Gist Limited Pension Scheme

Transcription

1 Gist Limited Pension Scheme Annual Report and Financial Statements For the year ended 31 March 2016 Scheme Registration No

2 Contents Trustee and advisers... 2 Trustee Report... 3 Statement of Trustee Responsibilities Independent Auditor s Report Fund Account for the year ended 31 March Statement of Net Assets as at 31 March Notes to the financial statements Actuarial calculation of technical provisions Actuarial Certification of the Schedule of Contributions Summary of contributions Independent Auditor s Statement about Contributions Schedule of Contributions Page

3 Trustee and advisers Trustee Directors Employer nominated Capital Cranfield Pension Trustees Limited represented by S Anyan (Chair) D K T Devers (resigned 21 August 2015) M J Dowe + R Jurkowski G Parkin (appointed 1 September 2015, resigned 26 April 2016) Member-nominated N M Shiggins * (re-appointed 19July 2016) P A J Struthers #* (re-appointed 19 July 2016) # Audit Committee + Medical Committee * Risk Working Group Secretary Scheme administrator Principal employer S K Kelly BOC Pension Services ADP (Pension Payroll) (implemented 1 November 2015) Gist Limited Actuary R Shackleton FIA (resigned 15 July 2016) M Parker FIA (appointed 15 July 2016) Hymans Robertson LLP Auditor Legal adviser Investment advisers Investment services Investment manager Investment custodian Bankers Ernst & Young LLP Mayer Brown International LLP Mercer Limited BOC Pensions Investment department BlackRock Investment Management Limited BNY Mellon Asset Servicing BV HSBC Bank Plc Group life assurance Friends Life Management Services Limited (terminated 31 March 2016) Legal & General Assurance Society (appointed 1 April 2016) Medical adviser Enquiries Health Assured Limited Head of UK Pensions BOC Pension Services The Priestley Centre 10 Priestley Road The Surrey Research Park Guildford GU2 7XY pensions.uk@boc.com 2 Page

4 Trustee Report The Trustee of the Gist Limited Pension Scheme (the Scheme ) present their annual report for the year ended 31 March Introduction The Gist Limited Pension Scheme ( GLPS ) is a defined benefit pension scheme set up by a trust deed dated 30 March 2011 as updated by a Deed of Variation dated 17 September It was established for employees of GIST Limited with the signing of the Definitive Trust Deed and Rules on 30 March Throughout the year under review, GLPS Trustees Limited was the Trustee of GLPS. The Scheme provides a lump sum benefit in the event of death-in-service and earnings-related pension benefits for and in respect of Scheme members. In addition the Scheme may be liable to provide pension benefits in respect of Active Members with prior service in the BOC Pension Scheme, for example, in the event of redundancy. Active Members are also able to contribute to the AVC Section of the BOC Retirement Savings Plan ( BOCRSP ) as it provides facilities for the investment of additional voluntary contributions and transfer payments received prior to April It is also used for the investment of any pensions-related additional contributions made by the Company in respect of Scheme members. The Scheme was closed to new entrants on 1 April In the Report, Company means GIST Limited. The objective of this Report is to provide a formal and historical record. Less formal publications are used to keep members informed about the progress of the Scheme. Information can also be obtained from the BOC Pension Services internet website Enquiries and complaints The address for enquiries about the Scheme, matters regarding entitlement of an individual to benefits, complaints regarding Scheme administration and requests for further information is shown on page 2. Management of the Scheme The Company has the formal power under the Scheme Rules to appoint and remove the Trustee body. The Trustee of the Scheme is GLPS Trustees Limited. The term of office of individual Trustee Directors is normally five years. The Professional Trustee appointment is on an on-going basis subject to an agreed notice period on either side. As the member nominated trustees term of office is due to expire in July 2016 the election process opened in February 2016 to invite new applicants. The existing member nominated trustees were the only applicants as a result, and will therefore be reappointed in July A Trustee Director will generally cease to hold office on resignation or on leaving Gist Limited. However, a Member-Nominated Director who retires from service can remain as a Trustee Director for the remainder of his term of office and can then stand for re-election. The Company can remove appointed Trustee Directors and the Professional Trustee. The Trustee met on five occasions during the year to review investment activities, administration and any other matters affecting the Scheme and its members. The Trustee has appointed external specialists to advise on legal, investment, actuarial and accounting matters. Changes to the advisers during the year are listed on page 2. Acting on the advice of the Scheme Actuary, the Trustee decided not to accept individual transfer payments from members former pension schemes. The Trustee will only review this decision again if the Scheme Actuary so advises. 3 Page

