UNIVERSITY OF NEWCASTLE UPON TYNE RETIREMENT BENEFITS PLAN (1971) FOR NON-ACADEMIC STAFF

Transcription

1 Registered number: UNIVERSITY OF NEWCASTLE UPON TYNE RETIREMENT BENEFITS PLAN (1971) REPORT AND ACCOUNTS YEAR ENDED 31 JULY 2012

2 CONTENTS Page Trustee and its advisers 1-3 Trustee s report 4-8 Investment report 9-14 [ Statement of Trustee s responsibilities 15 Independent Auditors report to the Trustee Fund account 18 Net assets statement 19 Notes to the accounts Independent Auditors Statement about Contributions 27 Summary of contributions 28 Actuarial statements L. Compliance statement 32-33

3 TRUSTEE AND ITS ADVISERS YEAR ENDED 31 JULY2012 Trustee Trustee Directors Newcastle University Pension Trustee (1971) Ltd M Bird I Graham - Member Nominated (retired 30 June 2012) M Robertson - Member Nominated (appointed 1 July 2012) V Johnston M Levy (Chairperson) - Member Nominated R Warhurst - Member Nominated M Buckley S Wilmot M Coyle W Connolly Secretary to the Trustee IMCO Secretary Limited (removed 27 September 2012) Addleshaw Goddard LLP (appointed 27 September 2012) Principal employer Plan Administrators Auditors Plan Actuary Solicitors University of Newcastle upon Tyne Kings Gate Newcastle Upon Tyne NE 1 7RU Aon Hewitt 5th Floor The Fountain Precinct Sheffield SI 2JA PricewaterhouseCoopers LLP Benson House 33 Wellington Street Leeds LS1 4JP S Corbett FIA Aon Hewitt 3 The Embankment Sovereign Street Leeds LS1 4BJ Irwin Mitchell (removed 27 September2012) Wellington Place Leeds LS1 4PZ Addleshaw Goddard LLP (appointed 27 September 2012) Sovereign House Sovereign Street Leeds LS1 1HO Page 1

4 TRUSTEE AND ITS ADVISERS YEAR ENDED 31 JULY2012 Trustee and its Advisers (continued) Investment Managers Threadneedle Asset Management Limited 60 St Mary Axe London EC3A 8JQ Majedie Asset Management Ltd I Minster Court Mincing Lane London EC3R 7AA Legal & General Assurance (Pension Management) Limited One Coleman Street London EC2R 5AA BlackRock Investment Managers 33 King William Street London EC4R9AS Standard Life Investments 1 George Street Edinburgh E[12 2LL Global Infrastructure Partners (appointed 12 September 2011) 12 East 49th Street 39th Floor New York NY Custodians Bankers HSBC Bank plc Global Investment Services Citibank Global Securities Services L. The Bank of New York Mellon Ltd. The Bank of New York Mellon Europe Ltd. SNP Paribas Securities Services Fund Administration Ltd. CitiGroup Bank of Scotland 54/62 Sauchiehall Street Glasgow G2 3AH Insurers: Death in Aviva Service Benefits P.O. Box 4 Surrey Street Norwich NRI 3NG Page 2

5 TRUSTEE AND ITS ADVISERS YEAR ENDED 31 JULY2012 Trustee and its Advisers (continued) AVC provider Contact Address Prudential Assurance Company Limited PC Box nd Floor Abbey Gardens Reading RG1 3UG Miss V Wall Payroll Manager University of Newcastle upon Tyne King s Gate Newcastle upon Tyne NE1 7RU Page 3

6 TRUSTEE S REPORT YEAR ENDED 31 JULY2012 Introduction The Trustee is pleased to present its Report for the year ended 31 July Trustee and its Advisers The present Trustee and Trustee Directors are shown on page 1. The Principal Employer ( the University ) is responsible for the appointment and removal of the Trustee. The University is responsible for the appointment and removal of the Directors though the Member Nominated Directors are elected by the membership and can only be removed with the consent of all the other Directors. A Trustee Director can choose to retire from office at any time. The names of the present advisers to the Trustee are shown on pages 1 appointed by the Trustee. to 3. The advisers to the Plan are Trustee meetings The Trustee met formally three times during the year. Plan Membership Details of the membership of the Plan as at 31 July 2012 are given below: Members with Active preserved members Pensioners benefits Total Members at the start of the year 1,439 1,114 1,000 3,553 Adjustments to members (2) New entrants in the year Retirements (46) 74 (28) New spouses and dependents 8. 8 Deaths (22) (22) Members leaving with preserved benefits (52) 52 - Members leaving with contribution refunds (9).. (9) Full commutation of pension.. (3) (3) Transfer out (5). (18) (23) Total membership at the end of the year 1,461 1,176 1,029 3,666 Adjustments to the members represents membership movements identified after the prior year report was signed. These membership figures do not include movements notified to the Administrator after the completion of the annual renewal. Page 4

