Derbyshire Pension Fund AGM

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Derbyshire Pension Fund
Annual General Meeting
Chesterfield
12 November 2013
Steve McManus
Investment Officer
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Pension Fund Annual Report
Available 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 its
Management.
Responsibility is delegated from the Council to:
Pensions Committee - Administration/Benefits
Investment 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
Pensioners
Deferred Pensioners
35,791
22,024
20,652
33,151
23,451
23,260
33,586
24,160
23,859
Total
78,467 79,862
Copyright © Derbyshire County Council 2006
81,605
Derbyshire Pension Fund AGM
Pension Fund Costs
Costs per member 2012-13
Pensions Administration
Investments
£14.03
£48.44
Comparison of costs 2012-13
Pensions Administration
Investments
County
Average
Derbyshire
£24.90
£88.07
£14.03
£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 Councillors
2 Derby City Councillors
2 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
investments
The 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 Management
UK 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 equities
UBS Global Investment Management (discretionary)
(b)North American equities
Wellington Management International (discretionary)
(c) Direct property
Keneth 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 cashflows”
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Asset Category
Benchmark
Proportion
Permitted Range
Total Equities
64%
UK Equities
34%
Overseas Equities 30%
Bonds
24%
Fixed Income Bonds 16%
Real Return Bonds
8%
Alternative Assets
3%
Property
7%
Cash
2%
Copyright © Derbyshire County Council 2006
+/-6%
+/-5%
+/-5%
+/-7%
+/-7%
+/-3%
+/-3%
+/-4%
0-8%
Derbyshire Pension Fund AGM
Asset allocation at 31 March 2013 was as follows:
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%
2%
7.3%
+5.3%
Cash
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 2012-13
Equity Markets recovered strongly over the year:
N America
UK
Japan
+19.3% Europe
+16.8% Pacific Ex Japan
+14.3% Emerging Markets
Bonds returns were also good
UK Government
Corporate Bonds
Index Linked Bonds
+5.2%
+13.3%
+10.2%
Returns from Property were subdued at 2.5%
Copyright © Derbyshire County Council 2006
+18.0%
+18.1%
+7.4%
Derbyshire Pension Fund AGM
Investment Performance 2012-13
DCC
%
Benchmark
Index
%
Local
Authority
Average
%
17.7
16.8
18.0
Emerging Markets
20.3
17.2
18.1
20.4
10.5
19.3
18.0
14.3
18.1
7.4
19.0
20.4
15.4
19.2
10.5
Fixed Interest
UK Government Bonds
UK Corporate Bonds
Index linked
6.0
10.3
10.4
5.2
13.3
10.2
6.4
12.6
11.2
6.6
2.5
2.8
14.3
13.5
13.8
UK Equities
Overseas Equities
North America
Europe
Japan
Pacific ex Japan
Property
Total
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
%p.a.
Derbyshire
Benchmark Returns
Average Local Authority
Retail Price Index
8.4
8.5
8.1
4.1
Copyright © Derbyshire County Council 2006
5 years
%p.a.
7.4
6.9
6.5
3.2
10 years
%p.a.
9.9
9.6
9.4
3.3
Value of assets at 31 March for the
last 10 years
Copyright © Derbyshire County Council 2006
Derbyshire Pension Fund AGM
Economy - 2012-13 to date
Austerity Measures (spending cuts/ job losses)
High unemployment
Eurozone Sovereign Debt
Global economic growth - mixed
Inflation
Interest rates at historic lows
Quantitative 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 Account
2011-12
£’000
148,498
(137,527)
10,971
67,886
21,934
(3,520)
86,300
97,271
2,627,763
2,725,034
Contributions
Benefits & Administration
Net additions
Investment income
Change in market value
Investment management expenses
Net returns on investments
Net increase/(decrease) in the Fund
Net assets of the scheme at 1 April
At 31 March
Copyright © Derbyshire County Council 2006
2012-13
£’000
142,799
(130,399)
12,400
69,893
316,671
(3,953)
382,611
395,011
2,725,034
3,120,045
Derbyshire Pension Fund AGM
Pension Fund Net Assets Statement as at 31 March
2012
£’000
315,916
1,491,823
203,339
426,853
91,115
182,695
18,986
2,730,727
(15,636)
9,943
2,725,034
2013
£’000
Investments
Fixed interest securities
Equities
Index-linked securities
Pooled investment vehicles
Properties
Cash deposits and short term loans
Other
Total investments
Investment Liabilities
Current assets and liabilities
Net assets of the scheme at 31 March
Copyright © Derbyshire County Council 2006
293,470
1,767,534
237,657
510,063
96,635
203,988
13,538
3,122,885
(8,185)
5,345
3,120,045
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