5 Trustee Report (continued) Payments made in respect of deferred pensioners who exercised their option to have a cash equivalent or transfer value paid to another pension arrangement were calculated in accordance with the provisions introduced under Section 97 of Chapter IV of Pension Schemes Act 1993 using tables supplied by the Scheme Actuary. Payments made during the year fully reflected the value of the accrued benefit rights in each case. The calculation of transfer payments includes allowance for the Trustee s discretion to permit early payment of a deferred pension, without reduction, in circumstances of ill-health. No other discretionary benefits that could be available are included in transfer calculations. The Trustee has written agreements in place with the Actuaries, the appointed Scheme Actuary, the Auditor, the Legal Advisers, the Medical Advisers and the Investment Advisers and, in the form of delegation documents, Pensions Investment Department and the Benefits Administrators. Data protection The Scheme is registered under Data Protection Act 1998 to process on computer and otherwise, personal information that the Trustee or its delegates may need for Scheme management. Scheme tax and social security status The Scheme is a registered scheme with HM Revenue & Customs under Chapter 2 of Part 4 of Finance Act Contributory members of the Scheme were in contracted-out employment under Section 9 (2) of Pensions Act 1993 during the year for the purposes of state earnings-related pension provision, under certificate numbers E Y and S H. Committees Committees are set up for practical reasons where a number of additional meetings are required and to facilitate additional, targeted, technical training. The members of each Committee who represent the Trustee are shown on page 2. Audit Committee The Audit Committee met on three occasions during the year. The Audit Committee is a joint committee consisting of a representative of the Trustees of each of BOC Pension Scheme, BOC Senior Executive Pension Scheme, GLPS, BOC Retirement Savings Plan and from the Administrator of BOC Pensions Investment Fund (BOC Pensions Limited). The main objectives of the Committee are to review the plan for the annual audit, review the audit results and discuss them with the Scheme Auditor, consider the letter of representation to the Auditor, review and challenge the Report and Accounts and report to the Trustee Boards on these matters. The Audit Committee formally recommends the approval of the annual report and financial statements to the Trustee. Risk Working Group The Risk Working Group met on two occasions during the year. The Risk Working Group exists to review the Trustee s risk register and make related recommendations to the Trustee. Medical Committee The Medical Committee met on three occasions during the year. A Medical Committee exists to consider applications from members and the company for the award of medical pensions. 4 Page

6 Trustee Report (continued) Pensions Act 1995 and Pensions Act 2004 The Trustee has a range of procedures to ensure ongoing compliance with the requirements of Pensions Act 1995, the Pensions Act 2004 and other applicable regulatory bodies. The Pensions Regulator (TPR) is the regulatory body for work-based pension schemes in the UK. TPR has a defined set of statutory objectives and wide powers to investigate schemes and take any action it thinks necessary. As an aid to achieving its objectives, TPR requires the completion and submission of an annual scheme return by the scheme administrator. It also requires reports of notifiable events and significant breaches of pension scheme legislation. Notifiable events are specific events relating to a scheme or a participating employer that TPR considers could potentially have a major impact on the security of members benefits. The Company and the Trustee are under an obligation to advise TPR without delay of any notifiable events. Breaches of pension scheme legislation have to be reported to TPR when they are considered to be breaches likely to be of material significance (known as red breaches). Those with a duty to report include the Trustee, the Company and the Scheme s advisers. Red breaches are caused by: dishonesty, poor scheme governance, inadequate controls resulting in deficient administration or slow or inappropriate decision-making practices, incomplete or inaccurate advice, acting (or failing to act) in deliberate contravention of the law. An example of a red breach would be persistent failure to pay scheme contributions on time. During the year, there were no red breaches. No minor breaches were noted. The Trustee believes that in all respects the Scheme s administration has been in compliance with the requirements of both Acts throughout the year. The Trustee can confirm that contributions were of the amounts required and were received within the agreed timescales. Record keeping As part of its Guidance on Internal Controls, TPR has issued Guidance on record-keeping, which sets up a framework for measuring the presence of data used in the administration of pension schemes. The aim of the Guidance is to educate and enable those responsible for member record-keeping and those who administer pension arrangements to improve the standard of record-keeping across the industry. TPR s Guidance identifies three types of data that should be measured: Common data, Conditional data and Numerical data. Common data is the data that TPR considers to be applicable to all schemes and is used to identify a member, e.g. surname, forename(s)/initials, date of birth, Sex, National Insurance Number, address, postcode. Conditional data is the additional data required for administration and will vary and depend on the type of scheme, scheme design, member status, system design etc. Examples of Conditional data are date of leaving, benefit crystallisation event details, salary history, contributions, AVC details, active/deferred/pensioner record, date of retirement. Numerical data is the additional information that will enable the trustee to put the results of the data measurement into context, e.g. status, benefit category, pensioner type. The clean percentage for Common data is 99.96% and Conditional data is 99.97%. The Numerical data requirement is largely satisfied by the membership statistics/movements reported at each Trustee meeting. Taking account of the Scheme design, the data held is in a robust position to allow the Scheme to be administered efficiently and effectively. The Trustee has adopted an improvement programme which includes taking the Scheme design into account. 5 Page

