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2021-03-31-accounts

THE SALVATION ARMY OFFICERS' PENSION FUND

ANNUAL REPORT

FOR THE YEAR ENDED

31 MARCH 2021

CHARITY REGISTRATION NUMBER: 230791

Page 1

THE SALVATION ARMY OFFICERS' PENSION FUND

CONTENTS

Page
Report of the Salvation Army Pension Fund Board 2 to 6
Accounts 7 to 13
Auditors' Report 14 to 16
Actuary's Statement 17

Page 2

THE SALVATION ARMY OFFICERS' PENSION FUND

REPORT OF THE SALVATION ARMY PENSION FUND BOARD

The members of The Salvation Army Officers’ Pension Fund present their annual report together with the financial statements of the Fund for the year ended 31 March 2021.

CONTROLLING BODY

The Fund is under the control of a Board, which is constituted by the Second Schedule of the Salvation Army Act 1963. This consists of six ex officio members, under the Chairmanship of the Territorial Commander for the time being of The Salvation Army United Kingdom Territory with the Republic of Ireland, and three other Officers of the Army, appointed by the Board and whose terms of office may be determined by the Board, but may not exceed five years. The members of the Board who served during the year and those serving at the date of approval of the Annual Report were:

Commissioner A. Cotterill Commissioner G. Cotterill Commissioner L. Graves Colonel P. Main (Appointed 1 November 2020) Lieut-Colonel B. McCombe Lieut-Colonel A. McCombe Lieut-Colonel A. Read Major C. Daws Major J. Hilditch

PROFESSIONAL ADVISORS

1. Actuaries and Investment Messrs. BWCI Consulting Limited
Consultant: Albert House
St Peter Port
Guernsey GY1 1AW
2. Auditors: Knox Cropper LLP
65-68 Leadenhall Street
London EC3A 2AD
3. Solicitors: Messrs. Slaughter & May
One Bunhill Row
London EC1Y 8YY
4. Bankers: Reliance Bank Limited
Faith House,
23-24 Lovat Lane,
London EC3R 8EB
5. Investment Advisor: Investment Advisory Committee of The Salvation Army
6. Investment Managers: Sarasin & Partners LLP
100 St. Paul’s Churchyard,
London EC4M 8BU
Legal & General Investment Management (LGIM)
1 Coleman Street
London EC2R 5AA

Page 3

THE SALVATION ARMY OFFICERS' PENSION FUND

REPORT OF THE SALVATION ARMY PENSION FUND BOARD (CONTINUED)

ADDRESS OF SCHEME

101 Newington Causeway, London, SE1 6BN.

ORIGINATING INSTRUMENT: Salvation Army Act 1963

CONSTITUTION AND PURPOSES

The Salvation Army Officers' Pension Fund was established for two main purposes:

"..... to pay pensions to those Officers who (immediately before the implementation of the Act) were in receipt of retirement allowances from any of the Salvation Army undertakings", and

"..... to pay pensions and allowances and to make grants to Officers who may retire on or at any time after the appointed day whether by reason of having reached retirement age or on grounds of ill-health or of other disability or on any other grounds which, in the opinion of the Board, justify the payment of a pension or the making of an allowance or grant (as the case may be)."

The Act also states that:

"The pension fund shall be non-contributory and nothing in this Act shall confer any right on any officer or other person to receive or continue to receive a pension or a pension of any particular amount."

It will be seen, therefore, that the Fund is a Pension Fund, as this term is generally understood, in name only, since it has no members and the payments are according to rules which may be redefined at the discretion of the Board.

The fund is a registered Charity (No. 230791).

TAX STATUS

The Scheme is a deemed Registered Pension Scheme and adheres to HMRC regulations.

ANNUAL REPORT

The Salvation Army Officers' Pension Fund is exempt from S47(1)(a) and S47(1)(b) of the 1995 Pensions Act, and the regulations thereunder, and the requirement to produce an annual report including an audit report and actuarial statement is governed by the Salvation Army Act 1963.