7 TRUSTEE S REPORT YEAR ENDED 31 JULY 2012 Benefit Review During the year deferred benefits were increased in accordance with legislative requirements. Pension increases All pensions in payment were increased with effect from 1 April2012 by the following rates. Pre 97 Excess (RPI max 3%) - 3% Pre88GMP- 0% Post 88 GMP (RPI max 3%) - 3% Post 97 Excess (CPI max 5%) - 5% Post 2005 Excess (CPI max 2.5%) - 2.5% Plan changes There were no major changes to the Plan during the year. The Principal Employer The principal employer of the Plan is: University of Newcastle upon Tyne, King s Gate, Newcastle Upon Tyne, NEI 7RU. Review of the financial developments during the year as shown by the audited accounts The accounts on pages 18 to 26 show that the value of the Plan s assets increased by 8,518,297 to 152,291,114 as at 31 July The increase was comprised of net withdrawals from dealings with members of 1,526,454 together with a net increase in the value of investments of~1 0,044,751. The accounts have been prepared and audited in accordance with the regulations made under Sections 41 (1) and (6) of the Pensions Act Further details of the financial developments of the Plan may be found in the audited accounts on pages 18 to 26. Self-investment The investments of the Plan are invested in accordance with Section 40 of the Pensions Act 1995 and there is no direct self investment or indirect self investment through pooled investment vehicles during the year. Page 5

8 TRUSTEE S REPORT YEAR ENDED 31 JULY 2012 Review of the Plan s financial prospects having regard to the actuarial valuation and certificate. The date of the last formal actuarial valuation of the Plan was as at 1 August The results of the valuation showed that, on a Plan Specific Funding basis, the assets of the Plan covered 95% of the Plan s liabilities, with a deficit of 7.3m. A Schedule of Contributions was put in place and certified by the Plan Actuary on 22 June A copy of the Actuarial Statements can be found on pages 29 to 31. A summary of the key financial assumptions used for the valuation is below: RPI Inflation: 3.15% CPI Inflation: 2.65% Pre-retirement Discount Rate: 6.35% Post-retirement Discount Rate: 6.35% Mortality: A 65 year old male pensioner is assumed on average to live to age 86.2 A 65 year old female pensioners is assumed on average to live to age 87.0 The next valuation of the Plan must be carried out with an effective date no later than 1 August Investment advisers The current investment managers are shown on page 2. During the year Global Investment Partnership was appointed as a new investment manager for the Plan. The investment managers are given discretion in making investment decisions, subject to guidelines laid down by the Trustee. The investment managers are paid fees for their services. The fees are calculated as a percentage of the market value of the part of the fund that they manage and, in the case of Majedie Asset Management, depend also on their performance. Contributions During the year, contributions were paid at the following rates: Employer Member 11.15% pa of Pensionable Salaries 6.75% pa of Pensionable Salaries In order to address the shortfall in funding in accordance with the Recovery Plan, the Employer contributed an additional 2.1% pa of Pensionable Salaries. The employer contribution rate includes 0.5% pa of Pensionable Salaries in respect of the insured death in service benefits and 1.9% pa of Pensionable Salaries in respect of the expenses of administering the Plan, and any PPF levies. Page 6

9 TRUSTEE S REPORT YEAR ENDED 31 JULY2012 Transfers Members leaving service can normally transfer the value of their benefits under the Plan to another scheme that they join or to an insurance contract or personal pension. The transfer value of a Plan member s benefits includes no allowance for any discretionary benefits which might be awarded in the future. The basis of calculation for Non Transfer Club transfer values is determined by the Trustee on the advice of the Plan Actuary. The calculation of transfers adopts similar principles to the long-term funding approach for the Plan. Where transfers to or from other Transfer Club participants take place, the Transfer Club rules will apply. The Non Transfer Club values paid during the year were calculated and verified in accordance with regulations under Section 97 of the Pensions Act 1993, and were equal to the cash equivalent of the members leaving service rights. The basis was last revised to take effect on 31 March 2010 and this was appropriate to the regulatory changes that caine into force in October Additional voluntary contributions (AVCs) There is provision for members to pay AVCs in order to increase their benefits under the Plan. AVCs are a tax efficient method of saving as they are allowed against tax in the same way as normal contributions to the Plan. In addition they are invested in special insurance contracts where they benefit from the tax concessions available to pension arrangements. Members can either join the AVC Plans or increase their contributions, at any time. Full details are available on request from Miss V Wall or on the University Intranet. Expression of wish Forms The Trustee wishes to remind members that they can indicate to the Trustee the persons to whom they wish any lump sum benefits and pension benefits to be paid in the event of their death. The Trustee will then be able to take members wishes into account, although they are not obliged to do so. Members are also urged to review their Expressions of Wish Form should their circumstances change. Expression of Wish Forms are available on request from Miss V Wall or on the University Intranet. Page 7