7 Trustee Report (continued) Financial development of the Scheme The financial statements set out on pages 14 to 27 have been prepared and audited in accordance with the regulations made under sections 41(1) and (6) of the Pensions Act During the year net additions from dealing with members were 10,092,356 (2015: 9,255,163). Net returns on investments decreased to 202,318 (2015: 12,472,431). The prior year return was significantly higher as a result of the re-leveraging of the liability matching fund. There was no subsequent re-leveraging exercise performed in the current year. As a result of all the above the net assets of the Scheme rose to 65,313,160 at 31 March 2016, an increase of 10,294,674 over the position at 31 March Actuarial review The most recent actuarial valuation of the Scheme took place as at 31 March 2014 and resulted in the employer s contribution rate being adjusted from 1 April 2015 onwards. The member s contribution rates remain the same. A summary of the contribution rates for the year in review is disclosed on page 32 to 33. The Scheme Actuary has subsequently estimated that, as at 31 March 2016, the Scheme s assets fell short of its liabilities by 12 million and the funding level was 84% (2015: 92%). This is mainly due to a fall in gilt yields over the period, which underpins the value placed on the liabilities of the Scheme. This has been partially offset by higher than expected returns on the assets of the Scheme over the period. The next actuarial valuation is due to take place as at 31 March Statement of funding principles ( SoFP ) Under requirements introduced by Pensions Act 2004, the valuation consists of a SoFP, actuarial valuation, schedule of contributions and, if the Scheme s assets do not cover the technical provisions (the amount required to pay for the Scheme s built up pension benefits), a recovery plan. Under the SoFP, the Trustee, with advice from the Scheme Actuary and the agreement of the Company, selects the key assumptions to use in the valuation. Method The actuarial method to be used in the calculation of technical provisions is the Projected Unit Method. Actuarial assumptions Discount rate: (pre-retirement) term dependent rates set by reference to the market implied gilt yield curve (as derived from the Bank of England data) at the valuation date plus an addition of 1.8% per annum; (Postretirement) term dependent rates set by reference to the market implied gilt yield curve (as derived from the Bank of England data) at the valuation date plus an addition of 0.4% per annum. Retail price inflation ( RPI ): term dependent rates derived from the Bank of England gilt based inflation curve at the valuation date. Consumer price inflation ( CPI ): Term dependent rates derived from the assumption for RPI inflation less an adjustment equal to 0.5% per annum. Salary increases: Fixed rate of 2.5% per annum. Pension increases: Fixed rate of 2.5% per annum. 6 Page

8 Trustee Report (continued) Mortality The post retirement mortality base tables will be a suite of bespoke assumptions which reflect the characteristics of the Scheme membership ( Vita Curves ). The Vita Curves adopted will be based on pooled experience from occupational pension schemes during the period 2010 to 2012 as collated by Club Vita up to They will make allowance for observed variations in mortality according to age, gender, pension amount, salary, postcode based lifestyle group. The assumptions adopted vary according to the characteristics of each individual member. The pre-retirement mortality of future pensioners is assumed to be the standard PNMA00/PNFA00 tables. Future improvements in longevity will be assumed to be in line with the 2013 CMI model with a long term rate of improvement of 1.5% per annum assuming peaked short term improvements and declining at older ages. Contributions Following the Actuarial Valuation, the Schedule of Contributions was signed by the Trustee and agreed by the Company on 5 February The schedule is attached as an appendix on page 32. Pension increases The effective date for pension increases is 1 April each year. Pensions in payment will be increased in line with the annual increase in the Index of Retail Prices as at the previous 31 December, subject to a maximum of 2.5% on a rolling five year basis. For those pensioners who have been retired for less than 12 months but more than 1 month, a proportionate rate will be applied. As at 1 April 2015 pensions were increased by 1.6% (2014: 2.5%). Deferred pensions are broadly increased on each 31 March by the lower of 2.5% per annum compound and the movement in the Index of Retail Prices for the period of complete years to the previous 30 September from the date on which the member left the Scheme, except for members who resign or are dismissed in which case the measure of inflation will be the Consumer Prices Index. As at 1 April 2015, deferred pensions were increased by 1.2% (2014: 2.5%). 7 Page

9 Trustee Report (continued) Membership Active Level 1 Level 2 Level 3 Total At 1 April ,063 Late notifications - (5) - (5) Deaths - (2) - (2) Retirements (1) (27) - (28) Leavers with retained benefits (1) (13) - (14) At 31 March ,014 Deferred Total At 1 April Late notifications (2) New members 14 Deaths (1) Retirements (8) Leavers (2) At 31 March Pensioners Former members Dependants Children's allowances Total At 1 April New dependants Retirements Deaths (2) (1) - (3) At 31 March The late notifications relate to adjustments to the membership in respect of the prior year after the membership reconciliation was completed. 8 Page