During the year the participating employers’ contributions to the Fund amounted to £9.12m in aggregate and, after payment of benefits and administrative expenses, this resulted in net additions from dealings with Officers of £722k. In addition, as a result of the ongoing recovery of the financial markets from the initial effects of COVID-19 at the end of the preceding financial year, net returns on investments disclosed an inflow of funds this year of £45.80m. Overall, the Fund has disclosed a net increase in funds for the year of £46.57m.

Page 4

THE SALVATION ARMY OFFICERS' PENSION FUND

REPORT OF THE SALVATION ARMY PENSION FUND BOARD (CONTINUED)

STATEMENT OF PENSION FUND BOARD'S FINANCIAL RESPONSIBILITIES

The Pension Fund Board is responsible for preparing the Annual Report and financial statements in accordance with applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice). The Salvation Army Act 1963 requires the Pension Fund Board members to prepare accounts for each financial year which give a true and fair view of the state of affairs of the Fund for that period.

In preparing the accounts, they are required to select suitable accounting policies and apply them consistently; make judgements and estimates that are reasonable and prudent; state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements; and prepare the accounts on a going concern basis when it is appropriate to presume that the Fund will continue to operate.

They are responsible for keeping proper accounting records which disclose with reasonable accuracy, at any time, the financial position of the Fund and to enable them to ensure that the accounts comply with recommended practice. They are also responsible for safeguarding the assets of the Fund and for taking reasonable steps for the prevention and detection of fraud and other irregularities.

ACTUARIAL POSITION

The Fund is subject to triennial valuations. The most recent full actuarial valuation was carried out by BWCI Consulting Limited as at 31 March 2019 whose actuarial statement is set out on page 16.

ORDINARY CONTRIBUTIONS RECEIVABLE 2021 2020
The number of active UK officers in respect of which ordinary
contributions were payable at the year end amounted to:
Officers 959 982

As detailed in note 3 to the financial statements, contributions are also payable where there is a leadership post not held by an officer.

INVESTMENTS

The Fund’s investment policy is determined by the Board, under the advice of the Investment Advisory Committee of The Salvation Army (IAC) and its Statement of Investment Principles is summarised below. The Salvation Army maintains a Code of Ethical Practice to ensure its funds are invested to reflect its ethical and moral stance.

The Board’s objective is to invest the assets of the Fund in the best interests of members and beneficiaries. It aims to generate sufficient return, at appropriate levels of risk and in line with the Ethical Code, to enable the Fund to meet its future liabilities. The Board recognises that investment in a small number of asset classes or individual investments increases the risk of significant loss over a short period of time and believes that the need for an adequately diversified overall investment portfolio is met by the benchmark and ranges set out below.

In addition, the Board has selected a passive investment manager (LGIM) and an active investment manager (Sarasins) for the equities to provide diversification by manager and by investment style. Each investment manager is expected to take investment decisions with regard to a suitable level of diversification being maintained within asset classes.

Investments managed by Sarasins and Partners LLP are held with The Bank of New York Mellon who act as custodian for the assets. Investments managed by LGIM are held with HSBC Bank PLC and Citibank, NA (London Branch).

Page 5

THE SALVATION ARMY OFFICERS' PENSION FUND

REPORT OF THE SALVATION ARMY PENSION FUND BOARD (CONTINUED)

INVESTMENTS (Continued)

The Fund’s benchmarks and ranges of distribution are as follows.

