Trustee Report and Accounts

Transcription

1 Trustee Report and Accounts for the year ended 31 March 2016 Scheme Registration Number RP It s all about you

2 The National Grid YouPlan Contents Annual governance statement by the Chair of the Trustee Board 3 Trustee and advisers 6 Trustee s report 7 Statement of trustee responsibilities 13 Summary of contributions 14 Independent Auditors report to the Trustee of the National Grid YouPlan 15 Financial Statements 16 Independent Auditors statement about contributions 26 Participating employers 27 Further information 28 Appendix 1 Value for members assessment 30 Page no. Appendix 2 Statement of Investment Principles 31 2

3 The National Grid YouPlan Annual governance statement by the Chair of The Trustee Board of the National Grid YouPlan INTRODUCTION New governance rules apply to defined contribution pension arrangements like The National Grid YouPlan (the Plan ) from 6 April These were designed to help members achieve a good outcome from their pension savings. As the Chair of the Trustee Board, I have to provide you with a yearly statement which explains what steps have been taken by the Trustee Board, with help from our professional advisers, to meet the new governance standards. This statement has been prepared by the Trustee Directors ( The Trustee ) in accordance with regulation 23 of the Occupational Pension Schemes (Scheme Administration) Regulations ( the Administration Regulations ) 1996 (as amended). It describes how the Trustee has met the statutory governance standard in relation to: The default arrangement Requirements for processing financial transactions Assessment of charges and transaction costs The requirement for trustee knowledge and understanding The Trustee is committed to having high governance standards and monitor the controls and processes in place in connection with the Plan s investments and administration and their quarterly meetings. I welcome this opportunity to explain what the Trustee does to help to ensure the Plan is run as effectively as it can be. DEFAULT INVESTMENT ARRANGEMENT The default investment arrangement is provided for members who join the Plan and do not choose an investment option for their contributions. Members can also choose to invest in the default investment arrangement which is set up by the Trustee. This year 68% of members were invested in the default investment arrangement. Setting an appropriate investment strategy The Trustee is responsible for investment governance. This includes setting and monitoring the investment strategy for the Plan s default arrangement. The YouPlan default fund is the YouPlan Medium Risk Lifecycle Strategy. Details of the investment strategy and investment objectives of the default arrangement are recorded in a document called the Statement of Investment Principles. This document is included as an appendix to the Annual Report and Accounts and can be found on page 31. Reviewing the default investment arrangement The Trustee is expected to:. review the investment strategy and objectives of the default investment arrangement at regular intervals, and at least once every 3 years; and. take into account the needs of the Plan s membership when designing the default arrangement. The Trustee undertakes a review of the strategy and performance on the default fund on a quarterly basis. Following the implementation in April 2015 of the new flexibilities on retirement available to members of defined contribution schemes the Trustee agreed a further review recognising the need to reflect these new flexibilities and a fund designed with all types of saving and retirement expectations in mind, not just the more traditional annuity route whilst remaining within the charge cap limit set out within the Occupational Pension Schemes (Charges and Governance) Regulations

4 The National Grid YouPlan Annual governance statement by the Chair of Trustee - continued As a result of the review completed in January 2016, the YouPlan Bond fund was replaced from within the default fund to the new YouPlan Flexible Retirement Fund with savings being switched into the YouPlan Flexible Retirement Fund as members approach retirement. This change was reflected for all YouPlan Lifecycle Strategies with the exception of the YouPlan Drawdown Ready Strategy. CHARGES AND TRANSACTION COSTS PAID BY MEMBERS We are required to explain the charges and transaction costs (i.e. the costs of buying and selling investments in the Plan) which are paid by members rather than the employer. As you may know the employer pays for all administration and adviser costs. The Total Expense Ratio (TER) applied to the Plan s default arrangement and self-select funds are: YouPlan Fund TER 1 Higher Risk Lifestyle Accumulation Fund 0.13% Medium Risk Lifestyle Accumulation Fund % Transfer-option Lifestyle Accumulation Fund 0.53% Actively selected global shares Fund 0.74% Bond (50:50 Gilts / Corporate Bonds) Fund 0.35% Cash Fund 0.17% Commercial Property Fund 0.21% Diversified Fund 1.04% Ethical Fund 0.21% Flexible Retirement Fund 0.58% Global Company Bonds Fund 0.65% Global Equity Fund 0.13% Index-Linked Gilts Fund 0.13% Mixed Fund 0.90% Shariah-compliant Fund 0.51% Transfer-option UK equity Fund 0.12% Transfer-option Global Equity Fund 0.13% UK Equity Fund 0.11% During the Plan year, the Trustee is satisfied with the levels of charges and transaction costs; however, the Trustee will endeavour to enhance or reduce existing arrangements to enhance member outcomes. GOOD VALUE FOR MEMBERS In accordance with regulations 25(1)(b) of the Administration Regulations, the Trustee assesses the extent to which charges and transaction costs set out above represent good value for members. The Trustee is committed to ensuring that members receive value for money from YouPlan. The Trustee with support from their advisers, KPMG, undertook a value for members assessment in March The results of this assessment are shown on page TER stated as at 30 September 2015, is expected to change slightly over time. 2 This is the default fund 4