10 Trustee Report (continued) Scheme rules There have been no changes to the Scheme rules during the year. A copy of the Scheme rules may be obtained from the contact for enquiries on page 2. Post year end changes to the Scheme rules are disclosed in subsequent events on page 11. Custodial arrangements Custodian services are provided by BNY Mellon Asset Servicing BV. The Trustee believes it is essential that the assets of the Scheme should be recorded by a Custodian with secure, accurate and timely administration systems which ensure that those assets are clearly identifiable and which minimise the risk of any loss. The Trustee has to be satisfied that the Custodian has in place systems and procedures that should safeguard the Scheme s assets. The Trustee keeps separate investment records, with which those kept by the Custodian and by the Investment Manager are reconciled. Reports on controls issued by the Custodian and the Investment Manager are reviewed by the Trustee on an annual basis. Investment management In accordance with section 35 of the Pensions Act 1995, a Statement of Investment Principles ( SIP ) has been prepared by the Trustee which incorporates the investment strategy. The SIP is to be reviewed at least every three years and more frequently, if required. The last review took place in January A copy of the SIP may be obtained from the contact for enquiries on page 2. The SIP requires the Trustee to obtain confirmation annually from its Investment Managers that the Scheme s investments are diversified and suitable, and that the Manager has exercised its delegated powers of investment in a manner designed to give effect to the principles set out in the statement. The Investment Manager was appointed by the Trustee. As required by the Scheme s Rules, the investment management firm is independent of the Company. The Trustee is required to enter into investment management agreements with each Manager, setting out in detail the terms on which each portfolio is managed. Each agreement includes a detailed set of guidelines to be followed by the Investment Manager. BlackRock Investment Management Limited served as the investment manager during the year, managing portfolios in accordance with the mandates shown below: Asset Mandate Diversified Growth Active Multi-strategy Bonds Active Corporate Bonds Bonds Active Emerging Markets Bonds Equities Passive UK/Global Liability Driven Investment ( LDI ) Passive LDI 9 Page

11 Trustee Report (continued) Asset Allocation The main investment objective of the Scheme is to maintain a portfolio of suitable assets of appropriate liquidity which will generate investment returns to meet, together with future contributions, the benefits of the Scheme payable under the Trust Deed and Rules as they fall due. In addition the Scheme should ensure that the funding position remains at an appropriate level. The Trustee agreed to implement a Strategic asset allocation of 60% LDI (incorporating Fixed Income of 20%) and 40% Growth. The Scheme s asset allocation for the period to 31 March 2016 is shown in the table below: Asset Allocation Strategic Actual LDI 40% 41% Fixed Income 20% 19% Growth Assets 40% 40% Total 100% 100% Liability Driven Investment The Scheme has a leveraged liability driven investment (LDI) portfolio allocation. The LDI portfolio is planned to grow over time based on regular contributions. The LDI manager has been set a target for matching a proportion of the latest projected liability cashflows (target Hedge Ratio), as provided by the Actuary for the Scheme, by September The target Hedge Ratio for the Scheme is 70%, undertaking monthly rebalancing of a fixed benchmark. The purpose of this approach is to hedge a proportion of the risks associated with the Scheme s exposure to movements in interest rates. The LDI manager employs a number of investment instruments, via pooled funds, to achieve the hedging strategy which include nominal gilts, interest rate swaps and cash. These pooled funds are registered in the name of the Scheme. The Trustee monitors the hedge ratio regularly, including the advice given by the investment advisers to the appropriateness relative to market conditions. As of 31 March 2016, the Trustee agreed to a target hedge ratio of 50% given the existing market conditions, which has been adopted by the LDI manager. Performance The performance of the Scheme and its Investment Manager is measured by an independent performance measurement service. Since August 2011 this service has been provided by BNY Mellon Analytical Solutions. Investment performance net of fees has been measured by asset class since inception on 31 August Performance for the period ending 31 March 2016 is shown in the table below: Total Fund 1 Year 3 Year Since Inception Actual 0.01% 12.12% 13.37% Benchmark * 4.90% 6.25% 7.25% * Benchmark is defined as UK Gilts plus 1.6% per annum The one year performance reflects the change in the value of Scheme LDI assets relating to the benchmark of gilts, due to the variable amount of leverage used in the LDI allocation. Short-term market fluctuations can cause the absolute rate of return to vary considerably from year to year. It is important to look at the investment performance over the long-term, too much emphasis should not be placed on the absolute rate of return achieved in any one year. 10 Page