10 TRUSTEE S REPORT YEAR ENDED 31 JULY 2012 Further information Further information about the Plan is available, on request, to members and prospective members, their spouses and other beneficiaries together with all recognised trade unions. In particular, the documents constituting the Plan, the Rules and a copy of the latest actuarial report and the Trustee s Statement of Investment Principles can be inspected. Individual benefit statements are provided to active members annually. In addition to the information shown on these statements members can request details of the amount of their current transfer value and, if applicable, the current amount of any refund of contributions to which they would be entitled on leaving service. Such requests are available free of charge once a year. If members have any queries concerning the Plan in general or their pension position, or wish to obtain further information, they should contact Miss V Wall who will also be able to provide them with a further copy of the Plan booklet should they require one and answer any queries that they may have about entitlement to benefits. If the members have any questions or queries in relation to the Plan they should in the first instance contact: Miss V Wall Payroll Manager University of Newcastle upon Tyne King s Gate Newcastle upon Tyne NE1 7RU Data Protection The Data Protection Act 1984 covered information held electronically, i.e. computer-based information. The Data Protection Act 1998 extends data protection laws to cover paper-based records held for individuals and new restrictions on the processing of sensitive personal data to which individuals must have given express consent. Sensitive information can include information on, for example, the health of a member. Personal data will be used by the Plan s advisers to administer the Plan and for the provision of death in service benefits, and may be passed to other professional providers or advisers in order to maintain the death in- service benefits provided by the life offices who underwrite this risk. The Trustee, the University and the Plan s advisers each have a legal obligation and a legitimate interest to process data relating to members for the purpose of administering and operating the Plan, which includes passing on data to third parties, as mentioned above. For the purpose of the Data Protection Act 1998, the Trustee and the University are regarded as Data Controllers in relation to the processes referred to above. The advisers appointed by the Trustee are Data Processors. Page 8

11 INVESTMENT REPORT Introduction The Trustee is responsible for ensuring that the contributions are invested wisely to provide income and capital growth to pay the benefits as they become due. The delegation of day to day investment decisions to external investment managers is in accordance with the powers given to the Trustee by the documentation governing the Plan. The Trustee regularly assesses the performance achieved by the investment managers. The Trustee has produced a formal Statement of Investment Principles which sets out its policy on investment issues including risk, expected return and diversification of investments. A copy of the Statement is available for inspection. The choice of investments over the year was consistent with the criteria of the Statement of Investment Principles. The custodian of the Plan s assets are as follows: Assets invested with Legal & General Investment Management UK assets HSBC Bank plc Global Investment Services Overseas assets Citibank Global Securities Services Assets invested with Majedie The Bank of New York Mellon Ltd. Assets invested with BlackRock The Bank of New York Mellon Europe Ltd. Assets invested with Threadneedle - BNP Paribas Securities Services Fund Administration Ltd Assets invested with Standard Life - CitiGroup Assets invested with Global Infrastructure Partners llliquid assets - No custodian appointed (agreements held with Global Infrastructure Partners) Liquid assets - Separate custodian identified for each security The custodians are responsible for the safe keeping of share certificates and other documents relating to the ownership of listed investments. The Trustee is responsible for ensuring that the Plan s assets continue to be held securely. The Trustee reviews the custodial arrangements from time to time. Page 9

12 INVESTMENT REPORT Strategy Following a review of the Plan s investment strategy in December 2010, the Trustee agreed to increase the Plan s allocation to growth assets and appointed Standard Life Investments (Standard Life ) to manage an absolute return mandate on behalf of the Plan. Standard Life were appointed in order to reduce the volatility of returns associated to the growth asset portfolio, whilst also targeting a similar level of long-term return as equities. The revised investment strategy was funded by selling the majority of the Plan s fixed interest gilts held within the Legal & General Investment Management ( LGIM ) Active Bonds Portfolio. This decision was agreed based on Aon Hewitt s medium term views on markets and the potential for fixed interest gilt prices to fall in reaction to rising inflation and excessive economic stimulus. In February 2011, the Trustee decided to redeem the entire remaining fixed interest gilts based on the prevailing medium term views. Subsequently, the LGIM Active Bonds Portfolio was reorganised to 60% corporate bonds and 40% index-linked gilts and an additional investment was made into the absolute return fund managed by Standard Life. In September 2011, the Trustee agreed to allocate a proportion of the Plan s assets to infrastructure. The decision was taken to appoint Global Infrastructure Partners to further diversify the Plan s investment strategy and reduce the exposure to equity markets. The Plan has agreed to commit $1 6.3m (or 1 0.3m based on the current $:E exchange rate) and as at 31 July 2012, a total of 2.57m was invested with Global Infrastructure Partners. Further investments will be implemented over the next few years until the Plan has reached its agreed commitment amount. The Plan s asset allocation at the year end was as follows: 31 July July2011 (%) (%) UK Index Linked Corporate Bonds UK Equities Overseas Equities Property Units Trusts Global Absolute Returns Strategies Global Infrastructure Partners Total Page 10

13 INVESTMENT REPORT The following describes the mandates given to the fund managers within each asset class. Asset Class Manager Benchmark Weight Benchmark Target (%) UK Equities Majedie Asset Management 37.5 FTSE All Share ex Tobacco Index +3% pa over rolling 3 year periods World (ex-uk) Equity Index Legal & General 12.5 World (ex UK) Equity Index Track Index GARS Standard Life 10.0 UK 6 Month LIBOR +5% pa gross of fees over a rolling three year period Active Corporate Bond Over 10 Year Legal & General 21 iboxx Non-Gilt Over 10 Year Index + 1.0% pa over rolling 3 year periods Index-Linked Bond Legal & General 14 FTSE A Index-Linked (Over 5 Year) Index + 1.0% pa over rolling 3 year periods Property Threadneedle 5.0 CAPS Property Median To outperform the CAPS Property Median over three year periods Global Infrastructure Partners Global Infrastructure Partners II 7.5 Not Applicable To achieve a gross internal rate of return of 15% to 20% pa and a cash yield of 5% to 7% pa Performance for the year: 1 year 3 year %p.a 5 year %p.a Fund L&G World (ex UK) Equity Index 2.1 L&G BJ - Active Corp Bond - Over 10 Yr 18.1 L&G G - Index-Linked Bond 12.9 Standard LIfe Global Absolute Returns 9.7 Threadneedle Property Unit Trust 1.8 Majedie Asset Management Ltd 2.8 Index (0.8) Fund Index Fund Index n/a n/a n/a n/a n/a n/a n/a n/a n/a n/a (2.6) (2.4) n/a above means that the funds were not invested in those available. periods and hence the performance figures are not As the Plan invested with Global Infrastructure Partners in September 2011, 1, figures are not yet available 3 and 5 year performance Page 11