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6 Trustee and advisers The National Grid YouPlan Trustee Company Registered Office The National Grid YouPlan Trustee Ltd 1-3 Strand, London, WC2N 5EH Company Registered Number Director Employer Nominated Relationship to YouPlan Appointment date Resignation date Independent Trustee Services Ltd Independent 27 September 2013 (represented by Chris Martin) Jo Faulkner Active member 27 September 2013 Claire Jenkins Active Member 23 October 2014 Member Nominated Clive Bairsto Active Member 1 January 2016 Andrew Baker Active Member 1 January 2016 Ian David Briggs Active Member 1 March June 2015 Andrew Partington Active Member 1 March 2015 Stelios Poulman Active Member 1 March October 2015 Kate Willis Active Member 1 March 2015 Advisers (As at 31 March 2016) Auditor Crowe Clark Whitehill LLP Banker Royal Bank of Scotland Medical Adviser RPS Health, Safety and Environment Legal Adviser Eversheds LLP Investment Adviser KPMG LLP Retirement Support Premier Wealth Planning (appointed June 2015) Insurer National Grid Insurance Company (Isle of Man) Limited Investment Manager Standard Life Assurance Limited Secretary & Administration Plan Secretary Helen McIntosh National Grid Administrators- front office National Grid UK Pensions Operations Administrators back office Standard Life Assurance Limited 6

7 Trustee s report The National Grid YouPlan LEGAL STATUS YouPlan (the Plan) is run by a trustee company, The National Grid YouPlan Trustee Ltd and is governed and administered in accordance with the terms of the Trust Deed and Rules that are dated 30 September 2013 and subsequent amendments. The Plan is a registered Scheme under Chapter 2 of Part 4 of the Finance Act The Plan operates on defined contribution principles where employers and members contribute to individual pension pots to accumulate capital sums which will be used to provide members with retirement benefits. The benefits each member receives will depend upon the size of their pension pot and the options chosen at retirement. In addition members of the Plan are covered by benefits payable in the event of death before retirement. Employees and employers contribute at agreed rates based on a percentage of basic salary. The employer meets the premiums to cover death in service benefits payable under the Plan TRUSTEE DIRECTORS The power of appointing and removing Trustee Directors is vested in the principal employer, National Grid UK Limited. Although we use terms such as Trustee, Employer Nominated, Member Nominated, each Trustee is a Director of the company that acts as sole Corporate Trustee. The Corporate Trustee is The National Grid YouPlan Trustee Ltd. The Company registration number is Legislation requires that at least one-third of the Trustee of an occupational scheme must be nominated by pension scheme members. In accordance with the Pensions Act 2004, the Trustee has an agreed arrangement for selecting Member Nominated Directors. These arrangements were last communicated to YouPlan s members as part of a Member Nominated Trustee Director election process issued in September All Trustee Directors whether Employer Nominated or Member Nominated, represent the interest of all classes of beneficiary. Changes to Trustee Directors in the Period 1 April 2015 to 31 March 2016 During the Plan year, two Trustee Directors resigned, Ian David Briggs resigned 26 June 2015 and Stelios Poulman resigned on 31 October The YouPlan member nominated appointment process concluded in December 2015, Clive Bairsto and Andrew Baker were appointed Member Nominated Trustee with effect from 1 January Trustee knowledge and understanding (TKU) The Trustee continue to recognise the importance of maintaining the necessary knowledge and understanding in order to ensure members of the Trustee Board have the skills and knowledge needed to carry out their role effectively attending appropriate training to ensure that they are equipped to discharge their duties and responsibilities. New Trustee Directors are required to attend an induction day where they receive training on the role of a trustee, investments and on the YouPlan Trust Deed and Rules. This is in addition to training as part of their regular meetings on various areas including pension scheme governance, balance of powers and investments and legislation updates. The Trustee Directors are also required to complete the Pensions Regulator s Trustee toolkit and an ongoing programme has been developed to suit each director s needs, to make sure they are aware and striving to meet industry best practice. GOVERNANCE STRUCTURE The Trustee Board met 5 times in the period covered by this report consisting of formal quarterly meetings and a Trustee Planning Day. Matters that were discussed included administration and investment reports presented by the Trustee s advisers, Trustee objectives, governance of YouPlan, the annual business plans, the investment strategy including the review of the Lifecycle strategies summarised on pages 3 to 4 of this report, communications with members, and the exercise of Trustee Discretions. 7