12 Trustee Report (continued) Employer related investments Legislation prohibits the trustee of most occupational pension schemes, including the Scheme, from making employer-related investments in excess of 5% of Scheme assets. The Scheme permits the Investment Manager to invest in pooled equity funds designed to track the performance of the relevant index, and also to deal in financial futures. Since the pooled funds may invest in Group companies, investment in such funds may result in an indirect exposure to The Linde Group AG. Also, where Group companies form part of a particular index, investment in financial futures will result in an indirect exposure to The Linde Group AG. Having taken legal advice, the Trustee has satisfied itself that such indirect investment is permitted by their Rules. The Trustee is also satisfied that the exposure to Group companies shares which could result would not be material to the Scheme. There were no Employer-related investments at the year end. Subsequent events Contracting out Contracting out was abolished on 6 April Instead of the State Pension being a two tier scheme made up of the Basic State Pension and the State Second Pension (S2P), in future the State Pension will be a single-tier scheme. This means that from April 2016 S2P will no longer exist and GLPS will no longer be able to contract out of S2P. As a result the member and Company National Insurance contributions will increase from 1 April A new Schedule of Contributions has subsequently been signed on 26 May 2016 to reflect these changes. A copy of the schedule and the most recent actuarial review may be obtained from the contact for enquiries on page 2. Scheme rule changes Scheme rules were amended by a deed dated 8 April These rule changes are summarised below: Amendments to reflect the Company's proposal to introduce a new benefit/contribution structure with effect from 1 April 2016, in response to the abolition of contracting-out from 6 April 2016 The deletion of obsolete Rule C6 (General welfare), but with an amendment to Rule C7 (other early retirement) to retain the flexibility for the Company to provide an unreduced pension in appropriate cases Amendments formally to provide for same sex spouses and civil partners to be treated in the same way as opposite sex spouses Signed on behalf of the Trustee on 28 September 2016 S Anyan R Jurkowski Trustee Director Trustee Director 11 Page

13 Statement of Trustee Responsibilities The Scheme s Trustee is responsible for obtaining audited financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland, and for making available certain other information about the Scheme in the form of an Annual Report. The financial statements are the responsibility of the Trustee. Pension scheme regulations require the Trustee to make available to Scheme members, beneficiaries and certain other parties, audited financial statements for each Scheme year which: Show a true and fair view of the financial transactions of the Scheme during the Scheme year and of the amount and disposition at the end of that year of the assets and liabilities, other than liabilities to pay pensions and benefits after the end of the Scheme year, and Contain the information specified in The Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, including a statement whether the financial statements have been prepared in accordance with the United Kingdom Generally Accepted Accounting Practice The Trustee has supervised the preparation of the financial statements, and have agreed suitable accounting policies, to be applied consistently, making any estimates and judgements on a prudent and reasonable basis. The 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 normal contributions payable towards the Scheme by or on behalf of the employer and the active members of the Scheme and the dates on or before which such contributions are to be paid. The Trustee is also responsible for keeping records in respect of contributions received in respect of any active member of the Scheme and for monitoring whether contributions are made to the Scheme by the employer in accordance with the Schedule of Contributions. Where breaches of the schedule occur, the Trustee is required by the Pensions Act 1995 and 2004 to consider making reports to the Pensions Regulator and the Members. The Trustee has a general responsibility for ensuring that adequate accounting records are kept and for taking such steps as are reasonably open to them to safeguard the assets of the Scheme and to prevent and detect fraud and other irregularities, including the maintenance of an appropriate system of internal control. Date 28 September 2016 S Anyan R Jurkowski Trustee Director Trustee Director 12 Page

14 Independent Auditor s Report We have audited the financial statements of the Gist Limited Pension Scheme for the year ended 31 March 2016 which comprise the fund account, the statement of net assets and the related notes 1 to 16. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice), including FRS 102 The Financial Reporting Standard applicable to the UK and Republic of Ireland. This report is made solely to the Trustee, as a body, in accordance with regulation 3 (c) of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act Our audit work has been undertaken so that we might state to the Trustee those matters we are required to state to them in an auditor s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Trustee as a body, for our audit work, for this report, or the opinions we have formed. Respective responsibilities of trustee and auditor As explained more fully in the Statement of Trustees Responsibilities set out on page 12, the Scheme s Trustee is responsible for the preparation of financial statements which show a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board s Ethical Standards for Auditors. Scope of the audit of the financial statements An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Scheme s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Trustee; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the GLPS annual report and financial statements to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. Opinion on the Financial Statements In our opinion the financial statements: show a true and fair view of the financial transactions of the Scheme during the year ended 31 March 2016, and of the amount and disposition at that date of its assets and liabilities, other than the liabilities to pay pensions and benefits after the end of the year; have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and, contain the information specified in Regulation 3 of the Occupational Pension Schemes (Requirement to obtain Audited Accounts and a Statement from the Auditor) Regulations 1996, made under the Pensions Act Ernst & Young LLP Statutory Auditor Reading Date 4 October The maintenance and integrity of the Gist Limited Pension Scheme web site 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 financial statements since they were initially presented on the web site. 2 Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. 13 Page

