National Grid UK Pension Scheme Defined Benefit Section. financial report and accounts 2007/08. In this issue

Transcription

1 In this issue 2 Chairman s Report 3 Membership Details 3 Financial Reports 4 Funds and Investments 5 Summary Funding Statement 6 News and General Information plus Election Results National Grid UK Pension Scheme Defined Benefit Section financial report and accounts 2007/08 pensions update nov 2008

2 chairman s report Chairman of the Trustees, David Rees, writes: The last update, in July, focused on the results of the actuarial valuation as at 31 March In this update we cover the DB Section s Report and Financial Statements for the 2007/08 Scheme year, together with information on the funding position as at 31 March It seems that hardly a day goes by without more bad news stories about falling global stock markets or failing financial organisations. Some members may be worried about the effect on their pension. The Trustees investment advisers and investment managers are closely monitoring the impact of the current financial and economic situation and taking action to reduce the risk wherever possible. Whilst the falling global markets have undoubtedly had a negative effect on the DB Section investments, the longterm funding strategy is designed to smooth out short-term peaks and troughs in the stock markets. The next actuarial valuation is due in The actuarial valuation looks at the value of the DB Section investments (known as the assets) compared with the value of the benefits due to be paid out (the liabilities). The actuary makes various assumptions about how the investments will grow and how much it will cost to provide benefits in the future. If, at the time of the valuation, the funding level of the DB Section reveals a deficit (where the assets are less than the liabilities), the Trustees are likely to ask the Company to pay more money into the DB Section. A statement from the Company about the impact of the credit crunch can be found on page 6. Since the end of the Scheme year there have been two changes to the Trustee board together with the elections for Pensions Representatives. Colin Shoesmith resigned as an Employer Trustee in April 2008 after 11 years on the board and Stan Edwards, long standing Member Representative and later Pensioner Trustee, resigned in June I would like to thank them both for their valued contribution to the Scheme over the years. I welcome their replacements, Andy Smith, Employer Trustee, and John Whitehouse, Pensioner Trustee. More news on the elections is available on page 6. Jim Robson was appointed to the role of Scheme Secretary in February 2008, while the pension teams in Warwick and Basingstoke (formerly Eastlands) joined forces in April 2008 to form UK Pension Services. Although based in different locations, the team works closely to provide a high quality service to both the members and the Trustees. Our thanks, as always, to Aerion Fund Management Limited, who manage the bulk of the Scheme s assets. David R Rees, Chairman 2

3 membership details and financial reports 31 March March 2007 Contributing Members 5,348 5,837 Beneficiaries: Retired Members 53,815 54,571 Dependants 16,267 16,526 Children Deferred Pensioners 28,696 29,101 Total Membership 104, ,442 Equivalent Pension Benefit* 30,208 31,731 Total Membership 134, ,173 There were no significant changes to membership numbers during the year. * These members received a refund of contributions on leaving but are entitled to an Equivalent Pension Benefit from the Scheme at State Retirement Age. Income m Employer contributions Member contributions 9.8 Investment income Transfers from other Schemes 0.3 Total Expenditure m Pensions Lump sums on retirement 26.4 Lump sum death benefits (to include bereavement grants) 3.8 Transfers out 20.8 Administration costs 6.8 Investment Manager expenses 9.0 Other payments 0.2 Total A copy of the Annual Report & Financial Statements 2007/08 is available from UK Pension Services, Basingstoke. This information is also available via the DB website at: Contact details appear on page 7. The full Financial Statements were audited by PricewaterhouseCoopers LLP London. Value of the fund m Fund value at 31 March ,906.7 Money available for investment (income less expenditure) 48.6 Decrease in market value of investments (299.2) Fund value at 31 March ,

4 funds and investments Investment Strategy The long-term strategy for the Scheme s investments is established by the Trustees and set out in the Statement of Investment Principles, which is reviewed annually and is available to members on request. The DB Section s asset allocation at 31 March 2008 is shown in the table below: 2.8% Overseas Equities Property Cash UK Equities Fixed Interest Bonds Index Linked Gilts Private Equity 20.9% 16% 6.8% 2.3% 14.7% 36.5% Investment Performance Investment performance is measured by independent performance measurers and the DB Section's total return is shown below on a Scheme Year basis for the last five years, compared to the benchmark set by the Trustees. Period to 31 March 2008 DB Section Return Benchmark Return % % 12 months years (p.a.) years (p.a.)

