus; the use of the trustees toolkit to develop knowledge and to develop training logs to ensure compliance and record details of the training received each year. Principal Employer The Scheme is provided for all eligible employees of the Principal Employer. The Principal Employer s registered address is University of Glasgow, Glasgow, G12 8QQ. Statement of Trustees Responsibilities The Scheme s Trustees are responsible for obtaining audited Financial Statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, and for making available certain other information about the Scheme in the form of an Annual Report. The Financial Statements are the responsibility of the Trustees. Pension scheme regulations require the Trustees to make available to Scheme members, beneficiaries and certain other parties, audited Financial Statements for each Scheme year which: show a true and fair view of the financial transactions of the Scheme during the Scheme year and of the amount and disposition at the end of that year of the assets and liabilities, other than liabilities to pay pensions and benefits after the end of the Scheme year, and contain the information specified in The Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, including a statement whether the Financial Statements have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice. Page 3

6 Trustees Report for the year ended 31 March 2017 Statement of Trustees Responsibilities (continued) The Trustees have supervised the preparation of the Financial Statements and have agreed suitable accounting policies, to be applied consistently, making any estimates and judgements on a prudent and reasonable basis. The Trustees are responsible under pensions legislation for ensuring that there is prepared, maintained and from time to time revised a Schedule of Contributions showing the rates of normal contributions payable towards the Scheme by or on behalf of the Employer and the active members of the Scheme and the dates on or before which such contributions are to be paid. The Trustees are also responsible for keeping records in respect of contributions received in respect of any active member of the Scheme and for monitoring whether contributions are made to the Scheme by the Employer in accordance with the Schedule of Contributions. Where breaches of the Schedule occur, the Trustees are required by the Pensions Acts 1995 and 2004 to consider making reports to the Pensions Regulator and the members. The Trustees also have a general responsibility for ensuring that adequate accounting records are kept and for taking such steps as are reasonably open to them to safeguard the assets of the Scheme and to prevent and detect fraud and other irregularities, including the maintenance of an appropriate system of internal control. Financial Development The Financial Statements on pages 23 to 39 have been prepared and audited in accordance with the Regulations made under Sections 41 (1) and (6) of the Pensions Act They show that the value of the fund increased from 343,668,819 at 31 March 2016 to 409,103,721 at 31 March Page 4

7 Trustees Report for the year 31 March 2017 Membership Details of the membership of the Scheme are given below: Active Members Active members at the start of the year 1,495 1,711 Adjustments in respect of prior periods* 9 (96) Retirements (45) (35) Members leaving with trivial commutation - (1) Members leaving with decision pending - (18) Members leaving with contribution refunds - (1) Members leaving with preserved benefits (55) (63) Deaths (2) (2) Active members at the end of the year 1,402 1,495 Pensioners Pensioners at the start of the year 1,543 1,521 Adjustments in respect of prior periods* 10 - Active members retiring during the year Members with preserved benefits reaching retirement No liability (multiple posts)** (2) - Spouses and dependants 8 10 Commuted pensions (10) (5) Pensioners who died during the year (51) (45) Pensioners at the end of the year*** 1,573 1,543 Members with preserved benefits Number at the start of the year 1,396 1,355 Adjustments in respect of prior periods* (4) 27 Members leaving with preserved benefits Members with preserved benefits retiring during the year (30) (27) Members leaving with contribution refunds - (3) Transfers out during the year (5) (14) Deaths (4) (3) Commuted pensions (2) (2) Preserved at the end of the year 1,406 1,396 Total membership at the end of the year 4,381 4,434 Page 5

