ANNUAL REPORT
for the year ended
30 September 2003
CONTENTS
· How the Scheme Operates 2
· Investments Committee ; Professional Advisers 2/3
· Summary of Report 4
· Membership 5
· Summary of Scheme Benefits 6/7
· Information to Members 8
· Current Developments 8
· Actuarial Valuation 8/9
· Financial Statements 10
· Summary of Income & Expenditure 11
· Summary & Capital Account 12
· Investment Holdings – Sectorial Distribution 13
· Investment Performance 14
· Five Year Summary 15/17
The objective of this booklet is to provide members with an overview of the University College Cork Pension Scheme and its related Fund. Nothing in this booklet over-rides the provisions of the relevant pension statutes.
UNIVERSITY COLLEGE CORK PENSION SCHEME
All full-time and job-sharing permanent staff (excluding those for whom alternative pension arrangements have been made) of the University have an entitlement to benefits under the Scheme. Benefits may also apply to surviving spouses and children. (see reference to part-time staff and fixed-term contract staff under “Current Developments” on page 8) Established by U.C.C. statutes, the staff members and retired staff members are referred to as “participants” in the Scheme. The terms of the Scheme generally follow those applicable in the public sector. Full details of the current benefits are contained in the Explanatory Booklet, which is available from the Department of Human Resources. The University also operates a separate Defined Contribution Scheme for certain full-time and part-time staff who do not hold permanent appointments.
The Scheme is now contributory for practically all staff participants with employee contributions varying within the range 1½% to 6½%. (See Explanatory Booklet and page 7 of this Report for more details) The University makes an employer’s contribution varying from 10% to 15%.
To enable the University to meet its contractual obligations to pay pensions, a Pension Fund has been established. Its function is to provide adequate resources to fund pensions at the level payable at retirement. Post-retirement increases are funded by way of supplementary allocation from the annual income of the University.
The Scheme is operated under the aegis of the Pensions Committee, which is the Finance Committee, a sub-committee of the Governing Body. The Finance Committee appoints the Investments Committee, which oversees the management of the Pension Fund investments.
Investments Committee 2001 - 2004
Mr. D.O’Mahoney, Hon. Treasurer, Chairperson
Professor G.T. Wrixon, President
Professor E.C. Cahill
Dr. T. Cavanagh
Mr. M.F. Kelleher, Secretary/Bursar
Secretary: Ms. M. McSweeney, Finance Officer
Professional Advisers
Investment Managers
Baillie Gifford Overseas Ltd.,
Calton Square,
1 Greenside Row,
Edinburgh EH1 3AN,
Scotland.
K.B.C. Asset Management Ltd.,
Joshua Dawson House,
Dawson Street,
Dublin 2.
Investment Advisers
L.&P. Financial Trustees Limited,
2/3 Terminus Mills,
Clonskeagh Road,
Dublin 6.
Auditors
Deloitte & Touche,
City Chambers,
4 Lapps Quay,
Cork.
Actuary
Mercer Human Resource Consulting,
23/25 South Terrace,
Cork.
Solicitors
Ronan, Daly, Jermyn,
12 South Mall,
Cork.
Bankers
Bank of Ireland,
32 South Mall,
Cork.
The Pensions Board – Registration Number: 43791
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UNIVERSITY COLLEGE CORK PENSION SCHEME
Year to 30 September 2003
SUMMARY OF REPORT
· The rate of return (income earned plus capital appreciation) for the year was positive at 8.5%. This compares with an average positive return of 2.6% over the five years to 30 September 2003 and a negative 15.5% in the previous year.
· The contributions to the Fund for the year amounted to €10.1m. (previous year €9.0m)
· The value of the Fund’s assets increased from €151.1m at 1 October 2002, to €167.6m at 30 September 2003.
· Pensions and lump sums paid amounted to €9.0m. Of this sum, €6.2m was financed directly from the Pension Fund, while the balance of €2.8m (representing post-retirement increases) was borne by the Income and Expenditure Account of the University.
· The active membership at the year end was 1242 compared with 1185 at the start of the year. The number of pensioners was 320 (298 in previous year). The number of former staff who are entitled to deferred pensions is 125 (118 in previous year).
· During the year, in accordance with the Pension Scheme and with public sector policy, pensions in payment were increased so as to maintain relativity between the level of pension payable and the salary on which it was based.