8 The National Grid YouPlan Trustee s report - continued The Trustee has received and considered an administration report from Standard Life and National Grid UK Operations at each quarterly Trustee Board meeting. These reports provided a detailed summary of all recent administration issues ranging from a schedule of contributions through to a summary of administration response times. The Trustee has also received and considered reports from their advisers that amongst other things provided details of the Investment Managers performance and the review of the lifecycle strategies. These reports, along with other papers provided by their advisers, help the Trustee follow a risk based approach to internal controls to make sure the Plan has been managed effectively within a robust governance framework. As part of this framework the Trustee maintained a detailed risk register and has reviewed this regularly to make sure the Plan s controls remain relevant and adequate. The Trustee has also reviewed the Plan against the key principles and underlying quality features for Defined Contribution Schemes set by the Pensions Regulator as well as commissioning an independent assessment of value for members. The Trustee is satisfied the Plan meets The Pension Regulator s requirements and will in future carry out regular reviews that will be reported in the Annual Governance Statement. Changes to participating employers During the period of this report there were two changes to employers whom participate in the Plan; NGUKPS Trustee Executive Limited (TEL) became a participating employer from 1 September 2015 and Aerion Fund Management Ltd ceased to participate on 30 November 2015 following receipt of a Notice of cessation of participation. Amendments to the Trust Deed and Rules The Trustee has updated The Plan s Trust Deed and Rules and signed deeds of amendment which were executed as follows: 24 June 2015 A deed of amendment to amend the Rules to reflect the new flexibilities on retirement following the implementation of the freedom and choice legislation from 6 April In addition amendments to the definition of preservation limit for members joining the Plan on or after 1 October 2015 to reflect the abolition of short service refunds 5 October 2015 A deed of participation - NGUKPS Trustee Executive Limited (TEL) as a participating employer from 1 September March 2016 A deed of amendment to insert new definition for fixed protection 2016 members and add Rule 11 fixed protection 2016 member to reflect the Fixed Protection 2016 provisions of the Finance Act This deed also reflected the amendment to Rule 6.1 reflecting how pensions payable under Rule 6.1 are increased. There have been no other deeds or material changes during the period from 1 April 2015 to 31 March AUTOMATIC ENROLMENT The Participating Employers listed on page 27 have chosen to use the Plan to meet their automatic enrolment obligations. The Plan is a qualifying scheme as defined by Automatic Enrolment regulations. FINANCIAL DEVELOPMENT OF THE PLAN The financial statements have been prepared and audited in accordance with regulations made under Section 41(1) and (6) or the Pensions Act The fund account shows that the total net assets increased from 175.8m to 203.6m during the year. 8

9 Trustee s report - continued The National Grid YouPlan YOUPLAN MEMBERSHIP At 31 March 2016 the membership was categorised as follows: Membership at 31 March 2015: 1,396 deferreds Active members: 5,236 Deferred members: 1,259 Total membership: 6,495 Active members Deferred members 1,259 deferreds 6,104 actives Total membership: 7,500 5,236 active Active members are employees still employed and contributing to their pension pot Deferred members are members who have either left employment or opted out of YouPlan but their pension pots remain invested Member movements Membership at 1 April 2015 Active members 5,236 Deferred members 1,259 Total opening membership 6,495 New Entrants during the period 1216 Short service refunds (100) Opt out* (5) Retirements (27) Transfer Out (63) Deaths (3) Not Taken Up (cancel) (13) Switch In** 1,164 Switch Out** (1,164) Closing membership at 31 March ,500 * 10 employees also opted out under auto-enrolment within the auto enrolment window ** Includes movements of new starters to switch in once payment of contribution commences, switch-out following categorisation of some members to deferred and a movements from active paying to not active paying e.g. long-term absence. CONTRIBUTIONS The contribution rates are as follows: Employee contribution 3 Employer contribution 2% 4 4% 3% 5 6% 4% 8% 5% 10% 6% 12% 3 If a member is enrolled in flexible pensions savings (FPS), these are notional contributions paid by their employer. 4 Only those previously contributing 2% prior to November 2013, are permitted to remain on this level. This rate will cease from 2018 to meet auto enrolment minimum contribution legislation requirements. 5 This is the default contribution rate. 9

10 Trustee s report - continued The National Grid YouPlan CUSTODIAL ARRANGEMENTS The Trustee is responsible for ensuring the Plan s assets continue to be securely held, and as such use the custodians appointed by the investment managers. Investments are held in the name of the custodians in line with common practice for pension schemes. INVESTMENT POLICY The Trustee is responsible for deciding which fund choices are offered to members, and must monitor the quality of the options made available on behalf of their members on a regular basis. The fund managers the Trustee appoints must be authorised to manage money on behalf the Trustee and comply with the necessary requirements as outlined in legislation. In accordance with Section 35 of the Pensions Act 1995, the Statement of Investment Principles sets out the principles of how the Trustee will select and monitor the fund choices offered to its members. A copy is available as an appendix to this report on page 31. All decisions about the day to day management of assets within each pooled fund have been delegated to the fund manager Standard Life Investment Management. This delegation includes decisions about: Social, environmental and ethical considerations; and The exercise or rights (including voting rights) attaching to the investments. In consideration of the investment objectives, the risk/return characteristics of the asset classes available and with advice of the Trustee s investment adviser, the funds listed below were available to Plan members during the period ending 31 March The investment funds offered to members are white label funds provided by Standard Life Assurance Limited ( SLAL ). These funds are specifically created for the Plan and invest in other funds through the Standard Life Investments Limited ( SLIL ) platform. The Trustee has an investment agreement in place with SLAL that sets out the parameters of the underlying investments held by each fund. The day to day management of the underlying investments of the funds is the responsibility of SLIL. FUNDS AVAILABLE TO MEMBERS Lifecycle options Lifecycle strategies are available to members. These are designed to support members by automatically changing the way member savings are invested over time. The Lifecycle funds members can choose from: Type of Fund Lifecycle Duration Description YouPlan Medium Risk Lifecycle Strategy 5 year version 5 years Only for members who transferred assets from NGUKPS and were invested in the 5 year version. YouPlan Medium Risk Lifecycle Strategy 10 Years Default Fund 10 year version YouPlan Higher Risk Lifecycle Strategy 10 Years Suitable for planned income drawdown YouPlan Drawdown-ready Lifecycle Strategy 10 Years Designed to create an income from investments in retirement YouPlan Transfer-option Lifecycle Strategy 10 or 5 Years Only for members who transferred assets from NGUKPS. New contributions cannot be invested in this fund 10

