I am pleased to present my review of the Scheme year ended 31 March 2006. Once again, the past year has seen a lot of press comment about pensions. Whilst there has been some doom and gloom with a number of pension scheme closures the year has also heralded a radical new beginning in pensions thinking with a report from the Pensions Commission on the future of State provision and the resulting Government White Paper entitled ‘Security in retirement: towards a new pensions system’. This paper introduces a radical overhaul to State pension provision going forward with the introduction of a new scheme of personal accounts and increase in the State pension age.

Also this year the provisions of the Finance Act 2004 (also known as ‘simplification’) finally came into force on 6 April 2006 (‘A Day’). The old complicated Inland Revenue limits on the amount of pension a member can receive from a pension scheme have been abolished and replaced by one Lifetime Allowance that covers all pension arrangements. The amount that an individual can contribute to their pension scheme before tax is deducted has also been greatly increased. You should have received two A Day communications from the Pensions Department over the past year keeping you informed of progress and what the new changes mean to you. If in any doubt, please contact the Kingfisher Pensions Department.

As a result, this year has been one of significant change for the Pensions Department who have worked hard toward making the Department compliant with the new pensions regime that came into effect from 6 April 2006.

This year the Trustees have also undertaken a review of the Scheme’s investment strategy. Briefly, the investment objectives are over the longer term to achieve a return on the Scheme’s assets that exceeds the growth of the Scheme’s liabilities, consistent with an acceptable degree of risk. Therefore it is essential that the Trustees get the right mix of asset classes in the Scheme’s portfolio. Longevity, inflation and wage rises are significant risks. In an attempt to mitigate these risks the Trustees are currently seeking out better matching longer term investments and reducing equity exposure.

On top of this the Scheme went through a valuation at 30 September 2005. The reason for this valuation taking place ahead of schedule has been to try to reduce the levy the Scheme has to pay to the Pension Protection Fund for the 2006/2007 tax year. The background to this is at 29 September 2005 the first stage of the additional payment by the company (£130 million) was made to the Scheme to improve the Scheme’s funding position. As the levy rises for pensions schemes that are not well funded, the Trustee wanted to make sure that the levy was based on the latest valuation, i.e. including the £130 million extra contribution. This should reduce the amount the Scheme has to pay to the Pension Protection Fund whilst ensuring the Scheme is as well funded as it can be for the security of its members. The remaining £120 million of the £250 million extra funding agreed by the company is scheduled to be paid to the Scheme over the next two scheme years (i.e. £60 million in the 2006/2007 scheme year and £60 million in 2007/2008).

Later on this year, if you are an employee, you will receive your new look Annual Benefit Statement. As with last years Statement this will also provide you with details of what pension you might expect to receive from the State. By having this information alongside the illustration of your Kingfisher pension, you will be able to get a much clearer idea of the level of pension you can expect to retire on.

We are now also obliged to provide members with a Summary Funding Statement on an annual basis to provide you with information about the Scheme funding. This information will be communicated to members later in the year, if you have not received it already.

There have been some changes to the Board of Trustee Directors during the last year. Mrs Helen Chandler retired on 30th September 2005 after 15 years as a Trustee. Helen made an excellent contribution to the good running of the Scheme during her time as a Trustee and she will be missed. Following on from this I am pleased to announce that two more Trustee Directors have been appointed from the active membership of the Scheme. Alison Martin replaces Charles Baker who resigned in late 2004 and Karl Lidgley fills the vacancy left by Helen Chandler.

Finally, I am especially pleased to announce that this year the Scheme won ‘Best New Benefits Strategy Implementation Award’ at the prestigious ‘Pensions Management’ Awards. Pensions Management is a Financial Times Business publication and the awards seek to recognise excellence in UK occupational pension schemes. These awards have become highly regarded as a badge of quality among schemes. The category the Scheme won is designed for schemes that have changed their benefits for members and aims to recognise good planning and implementation of a change in benefits. This award recognises the hard work put in by the Pensions Department and the Trustee Board in implementing last years Benefit Review.

We live in interesting times and no doubt the recent evolution in pensions thinking will present challenges in the future for pension scheme trustees, employers and the Government. I am certain that we can all work together to make a significant positive contribution to the security of pension provision going forward.

On behalf of the Board I would also like to take this opportunity to recognise the hard work of the Kingfisher Pensions Department and thank them for their tremendous efforts this year.

Tony Stanworth