15 Fund Account for the year ended 31 March 2016 Contributions and benefits Reclassified Notes Employer contributions 2 11,169,397 10,095,242 Employee contributions 2 165, ,554 Other income 3 251, ,417 11,585,983 10,820,213 Benefits paid or payable 4 (744,731) (874,967) Payments to and on account of leavers 5 (7,427) (58,716) Other payments 6 (200,495) (227,665) Administrative expenses 7 (540,974) (403,702) (1,493,627) (1,565,050) Net additions from dealing with members 10,092,356 9,255,163 Returns on investments Investment income 8 3,220 6,480,600 Change in market value of investments 9 423,216 6,015,616 Investment management expenses 11 (224,118) (23,785) Net returns on investments 202,318 12,472,431 Net increase in fund during the year 10,294,674 21,727,594 Net assets of the fund At 1 April 55,018,486 33,290,892 At 31 March 65,313,160 55,018,486 The notes on pages 16 to 27 form part of these financial statements. 14 Page

16 Statement of Net Assets as at 31 March 2016 Investment assets 9 Reclassified Notes Pooled investment vehicles 64,163,963 54,186,248 Cash and cash equivalents 544, ,000 Investment liabilities 64,708,090 54,921,248 Other investment balances - (725,460) - (725,460) Total net investments 64,708,090 54,195,788 Current assets 12 1,125,763 1,216,158 Current liabilities 13 (520,693) (393,460) Net assets of the Fund at 31 March 65,313,160 55,018,486 The financial statements summarise the transactions and the net assets of the Scheme and deal with the net assets at the disposal of the Trustee. They do not take account of obligations to pay pensions and other benefits that fall due after the end of the Scheme year. The actuarial position of the Scheme, which does take account of such liabilities, is dealt with in the Summary Funding Statement and the Actuarial Certificate on pages 28 and 29 of the Annual Report, and these financial statements should be read in conjunction with them. The notes on pages 16 to 27 form part of these financial statements. These financial statements were approved by the Trustee on 28 September 2016 Signed on behalf of the Trustee: S Anyan R Jurkowski Trustee Director Trustee Director 15 Page

17 Notes to the financial statements 1. Accounting policies 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 (FRS 102) The Financial Reporting Standard applicable in the UK and Republic of Ireland, issued by the Financial Reporting Council, and with the guidelines set out in the Statement of Recommended Practice (SORP) 2014 Financial Reports of Pension Schemes. This is the first year that FRS 102 and the SORP (2014) have applied to the Scheme s financial statements. The amendments to FRS102 as set out in FRED62 for the changes to fair value hierarchy disclosure have been early adopted. There was no effect on these financial statements other than additional disclosures. (a) Investments (i) Investments are included at market value. (ii) Pooled investment vehicles are valued at bid price where available or closing prevailing price of units concerned at the close of business at the year end. (iii) Investment income is recognised on an accruals basis. (iv) Investment income arising from the underlying investments of the pooled investment vehicles is rolled up and reinvested within the pooled investment vehicles. This is reflected in the unit price and reported with Change in Market Value. (b) Contributions Employer and members contributions are accounted for at the rates agreed between the Trustee and the Employer based on recommendations of the Actuary and the Schedule of Contributions. (i) Members normal contributions are accounted for when deducted from pay in accordance with the Schedule of Contributions. (ii) Employers normal contributions are accounted for in the period in which the corresponding members contributions are deducted from pay in accordance with the Schedule of Contributions. (iii) Employers contributions under Salary Exchange are accounted for in the period that exchanged employee contributions would have been deducted from earnings. (c) Benefits Benefits are generally accounted for in the year in which the member notifies the Trustee of his decision on the type of benefit to be taken or, if there is no member choice, on the date of retirement or leaving. For members with whom we have lost contact, benefits are accounted for on the date that we establish a contact with the member or beneficiary or, if later, the date that the relevant benefit has been identified. (d) Expenses All administration expenses and investment management costs are accounted for on an accruals basis. Reclassification The following notes have been reclassified in the prior year: Note 3, Note 7 and Note 8 - bank interest receivable/payable is now shown within investment income as net interest receivable; Note 3 and Note 4 - the transfer in of AVC disinvestment from the BOCRSP AVC Section has been reclassified to provide better clarification between the aggregated benefit amounts of the defined benefit and defined contribution schemes. Note 9 - to show cash and other investment balances as separate line items. There was no effect on the overall increase in the fund reported for the year to 31 March 2015 nor the overall net assets reported in the financial statements as at that date. 16 Page