11 The National Grid YouPlan Trustee s report - continued Self-select funds Self select funds are available to members who do not want to rely on a predetermined lifecycle strategy and members can choose from: YouPlan Fund Management Style Underlying Fund Manager(s) Global Equity Passive BlackRock/Standard Life UK Equity Passive BlackRock Indexed Linked Gilts Passive Vanguard Flexible Retirement Active BlackRock Diversified Fund Active Standard Life Cash Active Standard Life Mixed Fund* Active Schroder Life Bonds Active/Passive M&G/Vanguard UK Global Shares (unconstrained) Active Standard Life Shariah Compliant Passive HSBC Amanah Ethical Active Standard Life Commercial Property Active Standard Life Global Company Bonds Active M&G Transfer-option Global Equity* Passive Vanguard/ Standard Life Transfer-option UK Equity* Passive Vanguard *Only available to those who were already invested in this fund in the DC Section of the National Grid UK Pension Scheme Funds are either Active or Passive. This refers to the investment techniques used while they are being managed. Active Management: Investments aim to achieve returns that are above target. Passive Management: Instead of trying to outperform the market, passive management involves tracking an index or indices. Effectively this means neither outperforming or underperforming but achieving returns that mirror the overall index return the FTSE All Share for example. Legislation from 1 April 2015 for defined contribution schemes used for automatic enrolment introduced a cap on member borne charges on default funds of 0.75%. This cap applies to funds under management, but excludes transaction costs. The Plan s default fund is the Medium Risk Lifecycle Fund and this meets the charge cap requirements. REVIEW OF LIFECYCLE STRATEGIES The Trustee reviewed the Lifecycle strategies (with the exception of the YouPlan Draw-down Ready Lifecycle Strategy) following the new flexibilities on retirement. To reflect these new flexibilities changes were made to the Lifecycle strategies to be more flexible, and designed with all types of saving and retirement expectations in mind, not just the more traditional annuity route. A new fund, the YouPlan Flexible Retirement Fund, designed to cover all types of retirement financial plans was created. Savings are no longer switched into the YouPlan Bonds Fund as members approach retirement. Instead, savings are now switched into the YouPlan Flexible Retirement Fund aimed at achieving positive investment returns, but with lower volatility than investing in equities. The change was completed in January 2016 and lifestyle profile switches took place for 5,924 members, 316 of whom were already in the pre-retirement phase and a disinvestment and investment was required. 11

12 Trustee s report - continued The National Grid YouPlan INVESTMENT PERFORMANCE The Trustees regularly reviews the investment performance of the funds against appropriate benchmarks as summarised in the table below. 1 Year B mark Relative Self-select funds (%) (%) (%) YouPlan Actively Selected Global Shares SLI Global Equity Unconstrained A YouPlan Commercial Property Standard Life Property Pension A YouPlan Ethical Standard Life Ethical Pension A YouPlan Global Company Bonds M&G Corporate Bond A YouPlan Mixed Schroder Life Intermediated Diversified Growth A YouPlan Shariah-Compliant HSBC Amanah P YouPlan Global Equity BlackRock UK Equity Tracker P Standard Life Overseas Tracker P YouPlan UK Equity BlackRock UK Equity Tracker P YouPlan Diversified SLI Global Absolute Return Strategies A YouPlan Bonds (50:50 gilts/corporate bonds) Vanguard UK Long Duration Gilt Index P M&G Corporate Bond A YouPlan Index-linked Gilts Vanguard UK Inflation Linked Gilt Index P YouPlan Cash Standard Life Deposit and Treasury A YouPlan Transfer-option Global Equity SL Vanguard FTSE All Share Index P Standard Life Overseas Tracker P YouPlan Transfer option UK Equity SL Vanguard FTSE All Share Index P YouPlan Flexible Retirement Fund * N/A N/A N/A SL BlackRock Dynamic Allocation* A N/A N/A N/A Source: Standard Life; fund managers; KPMG calculations Notes: Performance shown is net of fees unless otherwise stated Key: A = actively managed fund, P = passively managed fund * Fund does not have 1 year performance history The overall return for the Plan for the year to 31 March 2016 was -2.59% and for the period 1 November 2013 to 31 March 2016 was 4.59%. 12

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16 Financial statements The National Grid YouPlan Fund Account For the year ended 31 March 2016 Notes 2016 Period 1 November 2013 to 31 March 2015 Contributions and benefits 3 Employer contributions 31,720,083 35,067,908 Employee contributions 370, ,711 Additional voluntary contributions 779, ,638 Total contributions 32,870,633 36,218,257 Transfers In 4 Transfer in from the National Grid UK Pension Scheme (DC Section) - 124,580,533 Individual transfers in from other schemes 2,230,274 1,784,476 2,230, ,365,009 Other income 5 941,766 4,561,366 Total Income 36,042, ,144,632 Expenditure Benefits paid or payable 6 (1,514,017) (4,945,477) Payments to and on account of leavers 7 (2,998,519) (1,664,942) Administrative expenses 8 (3,716) (4,347) Total Expenditure (4,516,252) (6,614,766) Net additions from dealings with members 31,526, ,529,866 Return on investments Change in market value of investments Fee rebates Net total assets of the Plan 10 9 (5,235,049) 14,484,562 1,506, ,505 (3,728,651) 15,301,067 1 April 175,830,933 -* 31 March 203,628, ,830,933 *1 November