14 INVESTMENT REPORT Market Commentary General Background Over the last year, the ebb and flow of the Eurozone debt crisis has dominated market moves with risk assets weakening and safe haven bond markets rallying during times of heightened tensions, such as in July and November Sentiment improved over the first quarter of 2012 on the back of two bouts of the European Central Bank s long-term refinancing operations, despite difficult bail-out negotiations for Greece in February. In the second quarter of 2012, concerns resurfaced over Spanish banks. The last year also saw a deterioration of economic conditions across the globe with the UK falling into a technical recession, the broad-based improvement in US economic data over 2011 losing momentum, lower growth in China and steep declines in peripheral European growth rates. Central banks across the world stepped in to ease monetary conditions by quantitative easing and other actions. Global equity returns were positive over the 12 months to July UK, Europe, US and Emerging Markets posted positive returns, whilst Japanese equities were down. With uncertainty elevated over much of the period, high quality government bonds performed strongly as fixed and index-linked gilt yields fell sharply. UK non-government bonds also performed strongly over the year despite credit spreads widening over the second half of The iboxx Non Gilts Index returned 10.5%, boosted by income and falling gilt yields. UK Property returns were positive, with the PD Monthly Index returning 4.3% over the period. Returns have been reducing in recent months, with falls in capital values coming through. UK Equities The UK equity market (FTSE All Share) rose 0.4% over the 12 months, but was outperformed by the US markets. Basic Materials (-27.0%) and Financials (-6.4%) were the two worst performing sectors. As these two sectors constitute a large proportion of the FTSE All Share index, this poor performance contributed significantly to the overall poor performance over the year. Defensive sectors benefited from the uncertain macroeconomic backdrop. The Consumer Goods sector (21.4%) produced the strongest return, with Telecommunications (13.7%) and Utilities (15.0%) also performing well. The Technology sector Returned 14.3%. Small cap equities underperformed mid and large cap equities by 4.2% and 4.7% respectively over the year. Page 12

15 INVESTMENT REPORT Market Commentary (continued) Overseas Equities US equity outperformance resulted from the US safe haven status, higher economic growth levels and strong corporate earnings. Over the period, US equities returned 9.0% in local currency terms, the only major overseas region to post positive returns. The US dollar appreciated and caused returns in sterling to be higher (14.2%). European (ex UK) equities outperformed Japanese and Emerging Market equities in local currency terms, returning -2.4%. But with the euro suffering, unhedged investors suffered worse returns as the region returned -12.8% in sterling terms. Japanese equity returns were negative for the year in local currency terms (-11.2%) and slightly stronger in sterling terms (-8.1%) as the yen appreciated overall. Japanese equity markets were very weak over the first six months of the period. The first quarter of 2012 saw this region outperform and the yen weaken significantly on Bank of Japan policy action. However, these gains were lost in the second quarter of Emerging Markets also faltered as on the back of increasing evidence of a slowdown and fears of a global economic deceleration. They returned -3.7% in local currency terms. The depreciation of Emerging Market currencies versus sterling compounded negative returns for UK investors (-9.5%). Basic Materials (-20.5%) and Oil & Gas (-6.5%) were the worst performing sectors in the FTSE All World ex UK index. Health Care (16.7%) and Consumer Services (14.2%) were the best performing sectors. Currencies and Interest Rates Official Bank of England rates stayed at 0.5%, unchanged since March During the year, the Bank of England announced two rounds of quantitative easing; 75bn in October 2011 and SObn in February This brought the total asset purchase programme size to 325bn. The Federal Reserve indicated in August 2011 that the Federal Funds rate would remain exceptionally low at % until at least It announced in September that it would purchase long-term treasuries funded from the sale of shorter term issues, commonly referred to as Operation Twist and then later, extended its duration to December Sterling depreciated 4.5% against the US dollar over the 12 months. The European Central Bank raised rates earlier in the year and this was reversed in the second half of 2011 as the Eurozone sovereign debt crisis escalated. This, combined with concerns over the solvency of peripheral countries caused the single currency to weaken. Sterling has strengthened 10.4% against the euro over the year. Sterling has depreciated by around 3.4% against the Japanese yen. Page 13