5 summary funding statement At the date of the latest actuarial valuation at 31 March 2007, the Scheme Actuary found: The DB Section had assets of: 12,897m The amount the DB Section needs to cover its technical provisions (benefits) was: 13,339m This gave a deficit of: 442m This is the same as a funding level of: 97% Changes in funding position since the valuation at 31 March 2007 The Scheme Actuary has estimated the approximate financial position of the DB section at 31 March The ongoing funding level is estimated at 93% and corresponds to a deficit of 916m. There has been a deterioration in the ongoing funding level of the DB Section despite the Company having paid deficiency contributions during 2007/8 totalling 115m. The shortfall should be viewed in the context of the current volatility in global investment markets. Since 31 March 2008 the Company has paid further deficiency contributions of 295m. Another payment of 32m (plus interest) is due to be paid in April The DB Section s solvency position The Scheme Actuary estimates that if the Scheme had started winding up at 31 March 2007, the DB Section s assets covered 85% of the solvency liabilities. Pensions legislation requires the Trustees to tell you how well the Scheme was funded if it were to be wound up. However, this does not mean that the Scheme is likely to be wound up. Further information If you would like more information, the following documents are available from UK Pension Services, Basingstoke. Statement of Investment Principles (SIP) Schedule of Contributions Actuarial Valuation at 31 March 2007 DB Section Scheme booklet: Planning for the future A message from the Company The Company remains in a strong position and is committed to supporting pension provision for its employees, both past and present. The Company's customers are large businesses rather than individuals - revenues are stable, predictable and of low risk. Our businesses are mostly regulated the Company and Regulator work closely together to ensure that such activities are sufficiently financed. Pension costs can also be substantially passed on to customers as part of the cost of providing the UK's energy network; this provides extra financial security to pension scheme members. Whilst the cost of new borrowings has tended to increase for all businesses, this will not materially impact on National Grid. In times of market turmoil, we are well placed to meet our obligations as they fall due and we closely monitor our exposure to individual banks and financial institutions. Such policies help ensure that individual business failures are not material to the overall Company we had minimal interests in Lehman Brothers and none in the Icelandic Banks. 5

6 news and general information Pension Increases Pensions were increased by 3.9% in April This increase reflected the increase in RPI between September 2006 and September 2007 and was applied to the non- GMP element of the pension, while GMPs accrued after 1988 received a 3% increase. Increases do not apply to pre-88 GMPs or EPB pensions. Election results In June 2008, information was sent to all eligible members about the elections for Pensions Representatives. Nominations were sought to fill the vacancies for six Employee Member Representatives and one Pensioner Representative in each of the five constituencies. Not all vacancies were filled. Elections were required in two constituencies for Pensioner Representatives. No elections were required for Employee Member Representatives. Following meetings of the Employee Member Representatives and Pensioner Representatives, from 1 November 2008 the Member Trustees for the next five years are: Terry Merrin Vacant Darren Hudson Dennis Duffy Goldie Murray John Whitehouse Constituency 1: Scotland and the North Constituency 2: Wales and parts of the West Constituency 3: The Midlands Constituency 4: London and parts of the East Constituency 5: The South and Overseas Pensioner Trustee A full list of Representatives is available via UK Pension Services, Warwick. The current Employer s Trustees are: David R Rees (Chairman) Mike Calviou Andrew Kluth Jonathan Munsey John Ong Andy Smith 6

7 news and general information National Fraud Initiative The Trustees have a duty to protect the Scheme s assets. For a number of years, the Trustees have participated in an anti-fraud initiative organised under the Audit Commissions Act Details of pensioners and deferred pensioners are securely provided to the Audit Commission who compare certain Scheme data with that held by other audited bodies, such as police authorities and local councils. The aim is to prevent and detect fraud. From this we can ensure that pensions do not continue to be paid to deceased members where deaths have not been reported. The use of data for National Fraud Initiative purposes is controlled to ensure compliance with data protection and human rights legislation. The Trustees will continue to participate in the 2008/2009 National Fraud Initiative. Moving house? If you are an active member, the pensions team will be advised of any address changes by the Company payroll team. However, if you are a deferred member or already receiving a pension, please confirm any change to your address in writing direct to UK Pension Services. New DB website A new website has been developed for DB Section members and is available at: (or internally via the Company Infonet UK). The site contains useful information relevant to DB Section members. Future editions of Pensions Update will also be available for members to download. If you would prefer to access this information via the website and do not want to receive a hard copy sent by post, please let us know by ing: pensions@uk.ngrid.com Contact details If you have any further questions about any of the information contained in this edition of Pensions Update or about your DB Section benefits in general, please contact UK Pension Service, Basingstoke: Tel: Internal: National Grid UK Pension Scheme DB Section UK Pension Services PO Box 6666 Basingstoke RG24 4DB pensions@uk.ngrid.com Web: Letter of Intent: Lump sums If you are a contributing member, a deferred member or if you retired within the last five years a lump sum may be payable on your death. This is at the discretion of the Trustees. Although Letters of Intent are not legally binding, the Trustees will take full account of your wishes. It is important that you complete a Letter of Intent form and keep it up to date if your circumstances change. Nomination of Dependant: Dependant s Pension Similarly, unless you left or retired from service before 1 October 1987 you may nominate a Dependant by using a Nomination of Dependant form. If you are married or in a civil partnership, your spouse or civil partner will automatically be treated as your Dependant and you do not need to complete this form. Please contact UK Pension Services, Basingstoke if you would like to update your Letter of Intent or Nomination of Dependant form. These forms are also available via the DB website at: 7

8 Every effort has been made to ensure the accuracy of this publication. However it cannot override any requirements of the Scheme s Trust Deed and Rules or any legislative requirements. Issued on behalf of UK Pension Services, Warwick November 2008 Produced by The Clockwork Marketing Company Limited Reigate