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9th SEPTEMBER 2003
NORFOLK PENSION FUND ACCOUNTS 2002-2003
Report by Director of Finance
This report presents the final accounts of the Norfolk
Pension Fund for 2002-2003.
1. In accordance with Government Regulations, the Pension Fund Accounts
require formal approval before the end of September 2003.
2. The District Auditor has examined the attached accounts and a draft Audit
Certificate has been prepared. This will be signed after the Investment
Committee has formally approved the accounts.
3. The approved accounts will be included in the Annual Pension Fund report
that will be available shortly.
4. It is recommended that the Investment Committee approve the 2002-
03 Final Accounts of the Norfolk Pension Fund.
5. A revised Statement of Auditing Standards (SAS), SAS 610 Reporting to
those charged with governance – is applicable for the first time to the audit
of the Pension Fund accounts. It requires auditors to report to those
charged with governance (as distinct from management) certain matters
before they give an opinion on the financial statements.
This report is presented to the Investment Committee. (To Follow).
Statement of Responsibilities
The Authority’s Responsibilities
The Authority is required:
to make arrangements for the proper administration of its financial affairs and to
secure that one of its officers has the responsibility for the administration of those
affairs. In this authority, that officer is the Director of Finance;
to manage its affairs to secure economic, efficient and effective use of resources
and safeguard its assets;
approve the statement of accounts.
The Director of Finance’s Responsibilities
The Director of Finance is responsible for the preparation of the Pension Fund
statement of accounts in accordance with proper practices as set out in the
Chartered Institute of Public Finance and Accountancy (CIPFA) and Local Authority
(Scotland) Accounts Advisory Committee (LASAAC) Code of Practice on Local
Authority Accounting in Great Britain (“the Code”).
In preparing this statement of accounts, the Director of Finance has:
selected suitable accounting policies and then applied them consistently;
made judgements and estimates that were reasonable and prudent;
complied with the Code.
The Director of Finance has also:
kept proper accounting records which were up to date;
taken reasonable steps for the prevention and detection of fraud and other
Certificate by the Director of Finance
I certify that the statement of accounts set out on pages 1 to 17 present fairly the
financial position of the Norfolk Pension Fund at the accounting date and its income
and expenditure for the year ended 31 March 2003.
Date: 09/09/2003 Signature:
Director of Finance and Fund Administrator
When the auditors have completed their audit, the basis of their opinion, the opinion
and their certification will be inserted here.
Membership of the Scheme is voluntary and eligible employees are free to choose
whether to join the Scheme, remain in the Scheme or make their own personal
pension arrangements outside the Scheme.
Details of eligibility are contained in the booklet “Local Government Pension
Scheme”, a copy of which is given to each new member on joining the Scheme. If
an employee is in any doubt about membership they should contact the Pensions
Manager, Capita Business Services Limited, Charles House, Prince of Wales Road,
Norwich, NR1 1DJ.
The membership statistics shown below relate to the County, the seven District
Councils and the 83 other organisations that participated in the Scheme in 2002-
31 March 2002 31 March 2003
Number of Employers with Active Members: - 89 91
Number of Employees in Scheme: -
County Council 13,505 12,194
Other Employing Authorities 7,200 9,433
Total 20,705 21,627
Number in Receipt of Pension: -
County Council 5,999 6,003
Other Employing Authorities 5,439 5,824
Total 11,438 11,827
Deferred Pensioners: - 7,329 8,167
Employing authorities, other than the County Council, are either Scheduled Bodies or
Admitted Bodies. A Scheduled Body is an organisation, which is listed in the
Pension Scheme Regulations, and its employees are able to join the Scheme as of
right. An Admitted Body is an organisation, which, under the Pension Scheme
Regulations, is able to apply to the County Council to join the Scheme. Upon
acceptance, an Admission Agreement is prepared admitting the organisation and
allowing its employees to join.
A full list of participating employers is shown in appendix 1.
Hymans Robertson, the Fund‟s Actuary, carried out an actuarial valuation at 31
March 2001. In completing this valuation they have used a market related method
which derives the financial assumptions by considering various yields in the 12
months leading to the valuation date which builds in an element of smoothing and
stability for the future.
The key financial assumptions adopted at this valuation are set out below: -
% p.a. % p.a.