8 Trustees Report for the year 31 March 2017 Membership (continued) *Adjustments relate to movements notified to the Scheme administrator after the completion of the previous renewal. **relates to members who have multiple posts. Member benefits combined at retirement with main post and other records set to no liability. ***includes 215 (2016: 221) spouses and dependants of members in receipt of a pension. In addition to the above, the Scheme also has 172 members at the year-end who have left the Scheme with decisions pending (2016: 202). Report on Actuarial Liabilities Under section 222 of the Pensions Act 2004, every scheme is subject to the Statutory Funding Objective, which is to have sufficient and appropriate assets to cover its technical provisions, which represent the present value of benefits to which members are entitled based on pensionable service to the valuation date. This is assessed at least every 3 years using assumptions agreed between the Trustees and the Employer and set out in the Statement of Funding Principles, a copy of which is available to Scheme members on request. The last full actuarial valuation of the Scheme was completed as at an effective date of 1 April 2016 and was the fourth valuation carried out under the scheme specific funding requirements of the Pensions Act At that date the valuation assessed that the Scheme had technical provisions (the target level of Scheme assets given its commitments to pay pensions and other benefits) of 400m, assets of 343m, a deficit of 57m, and a funding level (ratio of assets to technical provisions) of 86%. As a result of the 2016 valuation, it was agreed that the Employer will continue to contribute 22.5% p.a. of the monthly pensionable salary roll into the Scheme and members will contribute 7.5% of their pensionable salary into the Scheme in respect of future benefit accrual. In addition, in order to eliminate the funding deficit, the Employer was required to contribute a lump sum of 17m into the Scheme by 31 August 2017, followed by 3.951m p.a. during the period from March 2023 to March 2034 inclusive, increasing by 2.5% per annum. Actuarial method The actuarial method used in the calculation of the technical provisions is the accrued benefits funding method. Actuarial assumptions The key assumptions used for calculating the technical provisions and future contribution requirement for the Scheme were: Principal actuarial assumptions for valuation as at 1 April 2016 Discount rate before retirement Discount rate after retirement Dependent on term and assumed to be 1% p.a. above the yield on fixed interest government bonds Dependent on term and assumed to be 1% p.a. above the yield on fixed interest government bonds Page 6

9 Trustees Report for the year 31 March 2017 Report on Actuarial Liabilities (continued) Actuarial assumptions (continued) RPI price inflation Consumer Price Inflation Pension increases in payment Salary increases Expenses Non-retired members mortality Retired members mortality Market expectation of future inflation dependent on term as measured by the difference between yields on fixed and indexlinked government bonds RPI curve less 0.75% p.a. Assumed to be in line with CPI, with a floor of 0% p.a. and a cap of 10% p.a. for pensions in excess of the GMP Assumed to be CPI plus 0.5% p.a. An allowance for Scheme expenses is included in the University s ongoing contributions in respect of the fees, charges, levies and expenses. SAPS All tables, with future improvements assumed to be in line with the CMI model with a long term rate of improvement of 1.5% for both males & females calibrated to VITA experience, assuming non-peaked short term improvements and declining life expectancy for the oldest old. Club Vita base tables, with future improvements assumed to be in line with the CMI model with a long term rate of improvement of 1.5% for both males & females calibrated to VITA experience, assuming non-peaked short term improvements and declining life expectancy for the oldest old. The next full actuarial valuation of the Scheme is currently underway, as at an effective date of 1 April Wind up funding level The estimated funding position of the Scheme on a wind up basis, had the Scheme been discontinued and wound up as at the date of the actuarial valuation of 1 April 2016, indicated that the Scheme had liabilities of 642m, assets of 343m, a deficit of 299m and hence a funding level of 53%. The winding up liabilities are much higher than the ongoing funding liabilities noted previously because the estimated cost of purchasing insurance policies to secure the benefits is significantly higher than the anticipated cost of providing the benefits from the Scheme s assets. This information is provided for legislative purposes only and the Trustees have no plans to wind up the Scheme in the foreseeable future. The Schedule of Contributions and the Actuarial Certificate in relation the Schedule of Contributions are shown on pages 18 to 20 of the Annual Report. Page 7

10 Trustees Report for the year 31 March 2017 Report on Actuarial Liabilities (continued) Updated funding position of the Scheme An updated actuarial position of the Scheme as at 1 April 2017 indicated that the funding position of the Scheme had changed to 84% from 86% (as at 1 April 2016) largely due to changes in market conditions, in particular reductions in government bond yields which increased the value of the liabilities. Positive investment performance from the Scheme s assets was not enough to offset the increase in the liabilities. It is expected that the funding position will go up and down in the short term with changing market conditions. Investment Report General All investments, with the exception of AVCs which are managed by Prudential, have been managed during the year under review by BlackRock Investment Management Limited, Newton Investment Management Limited, Pyrford International, Insight Investment and JP Morgan Asset Management. There is a degree of delegation of responsibility for investment decisions given to the investment managers. The investment strategy is agreed by the Trustees after taking appropriate advice. Subject to complying with the agreed strategy, which specifies the target proportions of the fund which should be invested in the principal market sectors, the day-to-day management of the Scheme s asset portfolio which includes full discretion for stock selection is the responsibility of the Investment Managers. Investment Principles The Trustees have produced a Statement of Investment Principles in accordance with Section 35 of the Pensions Act A copy of the statement is available on request. The Trustees overall investment policy falls into two parts. The strategic management of the assets is the responsibility of the Trustees acting on expert advice and is determined by their investment objectives set out in the Statement of Investment Principles. The remaining elements of the Trustees investment policy concern the day-to-day management of the Scheme s asset portfolio. Following the completion of an investment strategy review during the year the Scheme has adopted a strategic target investment allocation of 38% equities, 20% diversified growth funds, 32% bonds and 10% diversified credit. This strategy is being implemented in a staged manner. Code of Best Practice During the year the Trustees, in conjunction with their professional advisers, have continued their work of reviewing the Scheme s level of compliance with the recommendations contained in the Government s Code of Best Practice. This ongoing review is aimed at benchmarking the Scheme s level of compliance with these recommendations and identifying any actions that still need to be taken. There is an investment sub-committee which has Terms of Reference and reports to the main Trustee Board. Page 8

