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Transcript of Copyright © Derbyshire County Council 2006 Derbyshire Pension Fund Annual General Meeting...
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund
Annual General Meeting
Chesterfield12 November 2013
Steve McManusInvestment Officer
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Pension Fund Annual ReportAvailable on the Council’s website or in hard copy
on request
7 sections dealing with:
• Management and Financial Performance• Investment Policy and Performance• Arrangements for the Administration of the Fund• Pensions Administration Strategy/Fund Activity• Fund account and net asset statement• Auditor’s Opinion• Actuary’s Statement
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Membership of the Pension Fund is available to: All Local Authorities in Derbyshire Certain Admission bodies
Derbyshire County Council is responsible for itsManagement.
Responsibility is delegated from the Council to:
Pensions Committee - Administration/BenefitsInvestment Committee - Investment of Fund
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
• Day to day management rests with the Director of Finance
• Pensions Section -Administration of benefits
• Investment Section - Investment Management
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Membership 2011 2012 2013
Contributors 35,791 33,151 33,586Pensioners 22,024 23,451 24,160
Deferred Pensioners 20,652 23,260 23,859
Total 78,467 79,862 81,605
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Pension Fund Costs
Costs per member 2012-13Pensions Administration £14.03Investments £48.44
Comparison of costs 2012-13County Derbyshire
Average
Pensions Administration £24.90 £14.03Investments £88.07 £48.44
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Management of Investments
Responsibility is delegated to the County Council’s Investment Committee comprising:
7 County Councillors2 Derby City Councillors2 Councillors representing the Local Government Association (Derbyshire)
2 Employee representatives attend as non-voting members
2 Independent Investment Advisers
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Powers and Duties of the Investment Committee
Based on Government Regulations
Designed to ensure that the Fund is properly and effectively managed.
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Main Duties
To appoint managers, advisers etc.To monitor performance To determine an investment policy having regard
to:The advisability of investing in a wide variety of investmentsThe suitability of particular investments and types of investments
The Regulations require that advice should be taken in carrying out the above duties.
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Investment Management
The Fund’s investment assets are managed:
Internally by the in-house team
Externally by specialist managers
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Internal ManagementUK Bonds, International Bonds
UK Equities
Japanese Equities*, Asia Pacific Equities*, Emerging Market Equities*
Private Equity, Infrastructure, Cash.
(* through pooled investment funds)
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
External Management
(a)European equitiesUBS Global Investment Management (discretionary)
(b)North American equitiesWellington Management International (discretionary)
(c)Direct propertyKeneth Peters & Co. (agents and advisors)
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
• Investment Policy
• “To invest the Pension Fund with the aim of maximising its returns subject to an agreed level of risk and having taken into account the Fund’s liabilities and its projected cash-flows”
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Asset Category Benchmark
Proportion Permitted Range
Total Equities 64% +/-6%
UK Equities 34% +/-5%
Overseas Equities 30% +/-5%
Bonds 24% +/-7%
Fixed Income Bonds 16% +/-7%
Real Return Bonds 8% +/-3%
Alternative Assets 3% +/-3%
Property 7% +/-4%
Cash 2% 0-8%
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Asset Category Benchmark
Proportion
Actual Difference
Total Equities 64% 67.6% +3.6%
UK Equities 34% 33.7% -0.3%
Overseas Equities
30% 33.9% +3.9%
Bonds 24% 19.1% -4.9%
Fixed Income Bonds
16% 11.5% -4.5%
Real Return Bonds 8% 7.6% -0.4%
Alternative Assets 3% 1.2% -1.8%
Property 7% 4.8% -2.2%
Cash 2% 7.3% +5.3%
Asset allocation at 31 March 2013 was as follows:
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
• The Pension Fund’s investment performance targets
• To beat the actuary’s long term assumptions of returns (currently an investment return of 6.75%pa)
• To outperform the Fund’s benchmark index return by ¼% over 1, 3, 5 and 10 year periods
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Markets 2012-13Equity Markets recovered strongly over the year:N America +19.3% Europe +18.0%UK +16.8% Pacific Ex Japan +18.1%Japan +14.3% Emerging Markets +7.4%
Bonds returns were also good
UK Government +5.2%Corporate Bonds +13.3%Index Linked Bonds +10.2%
Returns from Property were subdued at 2.5%
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGMInvestment Performance 2012-13
DCC%
Benchmark
Index%
LocalAuthorityAverage
%UK Equities 17.7 16.8 18.0
Overseas Equities North America 20.3 19.3 19.0 Europe 17.2 18.0 20.4 Japan 18.1 14.3 15.4 Pacific ex Japan 20.4 18.1 19.2 Emerging Markets 10.5 7.4 10.5 Fixed Interest
UK Government Bonds 6.0 5.2 6.4UK Corporate Bonds 10.3 13.3 12.6Index linked 10.4 10.2 11.2
Property 6.6 2.5 2.8
Total 14.3 13.5 13.8
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Longer Term Performance (periods to 31 March 2013)
Performance for the Fund over 3, 5 and 10 years to 31 March 2013 is shown below
3 years 5 years 10 years
%p.a. %p.a. %p.a.
Derbyshire 8.4 7.4 9.9
Benchmark Returns 8.5 6.9 9.6
Average Local Authority 8.1 6.5 9.4
Retail Price Index 4.1 3.2 3.3
Copyright © Derbyshire County Council 2006
Value of assets at 31 March for the last 10 years
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Economy - 2012-13 to dateAusterity Measures (spending cuts/ job losses)High unemploymentEurozone Sovereign Debt Global economic growth - mixed Inflation
Interest rates at historic lowsQuantitative Easing and Tapering
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Pensions are based on
Number of years’ service
Final salary – Current Scheme
Career Average Salary – New Scheme w.e.f. 2014
No connection with investment performance
Employers/Council Tax Payers do expect good performance - the Scheme has to be affordable and sustainable
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Actuarial Valuation
Undertaken every three years to determine the solvency of the Fund and to set the level of employer contributions.
Last undertaken as at 31 March 2010.
The actuarial value placed on the assets represented 81% of the value of the past service liabilities compared with 80% at the 2007 valuation.The 2013 Valuation is near completion. Initial results show Funding position has improved to 83%, but the absolute funding shortfall has increased from £500m to 563m.
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Fund account and net asset statement
Pension Fund - Fund Account2011-12 2012-13
£’000 £’000
148,498 Contributions 142,799
(137,527) Benefits & Administration (130,399)
10,971 Net additions 12,400
67,886 Investment income 69,893
21,934 Change in market value 316,671
(3,520) Investment management expenses (3,953)
86,300 Net returns on investments 382,611
97,271 Net increase/(decrease) in the Fund 395,011
2,627,763 Net assets of the scheme at 1 April 2,725,034
2,725,034 At 31 March 3,120,045
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Pension Fund Net Assets Statement as at 31 March 2012 2013
£’000 £’000
Investments
315,916 Fixed interest securities 293,470
1,491,823 Equities 1,767,534
203,339 Index-linked securities 237,657
426,853 Pooled investment vehicles 510,063
91,115 Properties 96,635
182,695 Cash deposits and short term loans 203,988
18,986 Other 13,538
2,730,727 Total investments 3,122,885
(15,636) Investment Liabilities (8,185)
9,943 Current assets and liabilities 5,345
2,725,034 Net assets of the scheme at 31 March 3,120,045