· The return to a positive outcome after two successive years of negative returns follows some improvement in the performance of the investment markets. However, there is still a degree of volatility and the value of the Pension Fund at year end was only just over 80% of the value three years earlier (2000). As the Scheme is a “defined benefit” one, the prevailing difficult situation does not impact on members’ benefits. The Investments Committee, together with its professional advisers and managers, are continuing to keep the situation under detailed review.
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UNIVERSITY COLLEGE CORK PENSION SCHEME
MEMBERSHIP 30 September 2003
Number of employee members 30 September 2002 1185
New members (joined U.C.C. since 1.10.02) 99
Retirements (22)
Withdrawals with Deferred Benefits (16)
Withdrawals without Deferred Benefits (4)
Number of active members 30 September 2003 1242
Number of former staff with Deferred Benefits 125
Number of pensioners 320
TOTAL MEMBERSHIP 1687
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UNIVERSITY COLLEGE CORK PENSION SCHEME
Summary of Scheme Benefits
1. Retirement Age: Normal retirement age is 65 years but members may, at their own option, retire from age 60 onwards, subject to three months notice (excluding long vacation). (See third paragraph under “Current Development” on page 8)
2. Pension Benefit: (see paragraph 7 below)
Option 1: 1/80th of pensionable remuneration for each year of pensionable service subject to a maximum of 40/80ths (i.e. 50% salary)
plus
a lump sum of 3/80ths of final salary for each year of pensionable service subject to maximum of 120/80ths (i.e. 150% of salary)
Option 2: [Available only to members who joined before 6 April 1995] 1/60th of final salary for each year of pensionable service subject to a maximum of 40/60ths (i.e. two-thirds salary) (NO lump sum)
3. Spouses & Children’s Benefits: On death in service, a death gratuity of between 100% and 150% of final salary (depending on pensionable service) is payable; the spouse’s pension is the equivalent of 50% of the benefits based on the 1/80th calculation referred to in Option 1 above but reckoning the pensionable service as if staff member had been 65 years of age at death. On death after retirement, the spouse’s pension is 50% of the deceased member’s pension. Benefits are also payable in respect of eligible dependant children, generally on the basis of one-third of the spouse’s pension per child, up to a maximum of three children. A Social Welfare Contributory Spouse’s pension may also be payable.
4. On Leaving Service: On resigning before minimum retirement age (60 years), a member may transfer his/her benefits to another approved scheme or may avail of a deferred pension, payable (generally) from age 60. If a member has less than two years ‘qualifying service’, he/she may take a refund of his/her own contributions less tax.
5. Pension Increases: It is the present practice (in accordance with public sector policy) to review pensions in payment so as to maintain relativity between the level of pension and the salary on which it was based.
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6. Additional Voluntary Contributions: A member may, under certain conditions: (1) purchase notional additional service, and/or (2) arrange for additional life assurance cover of twice annual salary in respect of death before retirement. Both of these arrangements are funded in full by the staff members’ additional contributions.
7. Members who joined 6 April 1995 onwards: In accordance with regulations introduced by the Minister for Finance covering all public service schemes, including those of the Universities, the Scheme is now an “integrated” one (also referred to as “co-ordinated”) in that it takes into account the Contributory Old Age Pension (or similar contributory benefits) payable under the Social Welfare provisions. For members who joined before 6 April 1995, there is provision for the abatement of pension payable from the Scheme if there is entitlement to certain Social Welfare benefits, in respect of which the University has made contribution. For members who became participants on or after 6 April 1995, the following amendments to the foregoing provisions apply:
(a) only Option 1 for Pension Benefit applies (see page 6)
(b) pensionable remuneration for pension calculation becomes final salary less twice the annual rate of Social Welfare Old Age Contributory Pension; for lump sum calculation, the final salary is not abated
(c) pensionable remuneration for spouse’s pension calculation is abated by the annual rate of social insurance old age contributory pension (i.e. not by double the rate as applies for personal pension calculation)
(d) a contributory Social Welfare pension will also be payable from age 65.
8. Contributions: For those who became members before 6 April, 1995, the only contribution payable is 1½% of salary under the terms relating to the spouses and children’s benefits.
For most of those who became members on or after 6 April 1995, the overall contribution is 6½%, comprising 3% of pensionable remuneration and 3½% of net pensionable remuneration (i.e. net of twice the annual rate of Social Welfare old age contributory pension). The rate of remuneration payable to members to whom the 6½% contribution applies is generally, but not always, higher than that payable to corresponding grades, subject to the low rate of contribution (1½%). The difference effectively takes account of the 5% additional contribution (i.e. the salary is 1/19th higher).