11 Trustees Report for the year 31 March 2017 Investment Report (continued) Code of Best Practice (continued) The Trustees understand that the primary purpose of the Code of Practice is to ensure that the Trustees have the right skill set and decision-making structures and also that they have clear objectives for the Scheme and an appropriate and well-documented strategy in place for achieving these objectives. In a similar vein, the Trustees know that they should set explicit goals for the fund managers used by the Scheme. Progress has continued to be made against the principles set out in the Code. The Trustees have complied with the requirements for setting clear objectives and making strategic asset allocation decisions for the Scheme. The Trustees continue to review and agree mandates, appropriate benchmarks and performance targets with the four investment managers. The Statement of Investment Principles is reviewed regularly and is available to all members on request. Continued compliance with these principles is monitored by the Trustees. In addition, the Trustees continually review their training needs and the skills of its members to ensure effective decision-making. Where appropriate, they take independent expert advice. Deployment of Investments (excluding AVCs and unsettled transactions) The distribution of the Scheme s underlying assets at the end of the year is set out below: 2017 % 2016 % Quoted securities Equities - UK Pooled investment vehicles - Equities Diversified growth Bonds Diversified credit Cash and cash instruments Annuity policies Cash deposits Income receivable Page 9

12 Trustees Report for the year 31 March 2017 Investment Report (continued) Fund Performance The table below shows the performance of the Fund against its benchmark (where appropriate) to 31 March 2017: 1 year % 3 Years % p.a. 5 Years % p.a. BlackRock Investment Management Limited Investment Portfolio Benchmark (Blended based on underlying benchmarks)** BlackRock Investment Management Limited Dynamic Diversified Growth Portfolio 3.9 N/A* N/A* Benchmark (3 Month Sterling LIBOR) 0.4 N/A* N/A* BlackRock Investment Management Limited UK Equity Portfolio Benchmark (FTSE All-Share TR Index) Newton Investment Management Limited Newton Global Equity X Shares (Acc) Fund 24.2 N/A* N/A* Benchmark (MSCI AC World Index) 32.2 N/A* N/A* Pyrford International Global Total Return Fund (Class A Stg Accumulating) N/A* Benchmark (RPI) N/A* Insight Investment - UK Corporate All Maturities Bond Gross S ACC Fund 10.2 N/A* N/A* Benchmark (iboxx Sterling Non-Gilt All Maturities index) 9.2 N/A* N/A* Insight Investment - LDI Solutions Plus Funded Index-Linked Gilts Funds N/A* N/A* Benchmark (Customised LDI benchmark) 11.3 N/A* N/A* Insight Investment - LDI Solutions Plus Funded Index-Linked Gilts Funds N/A* N/A* Benchmark (Customised LDI benchmark) 18.2 N/A* N/A* Insight Investment - LDI Solutions Plus Funded Index-Linked Gilts Funds N/A* N/A* Benchmark (Customised LDI benchmark) 25.4 N/A* N/A* Insight Investment - LDI Solutions Plus Funded Index-Linked Gilts Funds N/A* N/A* Benchmark (Customised LDI benchmark) 30.9 N/A* N/A* Total Scheme N/A Scheme Benchmark N/A Note: Total Scheme return and benchmark are estimates based on KPMG calculations. Total Scheme returns are net of management fees. All individual fund performance has been provided on a gross of fees basis. *Performance unavailable given inception date of investment. ** Composite benchmark returns estimated based on KPMG calculations. No performance or benchmark information available for the JP Morgan Strategic Bond Fund as initial investment date was 24 March Source: Investment Managers; KPMG Calculations. Page 10