16 INVESTMENT REPORT Market Commentary (continued) Gilt Returns and Yields Overall Gills Market UK guts performed strongly over the year, supported by concerns over the economic growth outlook, heightened levels of risk aversion and quantitative easing. They significantly outperformed most equity markets over the period. Longer dated maturities outperformed medium and short maturities across both fixed interest (25.7%) and index-linked gilts (14.5%). Fixed interest gilt returns were stronger than their index-linked gilt counterparts at all maturities. Fixed Interest and Index-Linked Yield Curves Gilt yields fell sharply over the second half of 2011, moved up over the first quarter and turned down again in the second quarter of 2012 as Eurozone concerns deepened. Gilt yields fell the most at medium maturities. Index-linked gilt yields also fell over the period, ending in negative territory across the entire index-linked gilt yield curve with the exception of the 30 year point. UK Investment Grade Credit UK credit spreads (the difference between the yields on non-government bonds and equivalent maturity government bonds) widened by around 38bps over the 12 months to July This led to underperformance against government bonds. Credit spreads widened the most for BBB rated issues whilst AA rated spreads were the only ones that contracted. Despite the rise in credit spreads, non-gilt yields fell due to the sharp fall in government bond yields. Falling gilt yields and higher coupon income helped non-gilts to deliver strong returns (10.5%) over the year despite the drag from wider credit spreads. UK Property The IPD Monthly Index returned 4.3% over the twelve months to July Provided by Aon Hewitt Page 14

17 STATEMENT OF TRUSTEE S RESPONSIBILITIES The accounts, which are prepared in accordance with UK Generally Accepted Accounting Practice, are the responsibility of the Trustee. Pension scheme regulations require the Trustee to make available to Plan members, beneficiaries and certain other parties, audited accounts for each Plan year which: - show a true and fair view of the financial transactions of the Plan during the Plan year and of the amount and disposition at the end of the Plan year of its assets and liabilities, other than liabilities to pay pensions and benefits after the end of the Plan year: and - contain the information specified in the Schedule to the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations The Trustee has supervised the preparation of the accounts and has agreed suitable accounting policies, to be applied consistently, making any estimates and judgements on a prudent and reasonable basis. The Trustee is also responsible for making available certain other information about the Plan in the form of an annual report. The Trustee is 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 contributions payable towards the Plan by or on behalf of the employer and the active members of the Plan and the dates on or before which such contributions are to be paid. The Trustee is also responsible for keeping records in respect of contributions received in respect of any active member of the Plan and for monitoring whether contributions are made to the Plan by the employer in accordance with the schedule of contributions. Where breaches of the schedule occur, the Trustee is required by the Pensions Acts 1995 and 2004 to consider making reports to the Pensions Regulator and to members. The Trustee also has a general responsibility for ensuring that adequate accounting records are kept and for taking such steps as are reasonably open to it to safeguard the assets of the Plan and to prevent and detect fraud and other irregularities, including the maintenance of an appropriate system of internal control. Signed for and on behalf of the Trustee: Trustee Director: Trustee Director: (1~ ~ Date: Page 15

18 INDEPENDENT AUDITORS REPORT TO THE TRUSTEE Independent Auditors report to the Trustee of the University of Newcastle upon Tyne Retirement Benefits Plan (1971) for Non - Academic Staff We have audited the accounts of the University of Newcastle Upon Tyne RBP (1971) for Non - Academic Staff for the year ended 31 July 2012 which comprise the fund account, the net assets statement and the related notes. 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). Respective responsibilities of Trustee and Auditors As explained more fully in the statement of Trustee s responsibilities, the Trustee is responsible for the preparation of the accounts and being satisfied that they show a true and fair view. Our responsibility is to audit and express an opinion on the accounts 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. This report, including the opinion, has been prepared for and only for the Trustee as a body in accordance with section 41 of the Pensions Act 1995 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of the audit of the accounts An audit involves obtaining evidence about the amounts and disclosures in the accounts sufficient to give reasonable assurance that the accounts are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Plan s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Trustee; and the overall presentation of the accounts. In addition, we read all the financial and non-financial information in the accounts to identify material inconsistencies with the audited accounts. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on the accounts In our opinion the accounts: show a true and fair view of the financial transactions of the Plan during the year ended 31 July 2012, 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, and the Schedule to, the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Leeds Date: Page 16

19 INDEPENDENT AUDITORS REPORT TO THE TRUSTEE (a) The maintenance and integrity of the University of Newcastle Upon Tyne RSP (1971) for Non - Academic Staff website is the responsibility of the Trustee; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the accounts since they were initially presented on the website. (b) Legislation in the United Kingdom governing the preparation and dissemination of accounts may differ from legislation in other jurisdictions. Page 17

20 FUND ACCOUNT FOR THE YEAR ENDED 31 JULY Note Contributions and Benefits Contributions 3 5,688,320 5,457,629 Transfers in 4 40, ,938 Other income 5-313,109 5,729, ,676 Benefits 6 (6,109,902) (6,258192) Payments to and on account of leavers 7 (339,283) (1,269,223) Other payments 8 (294,715) (162,459) Administrative expenses 9 (511,617) (663,002) (7,255,517) (8,352,876) Net withdrawals from dealings with members (1,526,454) (2,437,200) Returns on investments Investment income 10 2,772,734 2,313,117 Change in market value of investments 11 7,982,101 14,396,920 Investment management expenses 12 (710,084) (826,232) Net returns on investments 10,044,751 15,883,805 Net increase in the Plan during the year 8,518,297 13,446,605 Net assets of the Plan At 1 August 143,772, ,326,212 Net assets of the Plan At 31 July 152,291, ,772,617 The notes on pages 20 to 26 form an integral part of these accounts. Page 18