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18 The National Grid YouPlan NOTES TO THE FINANCIAL STATEMENTS 1) 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 with the guidance set out in the Statement of Recommended Practice (Revised November 2014). This is the first year the Revised SORP has been applied to the Scheme s financial statements. The Trustee has decided to adopt the amendments to the FRS 102 fair value hierarchy disclosures which are disclosed in note 11. 2) Accounting policies All amounts are denominated in sterling. The principal accounting policies of the Scheme are as follows: (i) (ii) (iii) (iv) (v) (vi) Contributions a. Employee contributions, including AVCs, are accounted for when they are deducted from pay by the Employer, except for the first contribution due where the employee has been auto-enrolled by the Employer in which case it is accounted for when received by the Scheme. b. Employer normal contributions that are expressed as a rate of basic salary are accounted for on the same basis as the employees contributions, in accordance with the Payment Schedule in force during the year. c. Employer augmentation contributions are accounted for in accordance with the agreement under which they are payable. Payments to members a. Benefits are accounted for in the period in which the member notifies the Trustee of his decision on the type or amount of benefit to be taken. b. Opt-outs are accounted for when the Plan is notified of the opt-out. c. Individual transfers in or out of the Plan are accounted for when member liability is accepted or discharged which is normally when the transfer amount is paid or received. Group transfers are accounted for in accordance with the terms of the agreement between the Plan and the employer. Expenses are accounted for on an accruals basis. Income from cash and short term deposits is accounted for on an accruals basis. Investment income: a. Investment income arising from the underlying investments or the pooled investment vehicles is reinvested within the pooled investment vehicles, and reflected in the unit price. 18

19 Notes to the financial statements continued The National Grid YouPlan (vii) (viii) (ix) Rebates a. The amount of rebates have been agreed with Standard Life. 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. Investments are included at fair value as described below: a. Unitised pooled investment vehicles have been valued at the latest available bid price or single bid price provided by the Investment Manager. 3) Contributions and Other Income Period November 2013 to 31 March 2015 Employer contributions Normal 21,311,600 23,672,593 Salary Sacrifice (FPS Notional Contributions) 10,187,234 11,385,315 Augmentations* 211,249 - Additional Employer Contribution (expenses) 10,000 10,000 31,720,083 35,067,908 Employee contributions Normal 370, ,711 Additional voluntary contributions 779, ,638 1,150,550 1,150,349 32,870,633 36,218,257 The Salary Sacrifice contributions relate to notional contributions paid in respect of members enrolled in Flexible Pensions Savings (FPS). *Augmentations: contributions paid by the employer in respect of ill health retirements and redundancies. 4) Transfers In Period November 2013 to 31 March 2015 Transfer in from the National Grid UK Pension Scheme - 124,580,533 Individual transfers in from other schemes 2,230,274 1,784,476 2,230, ,365,009 19

20 Notes to the financial statements - continued The National Grid YouPlan 5) Other Income Period November 2013 to 31 March 2015 Insured death benefits 411,289 4,560,970 Insured ill health benefits 530,271 - Interest on bank account ,766 4,561,366 6) Benefits paid or payable Period November 2013 to 31 March 2015 Lump sum retirement benefits 594,759 46,590 Purchase of annuities/drawdown on retirement 115, ,348 Lump sum death benefits 634,298 1,422,160 Purchase of dependant annuities - 3,344,379 Ill health retirement top-up payments 169,720-1,514,017 4,945,477 7) Payments to and on account of leavers Period November 2013 to 31 March 2015 Returns of Contributions 81,477 32,251 Individual transfers out to other schemes 2,917,042 1,632,691 2,998,519 1,664,942 8) Administrative expenses Period November 2013 to 31 March 2015 Trustee Expenses 3,181 2,931 Bank Charges Professional fees Ill Health Case ,716 4,347 All administration expenses are paid by the Company. The specific administration expenses shown above were funded by a contribution from the Company when the Plan was launched (see note 3). This float is reviewed from time to time and may be topped up by the Company if necessary. During the year, the company topped up the float by 10,000 (2015; 10,000). Front office administration services are provided by National Grid UK Pensions Operations with back-office support from Standard Life. These costs are paid by the Company and not reflected in these accounts. 20

21 The National Grid YouPlan Notes to the financial statements - continued 9) Fee rebates 2016 Period 1 November 2013 to 31 March 2015 Fee rebates 1,506, ,505 National Grid has negotiated discounts to the investment charges paid by members. This is the fee rebate shown above. The unit price members pay is net of these discounts. 10) Reconciliation of investments Value at Purchases Sales Change in Value at at cost proceeds market value Pooled investment vehicles 175,805,876 37,415,282 (4,308,618) (5,235,049) 203,677, ,805,876 37,415,282 (4,308,618) (5,235,049) 203,677,491 Allocated to members 174,589, ,128,032 Not allocated to members 1,215,947 1,549, ,805, ,677,491 Investments purchased by the Plan are allocated to provide benefits to the individuals on whose behalf corresponding contributions were paid. The Investment Manager holds the investment units on a pooled basis for the Trustee. The back office administrator, Standard Life, allocates investment units to members. The Trustee may hold investment units representing the value of employer contributions that have been retained by the Plan that relate to members leaving the Plan prior to investing. Members receive an annual statement confirming contributions paid on their behalf and the value of their defined contribution rights. The change in market value of investments during the period comprises all increases and decreases in the market value of investments held at any time during the period, including profits and losses as realised on sales of investments during the year. Indirect transaction costs are incurred through the bid offer spread on investments within the pooled investment vehicles. The amount of indirect transaction costs are not separately provided to the Plan. 21