13 Trustees Report for the year 31 March 2017 Investment Report (continued) Investment commentary Political uncertainty was to the fore in the period, most notably in the UK s decision in June 2016 to leave the EU and the US election of President Trump in November Neither events were widely expected in March 2016 and both did disrupt financial markets but only very briefly. The most significant sustained reaction was a plunge in sterling after the referendum vote in trade-weighted terms it fell by 10% over the period as a whole. As so often, economic developments had the more lasting influence on markets. Global economic growth was a little disappointing over 2016 as a whole, but momentum increased towards the end of the year. Global inflation was certainly not pointing to a lasting downturn. True, a sharp rise in headline inflation in the US, UK and Eurozone mainly reflected a rise in oil prices from early 2016 after the collapse of the previous 18 months. However, underlying price pressures continued to grow, albeit slowly. The thrust of global monetary policy over the period broadly followed the evolution of economic growth. Easing dominated in the first half. April 2016 brought the (previously announced) extension of the Eurozone s QE programme and the Bank of Japan extended its own programme in September UK rates were cut to 0.25% p.a. in August 2016 in anticipation of post-referendum economic weakness. The second half of the period brought two rate rises in the US and an admission from the Bank of England that the further rate cut they had threatened wasn t required by a still-buoyant UK economy. There was even a growing view that further easing in the Eurozone and Japan was becoming less likely. Government bonds took their cue from interest rate expectations. Yields were flat or tending to drift down in the early part of the period, but moving higher later on. Over the 12 months to March 2017, 10-year gilt yields fell from 1.5% p.a. to 1.1% p.a., after falling as low as 0.6% p.a. in August The fall in index-linked gilt yields was even greater, reflecting both the likely rise in inflation over the next couple of years (driven by sterling weakness) and investors willingness to pay more for protection against future uncertainty. In general, non-government bonds outperformed government bonds. In sterling investment-grade markets, yield spreads relative to gilts were close to 5-year highs in March 2016 but much closer to 5- year lows in March Equity markets had dipped in advance of the US presidential election. Just before polling day, global indices were barely higher than they were at the start of the period. But initial doubts about a Trump regime were quickly replaced by growing optimism and markets rallied strongly. The FTSE All-World Index returned 18% over the period in local currency terms; currency weakness meant this was boosted to 33% in sterling terms. UK commercial property values fell in the wake of the EU referendum and some property funds (particularly those aimed at retail investors) had to make substantial sales quickly to meet redemption requests. As measured by the widely-followed IPD Monthly Index, values recovered towards the end of the period, but still finished a little lower than they started. The total return on the Index was positive, as income was sufficient to offset the modest capital falls. In aggregate, rents continued to Page 11

14 Trustees Report for the year 31 March 2017 Investment Report (continued) Investment commentary (continued) rise over the period, but the rate of growth was falling throughout, particularly in the office sector. Custodial Arrangements The investment managers appointed the Bank of New York Europe Limited, Northern Trust, State Street (Ireland) BNY Mellon and JPMorgan Chase Bank as custodians of the Scheme s assets. The custodians are responsible for the safe keeping, monitoring and reconciliation of documentation relating to the ownership of listed investments. Investments are held in the name of the custodian s nominee companies, in line with common practice for pension scheme investments. The Trustees are responsible for ensuring the Scheme s assets continue to be securely held. They review the custodian arrangements from time to time. Social, Environmental and Ethical Considerations The Trustees recognise that social, environmental and ethical considerations are among the factors which investment managers will take into account, where relevant, when selecting investments for purchase, retention or sale. The managers have produced statements setting out their general policy in this regard. The managers have been delegated by the Trustees to act accordingly. Exercise of voting rights The Trustees have delegated the exercise of voting rights to the investment managers on the basis that voting power will be exercised by them with the objective of preserving and enhancing long term shareholder value. Accordingly, the managers have produced written guidelines of their process and practice in this regard. The managers are encouraged to vote in line with their guidelines in respect of all resolutions at annual and extraordinary general meetings of companies. Basis of Investment Managers Fees Details of the investment managers fees are detailed below. Fees charged by BlackRock Investment Management Limited, Newton Investment Management Limited and Insight Investment are reflected in note 11 of the Financial Statements. Fees charged by Pyrford International and JP Morgan are reflected within the unit price of the funds. BlackRock Investment Management Limited The annual fee for BlackRock Investment Management Limited is charged on the rates detailed below: Value of funds On the first 10million On the next 10million Over 20million 0.70% per annum 0.44% per annum 0.33% per annum Page 12

