Background
The LGPS (NI) Regulations require NILGOSC to maintain a Fund to provide for the payment of current and prospective benefits to members of the Scheme. In order to ensure that this objective is achieved, NILGOSC must determine a suitable investment strategy, which provides a sound return on investments within an acceptable level of risk.
All income received by NILGOSC, including employees’ and employers’ contributions, rents, interest and dividends are paid into the Fund. Expenditure, such as monthly pensions, retirement allowances, death grants, refunds and the administration costs of NILGOSC are met from the Fund.
The assets and liabilities of the Fund are valued every three years by the Scheme Actuary. Following each valuation, the Actuary certifies the employers’ contribution rates to maintain the viability of the Fund. A statement by the Scheme Actuary for the year ended 31 March 2024 is included in the Annual Report and Accounts.
Fund Management
NILGOSC retains overall responsibility for the Fund, with the power to appoint one or more asset managers to manage and invest fund monies on its behalf. In appointing managers, NILGOSC retains statutory responsibility for the management of the Fund and that responsibility cannot be delegated.
NILGOSC has a statutory duty to:
- Take account of the amount to be managed by each manager and be satisfied, having taken advice, that it is not excessive.
- Have regard to the suitability of investments.
- Monitor the performance of the managers, and from time to time review their appointment.
- Take proper advice, obtained at regular intervals.
NILGOSC maintains overall control of the Fund by:
- Agreeing the overall investment objectives with the asset managers taking into account actuarial expectations and investment powers.
- Setting targets for asset allocation.
- Monitoring investment performance.
- Monitoring investment transactions.
NILGOSC has compiled a Statement of Investment Principles (SIP) as required by the Local Government Pension Scheme (Management and Investment of Funds) Regulations (Northern Ireland) 2000.
Investment Aims and Objectives
NILGOSC aims to invest the assets of the Scheme prudently to ensure that the benefits promised to members are provided, and to provide reasonable stability in contribution rates for the employers. To meet this aim, NILGOSC’s overall investment objective is to exceed price inflation and general salary growth over long-term periods.
The Consumer Price Index (CPI) is a measure of the average change over time in the prices paid by consumers for a market basket of consumer goods and services. The annual percentage change in CPI is used as a measure of inflation and to index (i.e. adjust for the effect of inflation) the real value of wages, salaries and pensions to show changes in real values. NILGOSC’s actuarial valuation as at 31 March 2022 assumes a prudent investment return of 4.2% for the main group of employers, which is equivalent to CPI+2.3%. NILGOSC’s overall investment target is to exceed CPI by 3.0% per annum, to be measured over three and five year periods. The target was set on 1 January 2022, following the 2021 investment strategy review.