Equities 6.25% 3.45%
Bonds 5.25% 2.45%
Pay Increases (excluding 4.8% 2%
Price Inflation/Pension Increases 2.8% -
(Nominal is a rate of return expressed only in monetary terms i.e. not adjusted for
inflation. Real is a return adjusted for inflation).
As in previous years, the increase in the contribution rate has been phased in over
the inter-valuation period as follows :-
Year Employer Contribution
(% of payroll)
1 April 2002 to 31 March 2003 Range from 9.1% to 17.6%
1 April 2003 to 31 March 2004 Range from 10.0% to 19.2%
1 April 2004 to 31 March 2005 Range from 10.1% to 20.8%
(For the period 1 April 1999 to 31 March 2002 the rates payable ranged from 6.1% to
The contribution rates as described are calculated to be sufficient to cover 100% of
the Fund‟s liabilities. They comprise of a Common Rate of Contribution of 13.5%
(previously 12%) of payroll. The contribution required from each employer is then
the Common Rate of Contribution plus or minus an individual adjustment, if
appropriate, reflecting the circumstances of each employer.
In conjunction with the Director of Finance and his staff, the Fund‟s Actuary monitors
the progress of the Fund during the inter-valuation period. This resulted in an interim
valuation being carried out in September 2002. As a result of this valuation
employers were recommended to increase their contributions by a further 1% with
effect from 1 April 2003 (in addition to the stepped increase already planned). This
increase will therefore be reflected in next years accounts.
The next actuarial valuation will be as at 31 March 2004, with revised levels of
contributions being payable from 1 April 2005.
Employees and employers contribute to the scheme.
Prior to 1 April 1998: - Officers contributed 6% of pensionable pay.
Manual and Craft Workers contributed 5% of
From 1 April 1998: - The new scheme introduced a common employee‟s
contribution rate of 6% of Pensionable Pay for all
classes of future employee.
Manual and craft workers employed on 31 March 1998 will continue to pay 5% as
long as they remain in continuous employment.
Employee contribution rates are prescribed by the governing regulations, and cannot
The contribution rates paid by employers are variable and are determined by the
Pension Fund‟s Actuary. Details of employer contribution rates are shown on the
Statement of Accounting Policies
1. GENERAL POLICIES
These accounts have been prepared in accordance with the 1996 SORP “Financial
Reports of Pension Schemes‟, and the 2000 SORP „A Code of Practice on Local
Authority Accounting in Great Britain”.
Investments are included in the statement of net assets at their market values, in
accordance with the policies shown below. Otherwise these accounts are prepared
under the historic cost convention.
The accounts summarise the transactions and net assets of the Scheme. They do
not, however, take account of liabilities to pay pensions and other benefits in the
2. ACCRUALS BASIS OF ACCOUNTING
The accounts have been prepared on the normal accruals basis of accounting.
3. BASIS OF VALUATION OF INVESTMENTS
Investments are shown in the accounts at market value, which has been determined
a) All UK investments traded within SET‟s are valued using the last SET‟s
traded price using FT Information – Extel feed. All other UK investments are
valued on the basis of middle market prices using Telekurs-Realtime feed.
b) All non-UK investments (with the exception of Denmark and Hong Kong)
which are traded on Exchange are valued using the Last Trade price.
Investments traded in Denmark are valued using the volume weighted
average price and in Hong Kong using the official close price. If the Last
Trade price is not available an alternative price is used for selected markets.
For Germany or Austria this is the Kassa (official close) price. For Thailand
Foreign board securities, if no trade price is registered for 10 days then the
Domestic board price is used.
c) Non exchange traded bonds are primarily valued using a mid price sourced
from ISMA (for Eurobonds) or contributors from the Bloomberg and Reuters
services. Futures are valued using the settlement price.
4. FOREIGN CURRENCY TRANSLATION
Assets, including investments, denominated in foreign currencies are translated into
sterling at the rate of exchange ruling at the end of the accounting year (the 16.00
WM/Reuters rates). Profits and losses on exchange arising from movements in
current assets and liabilities are included in the Revenue Account for the year.
5. EXTERNAL FUND MANAGER FEES
The External Fund Managers fees are paid in accordance with the terms of each
individual Management Agreement. Fees are based on the market value of the
portfolio managed. Any performance fee is paid after investment performance has
been measured against a bespoke benchmark. See note 4 of the accounts.