21 NET ASSETS STATEMENT AS AT 31 JULY Note Investment assets ,053, ,147,853 Current assets , ,530 Current liabilities 13 (287,526) (369,566) Net Assets at 31 July 152,291, ,772,817 The accounts summarise the transactions of the Plan and deal with the net assets at the disposal of the Trustee. They do not take account of obligations to pay pensions and benefits which fall due after the end of the Plan year. The actuarial position of the Plan, which does take account of such obligations, is dealt with in the Actuarial certificates and Funding Statement, included in the annual report on pages 29 to 31 and these accounts should be read in conjunction with them. The notes on pages 20 to 26 form an integral part of these accounts. These accounts were approved by the Trustee and were signed on its behalf by: Trustee Director: Trustee Director: ~ Date: c21 ~1tL ) i 2- Page 19

22 NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY BASIS OF PREPARATION OF THE ACCOUNTS The accounts have been prepared in accordance with the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996 and with the guidelines set out in the Statement of Recommended Practice Financial Reports of Pension Schemes (revised May 2007). 2. ACCOUNTING POLICIES The following principal accounting policies which have been applied consistently have been adopted in the preparation of the accounts. 2.1 Investments Investments are stated at market value. Quoted securities have been valued at the single market price at the close of business at the year-end. The market value of pooled investment vehicles is taken at the bid price or single price at the accounting date as advised by the investment manager. The Additional Voluntary Contribution investments include policies of assurance underwritten by The Prudential Assurance Company Limited. The market value of these investments has been taken as the surrender values of the policies at the year-end, as advised by the underwriter. The changes in investment market values are accounted for in the year in which they arise and include profits and losses on investments sold as well as unrealised gains and losses in the value of investments held at the year end. 2.2 Contributions and benefits Contributions are accounted for in the period in which they fall due. Benefits to members are accounted for in the period in which they fall due, whenever the members wishes are known. 2.3 Transfers to and from other schemes Transfer values represent the capital sums either receivable in respect of members from other pension Plans of previous employers or payable to the pension Plans of new employers for members who have left the Plan. They take account of transfers where the Trustee of the receiving Plans have agreed to accept the liabilities in respect of the transferring members before the year end, and where the amount of the transfer can be determined with reasonable certainty. 2.4 Investment income Dividends and interest on securities are accounted for when they fall due. Interest on bank deposits is accounted for as it accrues. Income from investment includes recoverable tax credits. Page 20

23 NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY ACCOUNTING POLICIES (continued) 2.5 Foreign currencies All assets and liabilities stated in foreign currencies are converted into sterling at rates of exchange ruling at the year-end date. Transactions in foreign currency are converted into sterling at the rate applicable on the date of transaction. 2.6 Administrative Expenses and Investment Management Expenses Administrative expenses and investment management expenses are accounted for on an accruals basis. 3. CONTRIBUTIONS Employers Normal 3,064,944 3, Salary sacrifice 1,673,567 1,561,418 Augmentations 68, ,921 Deficit funding 570,560 - Members Normal 162, ,445 Additional voluntary contributions 148, ,963 5,688,320 5,457, TRANSFERS IN Individual transfers in from other schemes 40, , OTHER INCOME Claims on term insurance policies. 286,218 Other income. 26, ,109 Page 21

24 NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY BENEFITS Pensions 4,648,790 4,323,409 Commutations and lump sum retirement benefits 1,450,907 1,752,619 Lump sum death benefits 10, ,164 6,109,902 6,258, PAYMENTS TO AND ON ACCOUNT OF LEAVERS State Pension Reinstatement 11,512 11,633 Group transfers to other schemes - 140,723 Individual transfers to other schemes 311,350 1,104,749 Refunds to members leaving service 16,421 12, ,283 1,269, OTHER PAYMENTS Premiums on term insurance policies 294, ,459 Term insurance policies are secured by a policy underwritten by Aviva. 9. ADMINISTRATIVE EXPENSES Administration, actuarial & consulting fees 397, ,203 Audit fee 7,200 6,881 Legal fees 5,196 25,653 The Pension Regulator 100, ,221 Trustee fees and expenses Bank charges Medical Assessments/Opinions Sundry expenses , ,002 Page 22

25 NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY INVESTMENT INCOME Dividend and interest receivable from investment holdings 2,300,638 1,870,542 Interest on cash deposits and other liquid funds 8,459 27,272 Other investment income 463, ,303 2,772,734 2,313, INVESTMENTS MOVEMENTS IN INVESTMENTS Value at Purchases at Sales Change in Value at cost proceeds market value 31/ Infrastructure - 2,494,816-71,844 2,566,660 Equities 47,688,861 26,276,476 (24,536,497) (222,802) 49,206,038 Pooled investment vehicles 91,487,663 7,782,914 (10,311,115) 8,096,343 97,055,805 AVC investments 1,232, ,760 (200,816) 36,716 1,218,241 Sub total 140,409,105 36,703,966 (35,048,428) 7,982, ,046,744 Cash deposits and other liquid funds 2,439,617 1,695,883 Income receivable 299, , ,147, ,053,937 Pooled investment vehicles are managed by companies registered in the UK. The change in market value of investments during the year comprises all increases and decreases in the market value of investments held at any time during the year, including profits and losses realised on sales of investments during the year. Transaction costs incurred during the year amounted to 193,273 (2011: 176,291). Indirect costs are incurred through the bid-offer spread on investments within pooled investment vehicles. The amount of indirect costs is not separately provided to the Plan. INFRASTRUCTURE Global Investment Partnership 2,566,660 - Page 23