18 Notes to the financial statements (continued) 2. Contributions Employer contributions Employer normal contributions include contributions in respect of salary sacrifice arrangements. Further information on contributions is disclosed in the Schedule of Contributions which is attached on page Other income Detail about the reclassification is provided in Note 1 on page Benefits Detail about the reclassification is provided in Note 1 on page Normal 11,142,857 10,095,242 Pension Protection Fund Levy 26,540 - Total employer contributions 11,169,397 10,095,242 Employee contributions Normal 165, ,554 Total employee contributions 165, ,554 Total contributions 11,334,760 10,280,796 Reclassified Claims on term insurance policies 251, ,417 Reclassified Pensions 164, ,990 Commutations and lump sum retirement benefits 393, ,770 Purchase of in-house annuity (4,154) - Lump sum death benefits 327, ,183 Disinvestments from BOCRSP AVC Section (136,737) (95,976) 744, ,967 The negative values above reflect the AVC amounts transferred to the Scheme to provide funding for all or part of the benefit payment mentioned above. Further explanation of the disinvestments process from BOCRSP-AVC Section can be found in note 9 on page 20. Purchase of in-house annuity comprises members who have chosen to take all or part of their AVC s as pension. During the year in review one member chose to take part of their AVC fund as pension. 17 Page

19 Notes to the financial statements (continued) 5. Payments to and on account of leavers Pension sharing orders 7,427 - Individual transfers to other schemes - 58,716 7,427 58, Other payments Premiums on term insurance policies 200, ,665 During the year in review life assurance benefit was provided by Friends Life Management Services Limited. Legal and General Assurance Society was appointed on 1 April 2016 to provide future benefit. 7. Administrative expenses Reclassified Administration and processing 195, ,958 Actuarial fees 233, ,660 Audit fees 10, Pension Protection Fund Levy 26,540 - Legal and other professional fees 74,534 60, , ,702 Detail about the reclassification is provided in Note 1 on page 16. Costs charged to the Scheme relate solely to the administration of the Scheme. Actuarial costs have increased during the year due to additional project work in the current year. The Pension Protection Fund Levy is based on the valuation of the Scheme. The first valuation was performed at 31 March 2014, therefore this is the first year in which the levy has become payable. 18 Page

20 Notes to the financial statements (continued) 8. Investment income Detail about the reclassification is provided in Note 1 on page 16. During the year approximately 965k of investment income was rolled up and reinvested within the fund. This treatment is in accordance with the accounting policy on page 16. Due to the fall in UK gilt interest rates there was a large capital distribution of 6.4m in the prior year from the liability matching funds. 9. Investments Investment reconciliation table Reclassified Income from pooled investment vehicles - 6,478,195 Net interest receivable on cash deposits 3,220 2,405 3,220 6,480,600 Reclassified Value at 1 April 2015 Purchases at cost Sales proceeds Change in market value Value at 31 March 2016 Pooled investment vehicles 54,186,248 45,104,053 (35,529,880) 403,542 64,163,963 Cash 735,000 19, ,127 Other investment balances (725,460) - Total investments 54,195, ,216 64,708,090 Detail about the reclassification is provided in Note 1 on page 16. Indirect costs are incurred through the bid and offer spread on investments within pooled investment vehicles. There were no transaction costs during the year in review. 19 Page

21 Notes to the financial statements (continued) 9. Investments (continued) Pooled Investment vehicles Other investment balances Equities 19,748,922 16,106,150 Fixed Income 20,756,053 19,119,398 LDI 17,534,796 13,552,617 Diversified Growth 6,124,191 5,402,895 Cash - 5,188 Total pooled investment vehicles 64,163,963 54,186, Outstanding purchases - (725,460) AVC Investments Members of the Scheme may make additional voluntary contributions to a range of investment facilities, which are administered by the Trustee of BOC Retirement Savings Plan (BOCRS Plan). When a member retires, or dies, the funds accumulated within RS Plan (AVC section) in respect of that member are paid to the Trustee of the Scheme to provide additional benefits for, or in respect of, that member. They may also be paid to the Scheme when a member leaves service for transfer to another approved pension scheme. These amounts are shown in note 4 as negative amounts. The financial statements of BOCRS Plan are not included in the financial statements of the Scheme, but are separately available. A copy of these statements can be obtained by contacting BOC Pension Services at the address shown on page Page