6. ACQUISITION COSTS
Acquisition costs of investments are added to book cost at the time of purchase.
The Fund holds no direct property investments, only Property Unit Trusts.
Revenue and Fund Account
For the Year Ended 31 March 2003
2001-02 2002-03 Note
£'000's £'000's Ref
CONTRIBUTIONS AND BENEFITS
16,332 Employees 17,521 1
30,838 Employers 34,513 1
697 Employers Re: Augmentation 689
1,766 Employers Re: Strain on Fund Reimbursement 2,062
12,581 Transfer Values In 12,155
39,263 Pensioners and Dependants - Benefits 41,556 2
7,434 Lump Sums 6,875
910 Death Grants 688
(47,607) (49,119) 3
PAYMENTS TO AND ON ACCOUNT OF LEAVERS
6,783 Transfer of Values Out 4,940
208 Refunds of Contributions 165
152 Contributions Equivalent Premiums 298
(N.I. Adjustments on refunded premiums)
ADMINISTRATIVE AND OTHER EXPENDITURE
73 Actuarial Fees 115 4
950 Administration Expenses 1,036 5
6,441 FROM DEALINGS WITH MEMBERS 11,267
NET RETURNS ON INVESTMENTS
30,109 Investment Income 31,106 6
(35,286) Change in Market Value of Investments (236,905)
(3,894) Investment Expenses (3,236) 4
(2,630) NET INCREASE/DECREASE IN THE FUND DURING THE YEAR (197,768)
1,140,008 OPENING NET ASSETS OF THE SCHEME 1,137,378
1,137,378 CLOSING NET ASSETS OF THE SCHEME 939,610
Net Assets Statement
As at 31 March 2003
2001-02 2002-03 Note
£'000's £'000's Ref
1,118,623 TOTAL INVESTMENTS 912,902 7
14,139 Debtors 13,340 8
7,177 Cash in Hand 15,618
2,561 Creditors 2,250 9
18,755 NET CURRENT ASSETS 26,708
1,137,378 NET ASSETS OF THE FUND 939,610
R.D. Summers, Director of Finance and Fund Administrator
The market value of the assets held by each manager, at balance sheet date, are
Deutsche Asset Management Morgan Grenfell 422.8 46.3
Societe Generale Asset Management 134.4 14.7
Fidelity Pensions Management 127.8 14.0
Henderson Global Investors 121.1 13.3
Morley Fund Management 105.9 11.6
Internally Managed (venture capital and district council bond) 0.9 0.1
Statement of Movements in Investments for the Year Ended 31 March 2003
Market Value Purchases Sales Change in Market Value
31.3.02 During Year During Year Market Value 31.3.03
£'000's £'000's £'000's £'000's £'000's
Gilts 57,352 62,656 71,489 3,332 51,851
Index-Linked Gilts 45,646 44,640 24,600 4,017 69,703
Other Bonds 18,767 649 3,461 1,124 17,079
Equities (inc Convert) 435,527 153,877 139,491 (141,819) 308,094
Property Unit Trusts 104,161 26,571 26,281 8,203 112,654
Other Unit Trusts and Funds 61,829 8,327 1,919 (12,576) 55,661
Other Loans and Mortgages (unquoted) 26 0 29 3 0
723,308 296,720 267,270 (137,716) 615,042
Public Sector Fixed Interest Stocks 30,458 56,319 61,905 3,230 28,102
Other Fixed Interest 1,183 2,026 3,353 144 0
International Bond Fund 18,287 2,138 5,360 766 15,831
Equities (inc Convert) 130,785 112,464 100,267 (46,686) 96,296
Other Unit Trusts 202,507 12,764 10,873 (56,643) 147,755
383,220 185,711 181,758 (99,189) 287,984
Cash 15,013 0 1,776 0 13,237
Net Amount Receivable/(Payable) (2,918) 0 443 0 (3,361)
12,095 0 2,219 0 9,876
TOTAL INVESTMENTS 1,118,623 482,431 451,247 (236,905) 912,902
Totals for year ended 31 March 2002 1,130,377 580,705 557,173 (35,286) 1,118,623
Notes to the Accounts
1. Contributions Received by Body
24,994 Norfolk County Council 25,333
17,689 Scheduled Bodies 21,077
4,487 Admitted Bodies 5,624
2. Pensioners and Dependants - Benefits Payable
35,143 Employees' Pensions 37,258
3,834 Widows'/Widowers' Pensions 4,018
69 Childrens' Pensions 70
217 Chief Officers' Pensions 210
3. Scheme Benefits Payable by Body
22,953 Norfolk County Council 23,432
22,730 Scheduled Bodies 23,782
1,924 Admitted Bodies 1,905
4. Investment Expenses
3,462 Management Fees 2,688
150 Custody Fees 157
73 Actuarial Fees 115
282 Other Expenses borne by the Fund 391
5. Administration Expenses
The Local Government Pension Scheme Regulations 1997 enables administration expenses
to be charged to the Fund. These regulations came into effect on 1 April 1998.