26 NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY Investments continued EQUITIES UK quoted , Overseas quoted 129, ,533 UK unquoted 17,599 28,800 49,206,038 47,688,681 POOLED INVESTMENT VEHICLES UK Unitised Insurance Policies 72,742, ,807 UK Managed Fund 16,123, ,144 UK Unit Trust - Property 8,190,013 7,961,712 97,055,805 91,487,663 CASH DEPOSITS AND OTHER LIQUID FUNDS BlackRock 132, ,312 Majedie 164,838 (7,763) Global Treasury Fund (Majedie) 1,398,561 2,329,068 1,695,883 2,439,617 Page 24

27 NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY Investments continued AVC INVESTMENTS The Trustee holds assets which are separately invested from the main fund. These secure additional benefits, on a money purchase basis, for those members who have elected to pay Additional Voluntary Contributions. Members participating in this arrangement receive an annual statement made up to 31 confirming the amounts held to their account and movements during the year. July each year. The total amount of AVC investments at the year end is shown below Prudential 1,218,241 1,232,561 CONCENTRATION OF INVESTMENTS The following investments, excluding UK Government securities, account for more than 5% of the Plan s net assets as at 31 July / 2011 Market value 0 Market value Legal & General World Equity Index Fund 19,053, % 18,007, % Legal & General BJ - Active Corp Bond - Over 10 Yr Fund 32,746,120 22% 31,132,639 22% Legal & General G - Index-Linked Bond Fund 20,942,857 14% 21,674, % Standard Life Global Absolute Returns Strategies Fund 11,182,727 7% 7,243,184 5% Threadneedle Property Unit Trust - UK Non Taxable Fund 8,190,013 5% 7,961,712 6% 12. INVESTMENT MANAGEMENT EXPENSES Administration, management & custody 710, ,232 Page 25

28 NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31 JULY CURRENT ASSETS AND LIABILITIES Current assets Tax recoverable 4,286 78,767 Employer contributions due 23,414 2,126 Meniber contributions due 19,927 7,718 Prepayments 415, ,411 Cash balances 61, , , ,530 Current liabilities Unpaid benefits 135, ,075 Accrued expenses 147, ,890 HM Revenue and Customs 5,023 4, , ,566 Current assets and liabilities 237, ,964 All contributions due to the Plan relate to the month of July 2012 and were paid in full to the Plan within the timescale required by the schedule of contributions. L 14. EMPLOYER RELATED INVESTMENTS Other then those items disclosed elsewhere in the accounts, there were no other related party transactions. 15. RELATED PARTY TRANSACTIONS V Johnston, R Warhurst, S Wilmot and W Connolly are Trustees who are currently employed by the participating employers. I Graham and M levy are Trustees who were pensioner members of the Plan during the year and are entitled to benefits in accordance with the normal Rules of the Plan. 16. CONTINGENT LIABILITIES AND CONTRACTUAL COMMITMENTS In the opinion of the Trustee the Plan had no contingent liabilities at 31 July The Plan had a contractual commitment to Global Infrastructure Partners which is detailed on page 9 of this report. Page 26

29 INDEPENDENT AUDITORS STATEMENT ABOUT CONTRIBUTIONS FOR THE YEAR ENDED 31 JULY 2012 Independent Auditors Statement about Contributions to the Trustee of the University of Newcastle upon Tyne Retirement Benefits Plan (1971) for Non - Academic Staff We have examined the summary of contributions to the University of Newcastle upon Tyne Retirement Benefits Plan (1971) for Non - Academic Staff for the year ended 31 July 2012 which is set out on the following page. Respective responsibilities of Trustee and Auditors As explained more fully in the statement of Trustee s responsibilities, the Plan s Trustee is responsible for ensuring that there is prepared, maintained and from time to time revised a schedule of contributions and for monitoring whether contributions are made to the Plan by the employer in accordance with relevant requirements, It is our responsibility to provide a statement about contributions and to report our opinion to you. This report, including the opinion, has been prepared for and only for the Trustee as a body in accordance with section 41 of the Pensions Act 1995 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. Scope of work on the statement about contributions Our examination involves obtaining evidence sufficient to give reasonable assurance that contributions reported in the summary of contributions have been paid in accordance with the relevant requirements. This includes an examination, on a test basis, of evidence relevant to the amounts of contributions payable to the Plan under the schedule of contributions and the timing of those payments. Statement about contributions In our opinion, the contributions required by the Schedule of Contributions for the Plan year ended 31 July 2012 as reported in the Summary of Contributions have in all material respects been paid in accordance with the Schedule of Contributions certified by the Actuary on 22 June PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Leeds Date: Page 27