22 The National Grid YouPlan Notes to the financial statements - continued The Plan s investment in pooled investment vehicles at the year end comprised: Period 1 November to 31 March 2015 Equities 41,287,373 39,042,880 Bonds 2,422,621 4,972,285 Diversified growth* 2,185,001 1,407,501 Index linked gilts 7,108,115 6,746,374 Property 336,049 64,711 Accumulation funds** 134,402, ,655,090 Cash 8,072,441 6,992,780 Other funds*** 7,863,346 2,924, ,677, ,805,876 * Invests using a combination of traditional assets (equities and bonds) and investment strategies based on advanced derivative techniques. ** Invests wholly in equities, or a mix of equities and diversified growth funds. ** These funds comprise of a mix of investments that include diversified portfolios (some of which meet strict ethical criteria) and global equities which meet Islamic investment principles. AVC Investments Members AVCs are invested with the main Plan investments held with Standard Life Investment Management. These AVCs are included in the figure for pooled investment vehicles. 11) Investment Fair Value Hierarchy The investments have been analysed according to the basis of the fair value hierarchy. The basis of the fair value hierarchy is described in more detail below: Level 1: The unadjusted quoted price for an identical asset in an active market. Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3: Inputs are unobservable for the asset or liability. The Plan s investment assets and liabilities have been fair valued using the above hierarchy categories as follows: As at 31 March 2016 Level 1 Level 2 Level 3 Total Pooled investment vehicles - 203,677, ,677, ,677, ,677,491 22

23 The National Grid YouPlan Notes to the financial statements - continued As at 31 March 2015 Level 1 Level 2 Level 3 Total Pooled investment vehicles - 175,805, ,805, ,805, ,805,876 12) Investment Risk FRS 102 requires the disclosure of information in relation to certain investment risks. These risks are set out by FRS 102 as follows: Credit risk: This is the risk that one party to a financial instrument will cause a financial loss for the other party failing to discharge on obligation. Market Risk: This comprises currency risk, interest rate risk and other price risk. Currency risk: this is the risk that the fair value of future cash flows of a financial asset will fluctuate because of changes in foreign exchange rates. Interest rate risk: this is the risk that the fair value of future cash flows of a financial asset will fluctuate because of changes in the market interest rates. Other price risk: this is risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether these changes are caused by factors specific to the individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Plan has exposure to these risks because of the investments it makes to implement its investment strategy which is summarised on page 10 of the Trustee Report. The day to day management of the funds is the responsibility of Standard Life Assurance Limited ( SLAL ), including the direct management of credit and market risks. The Trustee monitors the Plan s investment options and underlying risks on a regular basis, with help from its investment adviser. The investment funds offered to members are white label funds provided by SLAL. The Plan s statement of investment principles will be reviewed at least every three years, or when a significant change to the fund range design has been made. The risks disclosed relate to the Plan as a whole. Members are able to choose their own investments from the range of funds offered by the Trustee, and therefore may face a different profile of risks from their individual choices compared with the Plan as a whole. Credit Risk The Plan is subject to direct credit risk in relation to SLAL through its holding in unit linked insurance funds provided by Standard Life Investments Limited ( SLIL ). SLIL is regulated by the Financial Conduct Authority and the Prudential Regulation Authority and maintains separate funds for its policy holders. In the event of default by Standard Life, the Plan is protected by the Financial Services Compensation Scheme. The Trustee monitors the financial strength of Standard Life and the security of Plan assets. 23

24 Notes to the financial statements - continued The National Grid YouPlan Indirect credit and market risk The Plan is also subject to indirect credit and market risk from the underlying investments held in the funds. The funds which have significant exposure to these risks are set out below: Fund Currency risk Interest rate risk Other price risk Accumulation Funds Global Equities - UK Equities - - Diversified Growth Commercial Property Bonds - Index Linked Gilts - - Shariah-compliant - Ethical Flexible Retirement Cash - The analysis of these risks set out above it at a Plan level. Member level exposures to these risks will depend upon the funds invested in by members. The Trustee has selected the above funds and considered the indirect risks in the context of the investment strategy described in the Trustees report on page ) Current assets Amount from insurer (in respect of insured benefits) 381, ,455 Other debtors 48,084 22,279 Cash balances 16,060 52, , ,044 Included within the cash balance is an amount not allocated to members of 12,561 (for period ending 31 March 2015 this was 6,940) 14) Current liabilities Accrued unpaid benefits (384,370) (635,396) Accrued unpaid refunds to members (3,323) (3,081) Accrued expenses (22) (891) Amount due to the participating employers (106,089) (27,107) Payments to be returned to Standard Life - (254) Accounting for tax liability (889) (258) (494,693) (666,987) 15) Employer related investments There were no employer related investments at 31 March 2016 (31 March 2015: Nil). 24