Overall asset allocation,

Asset Category
UK Equities
Overseas Equities
Long dated UK
corporate bonds
Property
Cash
TOTAL		 Long term
target asset
allocation
Permitted
range
Performance Benchmark
45.0%
+/- 5%
FTSE Custom All-Share Specialist
Ethical Index
22.5%
+/- 5%
FTSE Custom All World ex UK
Specialist Ethical (Net WHT) Index
25.0%
+/- 5%
Markit iBoxx Sterling Non-Gilts
Over 15 year Index
7.5%
+/- 2.5%
MSCI/AREF UK Quarterly All
Balanced Property Fund Index
0.0%
+ 5%
100%

Active manager asset allocation,

Asset Category
UK Equities
Overseas Equities
Long dated UK
corporate bonds
Cash
TOTAL		 Asset allocation
Permitted
range
Performance Benchmark
27.0%
+/- 10%
MSCI UK Investable Market Index
13.0%
+/- 10%
MSCI AC World ex uk Index
60.0%
+/- 5%
Markit iBoxx Sterling Non-Gilts
Over 15 year Index
0.0%
+ 5%
100%

The active manager is allocated 100% of the overall property allocation on an execution only service. The allocation to property is managed by the Board and delegated to the IAC.

Passive manager asset allocation,

Asset fund
category
Custom UK Equity
Index Fund
Custom All-World ex
UK Equity Index Fund
TOTAL		 Asset allocation
Permitted
range
Performance Benchmark
67.0%
+/- 2%
FTSE Custom All-Share Specialist
Ethical Index
33.0%
+/- 2%
FTSE Custom All World ex UK
Specialist Ethical (Net WHT) Index
100%

A full analysis of the investment portfolio is set out in Note 7 to the financial statements.

The analysis of investments (at bid market value) as at 31 March 2021 was as follows:

UK Equities
Overseas Equities
UK Bonds
Property
Equity Funds
Cash		 Market Value
£
24,210,894
25,031,734
63,147,032
16,879,186
127,886,888
1,759,704
£258,915,438		 %
9
10
24
7
49
1
100%

Page 6

THE SALVATION ARMY OFFICERS' PENSION FUND

REPORT OF THE SALVATION ARMY PENSION FUND BOARD (CONTINUED)

INVESTMENTS (Continued)

Lothbury Property Trust, had a market value of £16,879,186 at the year-end (2020: £16,765,019). Legal & General Custom UK Equity Index Fund had a market value of £87,049,395 at the year-end (2020: £65,226,881). Legal & General Custom All World ex UK Equity Index Fund had a market value of £40,837,493 at the year-end (2020: £31,749,792). All of these investments represent more than 5% of the net assets of the Pension Fund.

The Fund performance against benchmark over 1 and 3 years was as follows:

Performance over 1 year (%) Performance over 1 year (%) Performance over 3 years (%pa) Performance over 3 years (%pa)
Fund Benchmark Fund Benchmark
Sarasin excluding Property 15.3 17.9 8.2 8.0
Sarasin Property 1.9 2.5 1.4 2.4
LGIM UK Equities 27.2 27.2 n/a n/a
LGIM Overseas Equities 40.4 40.0 n/a n/a
OPF Consolidated 21.7 23.5 6.7 6.6

Approved by the Trustees on 13 January 2022.

SIGNED ON BEHALF OF THE BOARD

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________
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Lieut-Colonel A. Read ____

Page 7

THE SALVATION ARMY OFFICERS’ PENSION FUND

FUND ACCOUNT

FOR THE YEAR ENDED 31 MARCH FOR THE YEAR ENDED 31 MARCH FOR THE YEAR ENDED 31 MARCH 2021
Notes 2021 2020
£ £
CONTRIBUTIONS AND BENEFITS
Contributions Receivable 1(b), 3 9,119,733 8,574,665
Transfers in 520 34,971
9,120,253 8,609,636
Benefits Payable 4 8,124,095 8,325,725
Transfers out - 88,558
Administrative Expenses 5 274,454 207,906
8,398,549 8,622,189
Net Additions/(Withdrawals) from
Dealings with Officers 721,704 (12,553)
RETURNS ON INVESTMENTS
Investment Income 1(b), 6 2,915,991 3,806,707
Change in Market Value of
Investments 7 43,428,841 (20,291,566)
Investment Management Fees (495,331) (481,218)
Net Returns on Investments 45,849,501 (16,966,077)
NET
INCREASE/(DECREASE)		 IN THE
FUND DURING THE YEAR 46,571,205 (16,978,630)
NET ASSETS OF THE SCHEME
At 1 April 2020 214,644,247 231,622,877
At 31 March 2021 £261,215,452 £214,644,247