In 2002-2003 £1,035,657 has been charged to the Fund (£950,200 in 2001-2002).
6. Investment Income
(a) Arising from Securities
4,018 Fixed Interest Gilts 2,833
1,800 Fixed Interest Index Linked 1,193
490 Fixed Interest Quoted 943
2 Fixed Interest Unquoted 0
Dividends received on:-
11,728 UK Equities 11,263
1,399 Overseas Fixed Interest 1,313
1,402 Overseas Equities 1,753
1,188 Unit Trusts - Overseas 2,851
2,434 Unit Trusts - UK 1,789
2,714 Property Unit Trusts 2,961
3 Profit/(Loss) on Foreign Exchange (679)
27,178 Total Arising from Securities 26,220
(b) Arising from non dealing activities
893 Bank Interest 869
0 Mgmt Performance Fee Rebate 2,479
1,891 Pooled Funds Rebate 1,409
100 Stock Lending 82
44 Commission Recapture 35
3 Other Miscellaneous Income 12
2,931 Total Arising from non dealing activities 4,886
30,109 Total Investment Income 31,106
Stock Lending is a program of lending eligible securities, such as U.S. and non–U.S.
equities, corporate bonds, and government securities, from the portfolios of participating
clients to approved borrowers in return for a fee. No more than 25% of the funds value is on
loan at any one time.
The primary reasons for borrowing securities are market making, hedging, and arbitrage
All loans are fully collateralised with government securities, bank letters of credit, certificates
of deposit or UK equities settled in CREST.
The value of stock on loan at the balance sheet date was valued at £78.8m, this equated to
8.6% of the total investments.
7. Investment Assets
A full analysis of investments is provided in the Statement of Movements in Investments,
shown on page 10.
(a) Traded Options.
Traded Options are used by Fund Managers to anticipate market movements. The
Fund held no traded options at 31 March 2003.
(b) Currency Hedging.
At 31 March 2003 the Fund had no forward currency transactions.
(c ) Net Amounts Receivable / (Payable) for the Purchase and Sale of Investments.
The (£3,361,000) shown in the Statement of Movements in Investments is made up
as follows: -
31 March 2003
Amounts receivable in respect of sale of investments 6,270
Amounts payable in respect of purchase of investments (9,631)
An analysis of debtors shown in the Net Asset Statement is given below :-
0 Mgmt Performance Fee Rebate 2,479
1,139 Pooled Funds Rebate Due 310
6,326 Dividend Income 5,000
147 Overseas Tax Receivable 116
479 UK Tax Receivable 233
4,079 Contributions Due 4,361
219 Interest Due 152
973 Transfer Values Due 38
167 Pension Charges 8
203 VAT Refund Due 103
25 Stock Lending/Commission Recapture 27
360 Added Years / Augmentation 435
22 Sundry Debtors 78
An analysis of creditors shown in the Net Asset Statement is given below :-
1,552 Managers Fees 798
255 Other Fees & Charges 961
263 Lump Sum 0
37 Pensions Due 46
343 UK Tax 392
111 Sundry Creditors 53
10. Related Party Transactions
The 1996 SORP – The Financial Reports of Pension Schemes – requires the disclosure of
all material transactions between the pension fund and related parties in accordance with
the principles of FRS8. Related party transactions already disclosed in the body of the
accounts do not need to be repeated here. The other related party transactions during the
year, which requires disclosure, is noted below:
Surplus pension fund cash holdings are invested on the money market. During the 2002/03
financial year, the Pension Fund had an average investment balance of £10.3M earning
interest of £405,368.
11. Additional Voluntary Contributions (AVC’s)
The fund has three AVC providers; Prudential, Clerical Medical and Equitable Life. The
value of AVC investments is shown below.