15 Trustees Report for the year 31 March 2017 Investment Report (continued) Basis of Investment Managers Fees (continued) Newton Investment Management Limited The tiered management fee is calculated as follows: 0.25% per annum of the first 75 million of the client s quarter end value; and 0.20% per annum of the client s quarter end value which is above 75 million There is also a performance fee of 20% of any outperformance, with payment spread over 4 years. Pyrford International The investment management fees in respect of the Pyrford Global Total Return Fund are 1% per annum for Share Class A and such fees are based on the pro rata Net Asset Value of Class A shares accrued daily and payable monthly. There is a rebate of 0.4% per annum of the annual investment management fee paid, the rebate entitlement is accrued on a daily basis, and credited in the form of units on a monthly basis. The Investment Manager shall be responsible for paying the fees and out-of-pocket expenses of the Sub-Investment Managers out of its own investment management fee. Insight Investment The management charge for the UK Corporate All Maturities Bond Fund and LDI Funds is 0.27% and 0.05% respectively and are calculated by reference to the value of the Net Asset Value of the Fund. BlackRock Diversified Growth The management charge for the BlackRock Dynamic Diversified Growth Fund is 0.65%. JP Morgan The management charge for the JP Morgan Strategic Bond Fund is 0.40%. Employer-Related Investment There were no employer-related investments at any time during the year (2016: none). Page 13

16 Trustees Report for the year 31 March 2017 Contacting the Trustees Members and Trade Unions, recognised for the purposes of collective bargaining in relation to members, are entitled to inspect copies of documents giving information about the Scheme. In some circumstances, copies of the documents can be provided but a charge may be made for copies of the trust documents (Deed and Rules) and the Actuary s Report. The data provided by members in their application forms is processed using computers. The use of the data is registered under the Data Protection Act 1998 for the purpose of pension administration by the Trustees and of personnel administration by the Employer. The Scheme administration is compliant with the principles of the Data Protection Act Any complaints or enquiries about the Scheme, including requests from individuals for information about their benefits, should be addressed to The Trustees of the University of Glasgow Pension Scheme, care of Jim Ross at the address shown below or Jim.Ross@glasgow.ac.uk Mr James Ross Head of Pay & Pensions Finance Office (Tay House) University of Glasgow Glasgow G12 8QQ Approval of the Trustees Report The Trustees Report, including the Compliance Statement were signed for and on behalf of the Trustees: Trustee Trustee Date Page 14

17 Compliance Report Pension Increases Pensions in payment were increased by 0% where increases fell due between 6 April 2016 and 31 December 2016 and by 1.0% where increases fell due between 1 January 2017 and 5 April 2017 (Year ended 5 April 2016: 1.2% where increases fell due between 6 April 2015 and 31 December 2015 and by 0% where increases fell due between 1 January 2016 and 5 April 2016). This increase did not apply to any Guaranteed Minimum Pension, which was earned in respect of the service before April 1988, since this pension is increased separately by the State. Increases calculated in this manner are guaranteed. Preserved pensions were increased in accordance with statutory requirements. Calculation of Transfer Values During the year all cash equivalent transfer values and buy outs paid by the Scheme on behalf of members who have left service have been calculated and verified as prescribed in Section 93 of the Pension Schemes Act 1993 and subsequent amendments (The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 (SI 2008/1050) and The Occupational Pension Schemes (Transfer Values) (Amendment) Regulations 2008 (SI 2008/2450)). From 31 March 2015 all transfer values have been calculated on a non Public Sector Transfer Club basis. Discretionary benefits are not included in the calculation of transfer values. As the Scheme closed to new members with effect from 1 April 2014 the Trustees decided that no new transfers in would be agreed after 31 March The Pension Tracing Service The Pensions Tracing Service provides a tracing service for members (and their dependants) of previous employers schemes, who have lost touch with earlier employers and Trustees. To trace a benefit entitlement under a former employer s Scheme, enquiries should be addressed to: Pension Tracing Service The Pension Service 9 Mail Handling Site A Wolverhampton WV98 1LU Telephone: Website: Page 15