Page 8

THE SALVATION ARMY OFFICERS' PENSION FUND

STATEMENT OF NET ASSETS

AS AT 31 MARCH 2021

Notes
INVESTMENT ASSETS
Bonds
7
Equities
7
Property Fund
7
Legal & General UK Fund
7
Legal & General Worldwide Fund
7
Cash Deposits
7
CURRENT ASSETS
8
CURRENT LIABILITIES
9
TOTAL NET ASSETS AT 31 MARCH		 2021
2020
£
£
63,147,032
56,334,653
49,242,628
37,101,528
16,879,186
16,765,019
87,049,395
65,226,881
40,837,493
31,749,792
1,759,704
5,434,477
258,915,438
212,612,350
3,175,388
2,290,091
(875,374)
(258,194)
£261,215,452
£214,644,247

These financial statements were approved by the board on 13 January 2022.

Signed on behalf of the board:

Lieut-Colonel A. Read

Page 9

THE SALVATION ARMY OFFICERS' PENSION FUND

NOTES TO THE FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2021

1. ACCOUNTING POLICIES

2. ACTUARIAL VALUATION

The accounts summarise the transactions and net assets of the Fund. They do not take account of obligations to pay pensions and benefits which fall due after the end of the Fund year. The actuarial position of the Fund, which does take account of such obligations, is dealt with in the statement by the actuary on page 16 and these financial statements should be read in conjunction therewith. This statement relates to the Actuarial Valuation as at 31 March 2019.

3. CONTRIBUTIONS RECEIVABLE

Ordinary Annual Contribution
Annual Capital Contribution
Special Contribution		 2021
2020
£
£
5,119,733
4,574,665
2,000,000
2,000,000
2,000,000
2,000,000
9,119,733
8,574,665

Ordinary annual contributions represent a fixed rate per appointment where there is leadership, however, only commissioned officers at the point of retirement are entitled to a pension from the Scheme. Contributions are payable by The Salvation Army, which this year amounts to £4,860 per annum per officer (2020: £4,740). This represents an average 1,053 units paid during the year (2020: 965).

Page 10

THE SALVATION ARMY OFFICERS' PENSION FUND

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 MARCH 2021

3. CONTRIBUTIONS RECEIVABLE (Continued)

Following the 2019 actuarial valuation, contributions have been set at £4,680 per active officer from 1 April 2020 (increasing thereafter in line with changes in officers’ allowances) and additional capital contributions of £2,000,000 will continue to be paid for approximately 13 years (also increasing in line with changes in allowances) from that date.

4. BENEFITS PAYABLE

Pensions to retired Officers
Lump Sum Retirement Grants
Transfers		 2021
£
7,259,137
864,958
-
£8,124,095		 2020
£
7,654,575
671,150
-
£8,325,725

5. ADMINISTRATIVE EXPENSES

The Salvation Army Management Charge
Auditors Remuneration
Audit Fees
Actuarial Fees
Other Professional Fees
Other Expenses		 2021
£
29,504
12,600
202,701
24,681
4,968
£274,454		 2020
£
37,456
12,300
101,790
46,895
9,465
£207,906

6. INVESTMENT INCOME

Income from Fixed Interest Securities
Dividends from Equities
Income from Property Fund
Interest on Cash Deposits		 2021
£
2,117,357
694,601
102,792
1,241
2,915,991		 2020
£
2,140,282
1,104,762
542,861
18,802
£3,806,707