30 SUMMARY OF CONTRIBUTIONS FORTHE YEAR ENDED 31 JULY2012 Trustee Summary of Contributions payable under the Schedule in respect of the Plan year ended 2 31 July 2012 D Outing the year, the Contributions payable to the Plan were as follows: Contributions payable under the Schedule in respect of the Plan year: Employers Normal 3,064,944 Salary sacrifice 1,673,567 Deficit funding 570,560 Members Normal 162,365 5, Reconciliation of contributions Reconciliation of contributions payable under the Schedule of Contributions reported in the accounts in respect of the Plan year Contributions payable under the Schedule (as above) 5,471,436 U Contributions payable in addition to those due under the Schedule: 0 Employers augmentations 68,567 Members additional voluntary contributions 148,317 Signed on behalf of the Trustee: 5,688,320 Q Trustee Director: ~ ~ Trustee Direct 2 Page 28

31 ACTUARIAL STATEMENTS Schedule of Contributions Name of Plan: University of Newcastle upon Tyne Retirement Benefits Plan (1971) for Non-Academic staff This Schedule of Contribution has been prepared by the Trustee of the University of Newcastle upon Tyne Retirement Benefits Plan (1971) for Non-Academic Staff (the Trustee ) after discussions with the university of Newcastle upon Tyne (the Employer and after obtaining the advice of Simon Corbett, the Plan Actuary to the Plan. For the avoidance of doubt this Schedule of Contributions replaces the Schedule of Contributions dated March Contribution to be paid to the Plan from 1 August 2011 to 31 July 2026 By or on behalf of active Plan Members: 6.75% pa of pensionable salaries. Where members are making membership contributions themselves directly from their pay, the membership contributions for each month are to be deducted from salary by the Employer and paid to the Plan on or before the 19th of the calendar month following the month in which they were deducted. Where membership contributions are paid on behalf of members by the Employer or another Participating Employer the membership contributions for each month are to be paid to the Plan on or before the 19th of the calendar month following the month to which they relate. In respect of future accrual of benefits, the provision of death in service lump sum benefits and the expenses of administering the Plan the Employer and other Participating Employers will pay the following: By the Employer and other Participating Employers: 11.15% pa of pensionable salaries This rate includes an allowance of: 0.5%pa of pensionable salaries in respect of the insured death in service benefits; 1.9%pa of pensionable salaries in respect of expenses of administering the Plan and any PPF levies. In order to address the shortfall in funding in accordance with the Recovery Plan of the same date as this Schedule. By the Employer and other Participating Employers: 2.1% pa of Pensionable Salaries The Employer s contributions are payable on a monthly basis and are payable to the Plan on or before the 19th of the calendar month following the calendar to which they relate. Having regard to actuarial advice, the Employer and other Participating Employers may pay additional contributions to those detailed on this schedule of such amount and payable at such date as may be agreed from time to time between the Employer and the Trustee. This schedule may be revised from time to time where revisions are agreed between the Trustee and the Employer and after the Trustee has taken and considered written advice from the Plan Actuary, for example after the signing of a subsequent actuarial valuation. Signed on behalf of the Employer: Signed on behalf of the Trustee: Name: A C STEVENSON Name: M Levy Position: PVC Planning & Research Position: Chair Date: 22 June 2011 Date: 22 June 2011 Page 29

32 ACTUARIAL STATEMENTS ACTUARIAL CERTIFICATION OF SCHEDULE OF CONTRIBUTIONS Name of Plan: The University of Newcastle upon Tyne Retirement Benefits Plan (1971) for Non-Academic Staff Adequacy of rates of contributions 1. I certify that, in my opinion, the rates of contributions shown in this Schedule of Contributions are such that the statutory funding objective could have been expected on 1 August 2010 to be met by the end of the period specified in the recovery Plan 22 June Adherence to Statement of Funding Principles 2. I here by certify that, in my opinion, this Schedule of Contributions is consistent with the statement of Funding Principles dated 22 June The certification of the adequacy of the rates of the contributions for the purpose of securing that the statutory funding objective can expect to be met is not a certification of their adequacy for the purpose of securing the Plan s liabilities by the purchase of annuities, if the Plan were to be wound up. Signature: SIMON CORBETT Date: 22 June 2011 Name: Simon Corbett Qualification: Fellow of the Institute and Faculty of Actuaries Address: 3 The Embankment Name of Employer: Aon Hewitt Limited Sovereign Street Leeds LS1 4BJ Page 30

33 ACTUARIAL STATEMENTS Actuarial Certification of the calculation of Technical Provisions Name of Plan: The University of Newcastle upon Tyne Retirement Benefits Plan (1971) for Non-Academic Staff Calculation of technical provisions I certify that, in my opinion, the calculation of the Plans technical provisions as at 1 August 2010 is made in accordance with regulations under section 222 of the pension act The calculation uses a method and assumptions determined by the Trustee of the Plan and set out in the Statement of funding Principles dated 22 June2011. Signature: SIMON CORBETT Date: 22 June 2011 Name: Simon Corbett Qualification: Fellow of the institute and Faculty of Actuaries Address: 3 The Embankment Name of Employer: Aon Hewitt Limited Sovereign Street Leeds LS1 4BJ Page 31