18 Compliance Report The Pensions Advisory Service If you or your dependants have problems concerning pension rights or are not satisfied by the information or explanation given by the Trustees or the administrators, you can consult the Pension Advisory Service (TPAS) at any time. Normally you should try to contact a local TPAS advisor through your nearest Citizen s Advice Bureau. Alternatively, you can write to TPAS at: The Pensions Advisory Service 11 Belgrave Road London SW1V 1RB Telephone: Website: enquiries@pensionadvisoryservice.org.uk The Pensions Regulator The statutory body that regulates occupational pension schemes is the Pensions Regulator and can be contacted at: The Pensions Regulator Napier House Trafalgar Place Brighton BN1 4DW Telephone: Website: customersupport@tpr.gov.uk Pensions Ombudsman In cases where a complaint or dispute cannot be resolved, normally after the intervention of TPAS, an application can be made to the Pensions Ombudsman for him to investigate and determine any complaint or dispute of fact or law involving occupational pension scheme. The address is: The Pensions Ombudsman 11 Belgrave Road London SW1V 1RB Telephone: Website: enquiries@pensions-ombudsman.org.uk Page 16

19 Compliance Report Pension Protection Fund (PPF) The PPF was established to pay compensation to members of eligible defined benefit pension schemes when there is a qualifying insolvency event in relation to the employer and where there are insufficient assets in the pension scheme to cover PPF levels of compensation. The address is: Pension Protection Fund Renaissance 12 Dingwall Road Croydon Surrey CR0 2NA Telephone: Website: information@ppf.gsi.gov.uk Page 17

20 Actuarial Certificates Schedule of Contributions Page 18

21 Actuarial Certificates Schedule of Contributions Page 19

22 Actuarial Certificates Schedule of Contributions Actuarial Certificate Page 20

23 Independent Auditor s Report to the Trustees of the University of Glasgow Pension Scheme We have audited the Financial Statements of the University of Glasgow Pension Scheme for the year ended 31 March 2017 which comprise the Fund Account, the Statement of Net Assets and the related notes 1 to 15. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable to the UK and Republic of Ireland. This report is made solely to the Trustees, as a body, in accordance with regulation 3 (c) of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act Our audit work has been undertaken so that we might state to the Trustees those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Trustees as a body, for our audit work, for this report, or the opinions we have formed. Respective responsibilities of Trustees and Auditor As explained more fully in the Statement of Trustees Responsibilities set out on pages 3 and 4, the Scheme s Trustees are responsible for the preparation of Financial Statements which show a true and fair view. Our responsibility is to audit and express an opinion on the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the Financial Statements An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable assurance that the Financial Statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Scheme s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Trustees; and the overall presentation of the Financial Statements. In addition, we read all the financial and non-financial information in the Trustees Report and Financial Statements to identify material inconsistencies with the audited Financial Statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Page 21

24 Independent Auditor s Report to the Trustees of the University of Glasgow Pension Scheme Opinion on the Financial Statements In our opinion the Financial Statements: show a true and fair view of the financial transactions of the Scheme during the year ended 31 March 2017, and of the amount and disposition at that date of its assets and liabilities, other than the liabilities to pay pensions and benefits after the end of the year; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and, contain the information specified in Regulation 3 of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act Ernst & Young LLP Statutory Auditor Glasgow Date: Page 22

25 Fund Account for the year ended 31 March 2017 Contributions and other income Notes 2017 Employer contributions 3 12,180,879 12,527,339 Member contributions 3 237, ,026 Total contributions 3 12,418,016 12,773,365 Transfers in 4 4,304 4,423 Other income 5 191, ,363 Benefits and other payments ,613,457 12,975,151 Benefits 6 (10,647,864) (10,019,002) Payments to and on account of leavers 7 (144,219) (1,147,278) Other payments 8 (112,377) (285,681) Administrative expenses 9 (1,005,683) (745,723) (11,910,143) (12,197,684) Net additions from dealings with members 703, ,467 Returns on investments Investment income 10 7,431,217 2,275,410 Investment management expenses 11 (88,950) (1,047,030) Change in market value of investments 12 57,389, ,370 Net returns on investments 64,731,588 1,413,750 Net increase in the Scheme during the year 65,434,902 2,191,217 Net Assets at 1 April 343,668, ,477,602 Net Assets at 31 March 409,103, ,668,819 The notes on pages 25 to 39 form part of these Financial Statements. Page 23