Page 11

THE SALVATION ARMY OFFICERS' PENSION FUND

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 MARCH 2021

7. INVESTMENTS

Bonds
Equity Funds
Equities
Property Fund
Cash Deposits		 Market Value
1/4/20
£
56,334,653
96,976,673
37,101,528

16,765,019
207,177,873
5,434,477
£212,612,350		 Purchases
at Cost
£
31,039,323
-
12,865,966
-
43,905,289		 Sales
Proceeds
£
(25,439,293)
-
(11,916,976)
-
(37,356,269)		 Change in
Market Value
£
1,212,349
30,910,215
11,192,110
114,167
43,428,841		 Market
Value
31/3/21
£
63,147,032
127,886,888
49,242,628
16,879,186
257,155,734
1,759,704
£258,915,438

The change in market value of investments during the year comprises all increases and decreases in market value of investments held at any time during the year, including profits and losses realised on sales of investments during the year.

For Equity Funds, the change in market value also includes in respect of the underlying investments, any income generated, transactions costs and sale proceeds in respect of the purchase or sale of those investments. The value of these costs and revenues are not separately identified.

During the year the book value of investments increased by £8,336,484

BONDS
Fixed Interest Securities
Corporate Bonds
UK Gilts
Overseas Corporate Bonds
Overseas Government Bonds
Equity Funds
UK Quoted
Overseas
EQUITIES
UK Quoted
Overseas
PROPERTY FUND
CASH DEPOSITS
Brokers Balances
Sterling
TOTALS		 2021
£
Market Value
Book Value
£
£
63,147,032
60,756,252
-
-
-
-
-
-
63,147,032
60,756,252
87,049,395
83,204,982
40,837,493
32,485,058
127,886,888
115,690,040
24,210,894
20,889,641
25,031,734
18,366,049
49,242,628
39,255,960
16,879,186
14,535,353
1,759,704
1,759,704
£258,915,438
£231,967,309		 2020
£
Market
Value
Book Value
£
£
56,334,653
52,771,818
-
-
-
-
-
-
56,334,653
52,771,818
65,226,881
83,204,982
31,749,792
32,485,058
96,976,673
115,690,040
19,755,608
20,712,615
17,345,920
14,857,198
37,101,528
35,569,813
16,765,019
14,164,678
5,434,477
5,434,476
£212,612,350
£223,630,825		 2020
£
Market
Value
Book Value
£
£
56,334,653
52,771,818
-
-
-
-
-
-
56,334,653
52,771,818
65,226,881
83,204,982
31,749,792
32,485,058
96,976,673
115,690,040
19,755,608
20,712,615
17,345,920
14,857,198
37,101,528
35,569,813
16,765,019
14,164,678
5,434,477
5,434,476
£212,612,350
£223,630,825
52,771,818
83,204,982
32,485,058
115,690,040
20,712,615
14,857,198
35,569,813
14,164,678
5,434,476
£223,630,825

Page 12

THE SALVATION ARMY OFFICERS' PENSION FUND

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 MARCH 2021

7. INVESTMENTS (Continued)

Investment fair value hierarchy

The fair value of investments has been determined using the following fair value hierarchy:

Level 1 The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.

Level 2 Inputs other than quoted prices included within Level 1 that are observable (ie developed using market data) for the asset or liability, either directly or indirectly.

Level 3 Inputs are unobservable (ie for which market data is unavailable) for the asset or liability.