Value at 01/04/02 3,218
Investment Return (128)
Paid Out (712)
Value at 31/03/03 3,356
12. Employers Strain / Augmentation
Pension benefits are funded to be paid from normal retirement age. If any employee is
allowed to take their pension benefits early this places an additional cost (strain) on the
Pension Fund. Employers are required to reimburse the Pension Fund in respect of the
“strain costs” arising from an employee taking early retirement. The cost can be paid in full
at the date of retirement or by instalment over 3 or 5 years in which case interest is added.
The LGPS provides scope for employers to award additional years of membership on
retirement. If an employer opts to award augmented membership he is required to purchase
the additional period from the Pension Fund. Again the cost can be paid in one instalment or
over 3 or 5 years.
The outstanding instalments due at 31 March 2003 where:
Strain Costs £2,546,301 Augmentation £1,472,340
13. Statement of Investment Principles
The government announced that from July 2000 Local Authority Pension Funds should be
brought into line with private sector funds and be required to publish a Statement of
Investment Principles (SIP). This statement is available on the NCC intranet and on the
NCC website http://www.norfolk.gov.uk.
14. Post Balance Sheet Event
Due to fluctuations on the Stock Market since 31 March 2003 the market value of the fund
has increased, this having a positive effect on the overall funding level.
15. Fund Manager Changes
During the year the UK Equity brief held by Société Générale was reviewed and put out to
tender. As a result, in June 2003 the Investment Committee decided to appoint two
managers, Alliance Bernstein and Baillie Gifford, to replace Société Générale.
Each will manage a portfolio of £100m. The investment target and benchmark continues to
be performance of 1.25% above the FTSE all share index.
(employers with active members during the year)
Major Scheduled Bodies
Breckland Council Norfolk Magistrates Courts Committee
Broadland District Council Norfolk Police Authority
Great Yarmouth Borough Council Norfolk Probation Service
King's Lynn & West Norfolk B C North Norfolk District Council
Norfolk County Council Norwich City Council
Norfolk County Council (Education) South Norfolk District Council
Acle Parish Council Martham Parish Council
Aylsham Town Council Mundesley Parish Council
Bradwell Parish Council Norfolk Valuation Tribunal
Broads Authority North Walsham Town Council
Brundall Parish Council Norwich School of Art & Design
Buxton With Lamas Parish Council Old Catton Parish Council
Cawston Parish Council Paston College
City College, Norwich Poringland Parish Council
College of West Anglia Redenhall with Harleston Town Council
Costessey Parish Council River Wensum I D B
Cringleford Parish Council South Walsham Parish Council
Cromer Town Council Southery & District & Feltwell Fen Second
District I D B
Dereham Town Council
Spixworth Parish Council
Dersingham Parish Council
Sprowston Parish Council
Diss Town Council
Stoke Ferry I D B
Downham & Stow Bardolph I D B
Swaffham Town Council
Downham Market Town Council
Taverham Parish Council
East Norfolk Sixth Form College
Thetford Town Council
East of Ouse, Polver & Nar I D B
Thorpe St Andrew Parish Council
Eastern Sea Fisheries Joint Committee
Upton with Fishley P C
West of Ouse I D B
Fakenham Town Council
Wymondham Town Council
Great Yarmouth College of F. E.
Hellesdon Parish Council
Hethersett Parish Council
Loddon parish Council
Lower Bure IDB
Age Concern (Norwich) Norfolk County Assoc. of Parish & Town
Age Concern Norfolk Ltd Councils
Norfolk Heritage Fleet Trust
Norfolk Rural Community Council
Anglia Housing Group
Norman Recreation Centre
Anglia Maintenance Services
North Norfolk Community Transport
Ashfords Grounds Maintenance
CityCare Norwich Airport Ltd
Dereham & Watton CAB NPS Property Consultants Ltd
Flagship Housing Group Peddars Way Housing Association
Further Education National Consortium Peper Harow (East Anglia) Ltd
Great Yarmouth Port Authority Riversdale Multi-Purpose Centre
Great Yarmouth Racecourse Ltd S L F Group Ltd
Green Quay Trust South Norfolk Crossroads Care Attendant
NCS Ltd Scheme
West Norwich Partnership
Wymondham & District Citizens Advice
Norfolk Careers Services