In the case of a small number of longer-serving staff, in respect of whom different or no benefits for spouses and children apply, no contribution is payable.
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For further details of the Pension Scheme, see Explanatory Booklet available from the Department of Human Resources.
INFORMATION TO MEMBERS
The following information is provided to members:
· An Explanatory Booklet
· Personal Benefit Certificate (annual)
· An Annual Report providing a summary of the Scheme’s statistics
(this document)
· Briefing Sessions
CURRENT DEVELOPMENTS
Under the terms of the Universities Act, 1997, each University is required to submit a draft pension scheme to the Higher Education Authority. There are on-going discussions between the Universities and the Authority on how best to comply with this legislative provision. It is likely that a new or amended pension scheme will emerge with provisions existing along the lines of those applicable in the public sector generally. The existing University College Cork Pension Scheme adheres closely to the public sector norms. In any event, any changes that may be implemented will not affect pensions in payment or any existing contractual obligations.
The Protection of Employees (Part-Time Work) Act, 2001, came into effect from 20 December 2001 and provides for access to pension schemes for certain part-time staff; the precise application of this new legislation to Universities is still the subject of ongoing consultation with the Higher Education Authority. The same situation applies in regard to the Protection of Employees (Fixed Term Work) Act 2003, which came into operation on 14 July 2003; the Act gives fixed-term employees the right to be treated not less favourably than permanent employees of the same employer doing similar work unless it can be shown that the less favourable treatment is justified on objective grounds. This Act also gives access to pension schemes and the ongoing consultations will clarify the extent to which the Act applies in universities.
The Public Service Superannuation (Miscellaneous Provisions) Act, 2004, came into effect on 1 April 2004, as per the changes mentioned in the Budget speech of the Minister for Finance in November 2003. This new legislation will apply to “new entrants” to a public service body on or after 1 April 2004. It provides, inter alia, for the abolition of the right to retire on pension from age 60 and for the removal of compulsory retirement age. However, these new provisions will not apply to existing members of the U.C.C. Pension Scheme.
ACTUARIAL VALUATION
The most recent actuarial valuation of the Scheme took place on 1 October 2001. The next full valuation is due to take place on 1 October 2004. The latest statement from the Actuary is reproduced on page 9.
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9
UNIVERSITY COLLEGE CORK PENSION FUND
FINANCIAL STATEMENTS
The Pension Fund accounts are maintained separately from the financial statements of the University and are audited by the University’s Auditors. The Auditor’s report follows, as do the financial statements on pages 11 and 12 for the year ended 30 September 2003.
10
UNIVERSITY COLLEGE CORK PENSION FUND
Summary of Income & Expenditure
Year to 30 September 2003
Income
2001/02 2002/03
€000 €000
3,150 Investment income 4,536
8,986 Contribution from University and Members 10,088
2,392 Supplementary contributions from University 2,830
for post-retirement pension increases
1,087 Transfer values received 563
15,615 18,017
Expenditure
8,445 Pensions and Lump Sums 9,044
839 Professional Fees and other Costs 850
- Transfer Values / Refunds paid 13
9,284 9,907
6,331 SURPLUS for investment 8,110
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UNIVERSITY COLLEGE CORK PENSION FUND
CAPITAL ACCOUNT
Year to 30 September 2003
2001/02 2002/03
€000 €000
175,105 Opening Balance 151,081
6,331 Surplus from Income & 8,110 Expenditure Account
(30,332) (Depreciation)/Appreciation 8,252
in value of investments
Insured benefits appreciation/
(23) (depreciation) less maturities 132
151,081 Closing Balance 167,575
Represented by:
147,232 Securities at Market Value 166,623
698 Insured Benefits 830
1,065 Sundry debtors less creditors 210
2,086 Balance at bank (88)
151,081 167,575
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UNIVERSITY COLLEGE CORK PENSION FUND
INVESTMENT HOLDINGS – SECTORIAL DISTRIBUTION
as on 30 September 2003
Baillie Total %
SECTOR Gifford KBCAM Holding
Irish Equities 14.9% 15.6% 15.2%
U.K. Equities 8.8% 8.7% 8.8%
Eurozone Equities 22.1% 16.7% 19.5%
Europe Equities (ex Euro/U.K.) 8.0% 2.6% 5.3%
U.S. Equities 11.4% 17.9% 14.6%
Japanese Equities 2.8% 2.4% 2.6%
Other Overseas Equities 6.6% 8.7% 7.6%
TOTAL EQUITIES 74.5% 72.7% 73.6%