The Fund’s investment assets and liabilities have been fair valued using the above hierarchy levels as follows:

As at 31 March 2021
UK Bonds
Equity Funds (pooled investment vehicles)
Equities
Property
Cash
As at 31 March 2020
UK Bonds
Equity Funds (pooled investment
vehicles)
Equities
Property
Cash		 Level 1
Level 2
Level 3
Total
£
£
£
£
63,147,032
-
-
63,147,032

-
127,886,888
-
127,886,888
49,242,628
-
-
49,242,628
-
16,879,186
-
16,879,186
1,759,704
-
-
1,759,704
£114,149,364 £144,766,074
£-£258,915,438
Level 1
Level 2
Level 3
Total
£
£
£
£
56,334,653
-
-
56,334,653
-
96,976,673
-
96,976,673
37,101,528
-
-
37,101,528
-
16,765,019
-
16,765,019
5,434,477
-
-
5,434,477
£98,870,658 £113,741,692
£-£212,612,350

Investment risks

FRS 102 requires the disclosure of information in relation to certain investment risks.

Credit risk: this is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.

Market risk: this comprises currency risk, interest rate risk and other price risk.

Currency risk: this is the risk that the fair value or future cash flows of a financial asset will fluctuate because of changes in foreign exchange rates.

Interest rate risk: this is the risk that the fair value or future cash flows of a financial asset will

fluctuate because of changes in market interest rates.

Page 13

THE SALVATION ARMY OFFICERS' PENSION FUND

NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)

FOR THE YEAR ENDED 31 MARCH 2021

7. INVESTMENTS (Continued)

Other price risk: this is the risk that the fair value of future cash flows of a financial asset 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 individual financial instrument or its issuer, or factors affecting all similar financial instruments traded in the market.

The Fund is subject to credit risk because it directly invests in bonds. This risk is mitigated by investing in government bonds where the credit risk is minimal, or corporate bonds which are rated at least investment grade.

Currency risk arises on the Fund’s equities held in overseas markets and indirectly from the underlying investments held in the overseas equities fund. The Trustees have set a benchmark limit to overseas currency exposure of 27.5% of the total portfolio value.

The Fund is subject to interest rate risk because some of its investments are held in bonds and cash. The Trustees have set a benchmark for total investment in bonds of 30% and cash of 5% of the total investment portfolio.

Other price risk arises principally in relation to the Fund’s return seeking portfolio which includes directly held equities, indirectly held equities in the UK and overseas equity funds and the property fund unit trust. The Trustees have set a benchmark for total investment in property of 10% of the total investment portfolio.

8. CURRENT ASSETS

Debtors:
Accrued Dividends
Accrued Interest
Amounts due from Central Funds
Cash at Bank:
Current Account
Deposit Account
URRENT LIABILITIES
Sundry Creditors		 2021
£
79,646
814,895
494,248
1,033,345
753,254
£3,175,388
2021
£
£(875,374)		 2020
£
69,015
785,109
240,914
443,007
752,046
£2,290,091
2020
£
£(258,194)

9. CURRENT LIABILITIES

10. RELATED PARTY TRANSACTIONS

The administration of the Fund is undertaken by The Salvation Army United Kingdom Territory Central Funds, which has levied a management charge of £29,504 for the year (2020: £37,456). At the year end a net balance of £494,248 was due from Central Funds (2020: £240,914). The Fund's banker is Reliance Bank Limited, which is a subsidiary company of The Salvation Army International Trust. At the year end, the Fund had bank balances of £1,786,599 (2020: £1,195,053) with the Bank.

Page 14

INDEPENDENT AUDITORS’ REPORT

TO THE MEMBERS OF THE BOARD OF

THE SALVATION ARMY OFFICERS' PENSION FUND

OPINION ON FINANCIAL STATEMENTS

We have audited the financial statements of The Salvation Army Officers’ Pension Fund for the year ended 31 March 2021, which comprise the Fund Account, the Statement of Net Assets and the notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including FRS 102, the Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Members of the Board, as a body, in accordance with Section 145 of the Charities Act 2011 and regulations made under Section 154 of that Act and with The Salvation Army Act 1963. Our audit work has been undertaken so that we might state to the Members those matters we are required to state to them in an auditors’ 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 Pension Fund and the Members for our audit work, for this report or for the opinions we have formed.