22 Notes to the financial statements (continued) 9. Investments (continued) Investment Fair Value Hierarchy The fair value of financial statements has been determined using the following fair value hierarchy: Level 1 the unadjusted quoted price in an active market for an identical asset or liability that the entity can access at the measurement date; Level 2 inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly; Level 3 inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability The Scheme s investment assets and liabilities have been fair valued using the above hierarchy categories as follows: 2016 Level 1 Level 2 Total Pooled investment vehicles - 64,163,963 64,163,963 Cash 544, ,127 Total investments 544,127 64,163,963 64,708, Level 1 Level 2 Total Pooled investment vehicles 5,188 54,181,060 54,186,248 Other investment balances (725,460) - (725,460) Cash 735, ,000 Total investments 14,728 54,181,060 54,195,788 Valuation techniques Pooled investment vehicles The Scheme invests in pooled investment vehicles which are not quoted in an active market and which may be subject to restrictions on redemptions such as (monthly) periodic dealing. The Trustee considers the valuation techniques and inputs used in valuing these funds as part of its due diligence prior to investing, to ensure they are reasonable and appropriate and therefore the net asset value (NAV) of these funds may be used as an input into measuring their fair value. In measuring this fair value, the NAV of the funds is adjusted, as necessary, to reflect restrictions on redemptions, future commitments, and other specific factors of the fund and fund manager. In measuring fair value consideration is also paid to any transactions in the shares of the fund. Depending on the nature and level of adjustments needed to the NAV and the level of trading in the fund, the Scheme classifies these as Level Page

23 Notes to the financial statements (continued) 9. Investments (continued) Concentration of investments The following investments, excluding UK Government securities, represent more than 5% of the Scheme s net assets at 31 March 2016: BlackRock Aquila Life UK Currency 26% Liability Matching % BlackRock LSF Cash Fund 13% BlackRock Global Emerg Mkt FX Bond Fund 9% BlackRock Dynamic Div GRW - IA 9% BGI Global Screen Corp Bond 9% Liability Matching % 10. Investment objectives, strategy and risk Investment Strategy The Trustee s objective is to invest the assets in the best interest of the members and beneficiaries. Within this framework the Trustee has agreed a number of objectives to help guide it in its strategic management of the assets and control of the various risks to which the Scheme is exposed. The Trustee is responsible for determining the Scheme s investment strategy, which is set after taking appropriate advice. Subject to complying with the agreed strategy, which specifies the target proportions of the Scheme which should be invested in the principal market sectors, the day-to-day management of the asset portfolio, is the responsibility of the investment managers. Consideration is also given to the Scheme s long term liabilities within the Scheme s investment strategy, which permits use of LDI. The Scheme s current investment strategy is set out as follows: 50% in return-seeking assets comprising a diversified growth fund (10%), global developed market equities (30% of assets) and emerging market bonds (10% of assets). o The Trustee seeks to hedge the majority of the developed market equity exposure against currency movements. Approximately 95% of GLPS s global developed equity exposure is hedged back to sterling and does not have any emerging market equity exposure. 50% in investments that share characteristics with the Scheme s long term liabilities. This includes a 10% strategic allocation to corporate bonds and a 40% allocation to a Liability Driven Investment ( LDI ) strategy. The corporate bond assets are expected to generate fixed cashflows at a higher level of return than otherwise would be obtained from government bonds (although their hedging effectiveness to the impact of changes in interest and inflation rates is smaller). The primary goal of the LDI portfolio is to hedge a proportion of the impact of interest rate and inflation movements on the long term liabilities by investing in governments bonds or derivatives thereof as well as interest rate and inflation swaps. The Trustee has the responsibility for deciding the Scheme s underlying asset allocation and selecting and monitoring the specific investment managers. 22 Page

24 Notes to the financial statements (continued) 10. Investment objectives, strategy and risk (continued) Investment Policy Overall investment policy falls into two parts. The strategic management of members assets is fundamentally the responsibility of the Trustee acting on advice from its investment consultant, Mercer Limited, and is driven by its investment objectives as set out in the SIP. The remaining elements of policy are part of the day to day management of the assets which are delegated to professional investment managers. Decisions on appointment and retention of investment managers are taken by the Trustee on advice from its investment consultant. Risk FRS 102 requires the disclosure of information in relation to certain investment risks to which the Scheme is exposed to at the end of the reporting period. These risks are set out by FRS 102 as follows: 1. Credit risk: the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. 2. Market risk: the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. Currency risk: the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Interest rate risk: the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Other price risk: the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market prices (other than those arising from interest rate risk or currency risk), whether those changes are caused by factors specific to the financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market. The Scheme has exposure to the above risks because of the investments it takes to implement its investment strategy. The Trustee manages the investment risks through a strategic asset allocation which is set taking into account the strategic investment objectives. The investment objectives and risk limits are implemented through the investment management agreements in place with Scheme s investment managers and monitored by the Trustee through regular reviews of the investment portfolios. The investment objectives and risk limits of the Scheme are further detailed in the SIP. 23 Page