25 Notes to the financial statements continued The National Grid YouPlan 16) Subsequent Events On 23 June 2016 the UK electorate voted to leave the European Union. This decision is expected to begin an exit process that could take up to two years to complete under the relevant legislation, and the UK remains a member of the European Union until such time as this process is effected. The result of the referendum is likely to result in a period of uncertainty for the UK economy and financial markets and potentially significant volatility in the valuation of investment assets, including fluctuations from the impact of foreign exchange rates. The longer term impact of the referendum decision is clearly yet to be determined. The Trustee will keep the situation under review over the coming months, including implications for investment strategy and risk management. 25

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27 Participating employers The National Grid YouPlan Principle Employer National Grid UK Ltd 1-3 Strand London WC2N 5EH Participating Employers with contributing members Aerion Fund Management ceased 30 November 2015 National Grid plc National Grid Commercial Holdings Ltd National Grid Electricity Transmission plc National Grid Gas plc National Grid Metering Ltd National Grid Property Holdings Ltd National Grid UK Ltd National Grid UK Pension Services Ltd NGUKPS Trustee Executive Limited 1 September 2015 Xoserve Limited 27

28 The National Grid YouPlan Further information Internal dispute resolution (IDR) procedures Most concerns are addressed by informal communications with the Administrator. However, it is a requirement of the Pensions Act 1995 that the Trustee of all occupational pension schemes have Internal Dispute Procedures (IDR) in place for dealing with disputes between the Trustee and the Plan beneficiaries. A dispute resolution procedure had been agreed by the Trustee, details of which can be obtained by writing to the Scheme Secretary. CONTACT FOR FURTHER INFORMATION In the first instance please refer to the website Any further enquiries about YouPlan, including request from individuals should be sent to the Administrator, National Grid UK Pensions Operations at the address below. Scheme Secretary The National Grid YouPlan St Catherine's Lodge Bearwood Road Sindlesham RG41 5BN Day to day administration Website: dcpensions@nationalgrid.com Tel: The National Grid YouPlan PO Box 3604 Wokingham RG40 9JA The Pensions Advisory Service The Pensions Advisory Service (TPAS) exists to help members and beneficiaries of schemes in connections with difficulties where they have failed to resolve with the Trustee of YouPlan Administrators. TPAS may be contacted at The Pensions Advisory Service 11 Belgrave Road London, SW1V 1RB The Pensions Ombudsman The Pensions Ombudsman may investigate and determine any complaint or dispute of fact or law in relation to an occupational pension scheme. Any such complaints should firstly be addressed to the Plan Adjudicator as identified under the dispute resolution procedures. Enquiries to the Ombudsman should be addressed to The Pensions Ombudsman 11 Belgrave Road London, SW1V 1RB 28

29 The National Grid YouPlan Further information - continued The Pensions Regulator The Pensions Regulator (TPR) has the objective of protecting the benefits of members, promoting good administration, reducing the risk of claims on the Pension Protection Fund and minimising any adverse impacts of sustainable growth of the employer. TPR has the power to investigate schemes to take action to prevent wrongdoing in or maladministration of pension schemes and to act against employers failing to abide by their obligations. TPR may be contacted at the following address The Pensions Regulator Napier House Trafalgar Place Brighton BN1 4DW Pensions Tracing Service The Pensions Scheme Registry has been replaced by the Pensions Tracing Service and is now provided by the Department for Work and Pensions. Responsibility for compiling and maintaining the register of occupational pension schemes has been passed to The Pensions Regulator Pensions Tracing Service Tyneview Park Whitley Road Newcastle Upon Tyne NE98 1BA 29

30 Appendix 1 The National Grid YouPlan Value for Members Since April 2015, Trustee of occupational pension schemes life YouPlan have a legal requirement to meet new Defined Contribution (DC) governance standards by undertaking a Value for Members (VfM) assessment. The Trustee of YouPlan engaged KPMG to undertake an independent assessment of YouPlan in February In order to undertake the VfM assessment, the Trustee needed to determine the criteria to measure value, assess how the plan measures up against the criteria, and focus on any areas that are identified as needed improvement in order to build an action plan for the year ahead. The Trustee, working alongside KPMG, identified seven underlying components for assessment and have used a detailed scoring matrix in order to document the outcomes. The seven components were: Scheme charges Investment options and performance Retirement support Governance Administration Contributions & Associated Benefits Education and engagement The below summarises the results of this assessment. Source: KPMG National Grid YouPlan Outcome of the value for members assessment. During the assessment YouPlan was assessed within each of the seven areas listed above against three different scheme profiles, profile 1: basic scheme, profile 2: average scheme and profile 3: above average scheme. When measure against these profiles YouPlan in each of the areas scored ahead of market. The Trustee will continue to undertake value for members assessment. 30