In our opinion the financial statements:

BASIS FOR OPINION

We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the financial statements section of our report. We are independent of the Pension Fund in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

CONCLUSIONS RELATING TO GOING CONCERN

In auditing the financial statements, we have concluded that the Trustees’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Fund’s ability to continue as a going concern for a period of at least 12 months from when the financial statements are authorised for issue.

Our responsibilities and the responsibilities of the trustees with respect to going concern are described in the relevant sections of this report.

OTHER INFORMATION

The Members are responsible for the other information. The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon.

Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

Page 15

INDEPENDENT AUDITORS’ REPORT

TO THE MEMBERS OF THE BOARD OF

THE SALVATION ARMY OFFICERS' PENSION FUND

In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION

We have nothing to report in respect of the following matters where the Charities (Accounts and Reports) Regulations 2008 require us to report to you if, in our opinion:

RESPONSIBILITIES OF PENSION FUND BOARD

As described on page 4, the Pension Fund Board is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Members determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, the Members are responsible for assessing the Pension Fund’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Members either intend to liquidate the Pension Fund or to cease operations, or have no realistic alternative but to do so.

AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS

We have been appointed as auditor and report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with The Salvation Army Act 1963. Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below:

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INDEPENDENT AUDITORS’ REPORT

TO THE MEMBERS OF THE BOARD OF

THE SALVATION ARMY OFFICERS' PENSION FUND

There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of noncompliance. Auditing standards also limit the audit procedures required to identify non-compliance with laws and regulations to enquiry of the trustees and other management and the inspection of regulatory and legal correspondence, if any.

Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.

A further description of our responsibilities for the audit of the financial statements is located on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.

KNOX CROPPER LLP 65 Leadenhall Street London, EC3A 2AD 13 January 2022

Chartered Accountants Statutory Auditors

Knox Cropper LLP is eligible to act as an auditor in terms of section 1212 of the Companies Act 2006 .

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THE SALVATION ARMY OFFICERS' PENSION FUND

SUMMARY OF ACTUARIAL VALUATION

An actuarial valuation of the Fund was carried out as at 31 March 2019. The main purposes of the valuation were to review the financial position of the Fund at that date and to help establish the contributions payable to the Fund in the future.

The valuation assumed that the Fund would continue as a going concern. In order to carry out the valuation, the actuary made a number of assumptions based on economic conditions at the valuation date, on prospective investment returns and regarding longevity of Officers. However, changes in market values of the assets and in market conditions after the valuation date may mean that the assumptions and market values on which it is based are no longer appropriate. The Fund’s funding position could have changed significantly since the valuation and this could affect the contributions payable in the future.

The main economic assumptions used in the calculations were as follows:

Price inflation 3.6% pa
Rate of increase in allowances 4.1% pa
Rate of pension increases 4.1% pa
Rate of deferred pension increases 4.1% pa
Pre-retirement discount rate 3.4% pa
Post-retirement discount rate 2.7% pa
Management expenses 4.0% of the future ordinary contributions
(other than investment related expenses)
Assets Market value

The valuation revealed a funding shortfall of £7,156,000 and a funding ratio of 97.0%. After taking into account the cost of benefits accruing in the future and the future expected ordinary contributions, the overall shortfall was £26,369,000.

It was agreed that the following contributions would be requested from the Army to be paid to the Fund:

These payments would eliminate the funding shortfall over a period of around 13 years. However additional capital payments are expected to be made by the Army as and when they can be afforded, with the aim of eliminating the funding shortfall over a shorter period.

A contingent asset arrangement was put in place following the 2007 actuarial valuation between the Board and the Army, such that the Board would have first call over the housing stock of the Army when retired Officers were Promoted To Glory, if the Army was unable to meet the shortfall. The contingent asset supports the shortfall repayment period.

Diana Simon BWCI Consulting Limited Consulting Actuaries