26 Statement of Net Assets (available for benefits) as at 31 March 2017 Notes Investment assets: Equities Pooled investment vehicles Annuity policies AVC investments Cash deposits Investment income receivable 12 50,065,401 43,926, ,698, ,610, , ,100 1,391,328 1,239, , , , , ,980, ,810,001 Investment liabilities: Unsettled transactions The Financial Statements summarise the transactions of the Scheme and deal with the net assets at the disposal of the Trustees. They do not take account of obligations to pay pensions and other benefits which fall due after the end of the Scheme year. The Actuarial position of the Scheme, which does take account of such obligations, is dealt with in the Report on Actuarial Liabilities on pages 6 to 8 and in the actuarial certificates on pages 18 to 20 and these Financial Statements should be read in conjunction with them. The notes on pages 25 to 39 form part of these Financial Statements. 12 (11,351,868) - Total investments 403,628, ,810,001 Current assets 13 6,622,978 6,979,624 Current liabilities 14 (1,147,859) (2,120,806) Net Assets of the Scheme at 31 March 409,103, ,668,819 The Financial Statements on pages 23 to 39 were approved by the Trustees and signed on their behalf by: Trustee Trustee Date Page 24

27 Notes to the Financial Statements for the year ended 31 March Basis of preparation The Financial Statements have been prepared in accordance with the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland issued by the Financial Reporting Council ( FRS 102 ) and with the guidance set out in the Statement of Recommended Practice Financial Reports of Pension Schemes (revised November 2014) ( the SORP ). The amendments to FRS 102 Fair Value Hierarchy Disclosures issued in March 2016 have been adopted early in these Financial Statements. 2. Accounting policies Accruals concept The Financial Statements have been prepared on an accruals basis. Valuation of Investments Investments are included in the Financial Statements at fair value which is the amount for which an asset could be exchanged or a liability settled between knowledgeable partners in an arm s length transaction. The methods of determining fair value for the principal classes of investments are: Equities and pooled investment vehicles which are traded on an active market are included at the quoted price, which is normally the bid price; Unitised pooled investment vehicles which are not quoted on an active market, but which are priced daily, weekly or at the end of each month are included at the last price provided by the manager at or before the year end i.e. at the closing bid price if both bid and offer prices are available, or at the closing single price; The value of shares in other pooled investment vehicles which are not quoted or actively traded on a quoted market is primarily driven by the fair value of the underlying assets. The net asset value advised by the fund manager is considered a suitable approximation to fair value; Annuity policies are valued by the Scheme Actuary at the amount of the related obligation, determined using the most recent Scheme Funding valuation assumptions updated for market conditions at the reporting date; and Additional Voluntary Contributions (AVCs) investments are included in the Statement of Net Assets (available for benefits) at the surrender value of the policies as determined by the AVC provider. Change in market value All gains and losses arising on the sale of investment assets as well as increases or decreases of investments held at any time during the year are reported within change in market value. Page 25

28 Notes to the Financial Statements for the year ended 31 March Accounting policies (continued) Contributions & benefits Normal contributions from the employer and members, including members additional voluntary contributions are accounted for on an accruals basis in the payroll period to which they relate at the rates agreed between the Trustees and the Employer based on the recommendations of the Actuary and the Schedule of Contributions. Employer deficit funding contributions are accounted for in accordance with the Schedule of Contributions or any other agreement under which they are being paid or, in the absence of any formal agreement, on a receipt basis. Pensions in payment are recognised in the month to which they relate. Pension benefits paid in respect of which annuity income is received are included within benefits payable. Other benefits payable (except for transfers to and from other schemes which are accounted for as disclosed below) are included on an accruals basis when the member notifies the Trustees as to the type or amount of benefit to be taken, or where there is no choice, on the date of retirement or leaving. The Scheme has purchased annuity policies to cover certain pensions in payment. The cost of acquiring these policies is included in the fund account in the year of purchase and represents the cost of discharging the obligations of the Scheme to the relevant members at the time of purchase. Transfers to and from other schemes Transfer values represent the capital sums either receivable in respect of members from other schemes of previous employers or payable to the pension schemes of new employers for members who have left the Scheme. They are accounted for on an accruals basis on the date the Trustees of the receiving scheme accept the liability. Investment income Income from equities and any pooled investment vehicles which distribute income is accounted for on an accruals basis on the date the securities are quoted ex-dividend. Income arising from the underlying investments of the pooled investment vehicles that is rolled up within the pooled investment vehicle is reflected in the unit price. Such income is reported within the change in market value. Interest on bank deposits is accounted for as it accrues. Income arising from annuity policies is accounted for on an accruals basis and is included in investment income and the pensions paid included in pension benefit payments. Administrative expenses & investment management expenses Administrative expenses and investment management expenses are met by the Scheme and are accounted for on an accruals basis. Functional and presentational currency The functional and presentational currency of the Scheme is sterling. Taxation status In accordance with the provision of Schedule 36 of the Finance Act 2004, the Scheme became a Registered Pension Scheme under Chapter 2 of part 4 of the Finance Act with effect from 6 April The Trustees know of no reason why this approval may be prejudiced or withdrawn. Page 26