31 Statement of Investment Principles Revised version adopted by the Trustee on 1 January 2016 Introduction to this document The National Grid YouPlan is a defined contribution pension plan also known as a money purchase plan. The value of retirement benefits provided by these types of pension arrangements is based on the amount of money you have in your pot at the point of taking your benefits and the type of retirement benefit you may wish to take. The amount of money saved will depend on: Throughout this booklet we have used the following terms: The Trustee is the National Grid YouPlan Trustee Limited how much you and your employer has contributed into the plan, the performance of the funds in which your savings are invested, and how long you contribute to the plan. The Plan is the National Grid YouPlan SIP is the Statement of Investment Principles YouPlan is looked after by a Trustee the National Grid YouPlan Trustee Limited. It is the Trustee s duty to look after the best interests of its members (and beneficiaries). The Trustee is responsible for deciding which fund choices are offered to members, and must monitor the quality of the options made available on a regular basis. The fund managers the Trustee appoints must be authorised to manage money on behalf of members and comply with the necessary requirements as outlined in legislation. The Trustee of YouPlan has produced this Statement of Investment Principles (we ll refer to it as a SIP from now on), to formally set out how it will select and monitor the fund choices offered to its members. The SIP is a legal requirement. As required, the Trustee will obtain and consider written advice of a person the Trustee believes to be suitably qualified. The SIP will be reviewed at least every three years or when a significant change to the fund range design has been made. The Company is National Grid UK Limited (the principle employer for the Plan) The Pension Provider is Standard Life Pooled investment vehicles is when we aggregate funds from a number of investors and invest it according to a particular investment strategy.

32 Objective Your contributions and those paid on your behalf by the Company will be put into your pot and invested until you retire. The Trustee appreciates that different members will have different saving needs and therefore has created a range of funds to provide members with a suitable choice in which to place their retirement savings. It has taken into account members of different ages and has created the fund range to deliver positive returns over the long-term which take into account a number of different risks. Risk Exposures The risks disclosed here relate to the Plan s investments as a whole. Members are able to choose their own investments from the range of funds offered by the Trustee and therefore may face a different profile of risks from their individual choices compared with the Plan as a whole. Credit Risk The Plan is subject to credit risk through its unit linked insurance funds provided by Standard Life. It is therefore directly exposed to credit risk in relation to the units it holds in the pooled investment vehicle. The Plan is also subject to indirect exposure to credit risks arising from the underlying investments in the pooled funds. Standard Life is regulated by the Financial Conduct Authority and the Prudential Regulation Authority and maintains separate funds for its policy holders. In the event of default by Standard Life, the Plan is protected by the Financial Services Compensation Scheme. The Trustee monitors the financial strength of Standard Life and the security of Plan assets. In the last 12 months, the Plan s indirect exposure to credit risk has changed, as a result of the YouPlan Flexible Retirement Fund being introduced to the fund range. Market Risk The Plan is subject to market risks which will be different for each of the funds available within the funds available within the Plan. These are summarised below: The Trustee has selected the Plan s investment options, after considering market risk in the context of its investment objective. The Plan also manages exposure to other price risk by offering a range of funds which provide exposure to a diverse range of investments across various markets, with particular focus on diversification within the default investment option. In the last 12 months, the Plan s indirect exposure to credit risk has changed, as a result of the YouPlan Flexible Retirement Fund being introduced to the fund range. Other price risk Other price risk arises principally in relation to the Plan s return seeking investments, which includes equity, multi-asset and property and are held via pooled investment vehicles. Interest rate risk The Plan is subject to interest rate risk because some of the Plan s investments are held in bonds via pooled investment vehicles. Currency risk The Plan is subject to currency risk because some of its investments are held in overseas markets via pooled investment vehicles. Additionally, some of the UK pooled investment vehicles have underlying exposures to foreign currencies resulting in indirect currency risk.

33 Member level risks The Trustee recognises that there are risks associated with investing your retirement savings. In designing the range of funds for the Plan, the Trustee has considered how best to safeguard you from these risks. The following list summarises some of the main risks and the Trustee s response to them: Inflation the value of the same shopping basket of goods will increase in the future because of the effect of inflation. The value of member funds must keep pace with this, to protect what is known as the real value of your savings. The Trustee has defined its investment choices to provide options for members looking to grow the value of their savings and has set performance targets against this risk. Shortfall although the Trustee has no influence over how much money a member saves into the Plan, there is the potential that members receive a retirement benefit less than they had hoped for. The Trustee will aim to provide clear communication on at least an annual basis to inform you of the likely value of your benefits at retirement. Also, some of the fund options provided aim to reduce the impact on members benefits of a sudden change in investment markets as they approach retirement, reducing the chance of a sudden shock to the value of retirement savings. This is also covered in the Pension conversion risk mentioned below. Liquidity some investments such as property or shares in private companies are not easy to sell, meaning it can take time to get money returned or transferred to another fund. The Trustee has limited this risk by offering funds designed to reduce this issue, however investments in the YouPlan Commercial Property Fund remain subject to this risk. Pension conversion for members nearing their retirement who would like to purchase an annuity, the potential impact of poor performance leading to a reduction in retirement benefit value is significantly increased as they have less time to make up any lost money. The Trustee has created its choice of funds to cater for members looking to limit this risk to provide greater certainty as members approach their retirement. Performance ups and downs the performance of the funds will increase and decrease. We call this volatility. Those funds which have a chance of earning more money for members over the long term are likely to see greater volatility over short periods. The Trustee has provided a range of carefully considered choices, some of which provide a balance between the need to increase value but without exposing you to too much of this risk. Diversification keeping all your eggs in one basket, or holding a limited number of different investments, increases the risk of losing money if one particular investment fails. So funds holding a greater number of different shares, or which hold different types of investments, help to increase diversification and therefore reduce this particular risk. The Trustee has designed the fund range to provide appropriate levels of diversification in each of the fund options.