29 Notes to the Financial Statements for the year ended 31 March Contributions Employer From 1 October 2008 the Scheme implemented a salary sacrifice scheme. Employee contributions paid under this arrangement are disclosed under employer normal contributions. In accordance with the Schedule of Contributions certified by the Actuary in June 2017 the Employer will contribute 17.0m into the Scheme by 31 August 2017 followed by 3.951m p.a. during the period March 2023 to March 2034 inclusive (which increases by 2.5% each year) in order to eliminate the Scheme deficit. 4. Transfers in 2017 From 1 April 2017 the Scheme will no longer accept transfers in from current members Normal contributions 9,554,316 9,964,839 - Deficit funding contributions 2,626,563 2,562,500 Members 12,180,879 12,527,339 - Normal contributions 122, ,164 - Additional voluntary contributions 114, , , ,026 12,418,016 12,773, Individual transfers in from other schemes 4,304 4,423 4,304 4, Other Income Claims on term insurance policies 182, ,184 Interest on cash deposits held by the Trustees 8,145 13, , ,363 Page 27

30 Notes to the Financial Statements for the year ended 31 March Benefits Pensions 8,084,458 7,838,380 Commutations and lump sums on retirement 2,324,859 1,915,736 Lump sum death benefits - death in service 182, ,184 Refund of contributions - death in service 17,050 36,970 Lump sum death benefits - death in deferment 8,575 6,335 Trivial commutations 29,930 37,397 10,647,864 10,019, Payments to and on Account of Leavers Refunds to members leaving service 2,275 7,972 Contribution equivalent premiums payable for members rejoining state scheme 27,200 23,421 Individual transfers to other schemes 114,744 1,115, ,219 1,147, Other Payments Premiums on term insurance policies 112, , , ,681 Page 28

31 Notes to the Financial Statements for the year ended 31 March Administrative Expenses 10. Investment Income Administration Xafinity Consulting 220, ,316 Independent Trustee fees 64,032 31,938 Legal fees Investment consultancy fees 141,900 - Actuarial & Professional fees 221, ,789 Audit fees 16,740 16,100 Other directly attributable charges 26,373 25,029 Salary costs 83,973 88,386 Pension Protection Levy 230, ,625 1,005, , Equities 1,779,337 1,601,135 Income from pooled investments vehicles 5,603, ,121 Interest on cash deposits Annuity Income 36,126 34,611 Other investment income 12,468 23,402 7,431,217 2,275,410 The increase in Income from pooled investment vehicles when compared to 2016 is primarily due to Insight Investment dividends of 2,248,156 being received during the year and HMRC investment income tax reclaims of 2,152,792 being submitted and received during the year. 11. Investment Management Expenses Administration, management & custody 454, ,651 Performance (rebate)/fee (366,021) 639,379 (88,950) 1,047,030 The performance rebate credit balance above reflects previously accrued expenses of 366,021 that have been written back during the year as they have been deemed no longer payable by the Scheme. Page 29

32 Notes to the Financial Statements for the year ended 31 March Investment assets The movements in total investments during the year were as follows: Market value at 1 April 2016 Cost of investments purchased Proceeds of sales of investments Change in market value Market value at 31 March 2017 Equities 43,926,989 13,700,082 (16,264,389) 8,702,719 50,065,401 Pooled investment vehicles 292,610,925 66,234,280 (45,690,007) 48,542, ,698,022 Annuity policies 349, , ,100 AVC Investments 1,239, ,827 (86,020) 122,778 1,391, ,126,757 80,049,189 (62,040,416) 57,389, ,524,851 Cash deposits 144, ,267 Investment income receivable 539, ,352 Unsettled transactions - (11,351,868) 338,810, ,628,602 The pooled investment vehicles are held under managed fund policies in the name of the Scheme. Transaction costs charged directly to the Scheme are included in the cost of purchases and sale proceeds. During the year these costs amounted to 81,287 split 64,437 fees/stamp duty and 16,850 commission (2016: 134,146 split 100,283 fees/stamp duty and 33,863 commission). Indirect transaction costs are also borne by the Scheme in relation to transactions in pooled investment vehicles. Such costs are taken into account in calculating the bid-offer spread of these investments and are not separately reported. There were no employer-related investments at any time during the year (2016: none). The companies managing the investments are registered in the United Kingdom. Page 30