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surrey pension fund update

Agenda. The BasicsProposed changes to the benefitsInvestment performanceProspects for the actuarial valuationFunding Strategy Statement. The Basics. A statutory scheme

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surrey pension fund update

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    1. Surrey Pension Fund Update Michael Taylor Executive Director, Performance & Resources Surrey County Council

    2. Agenda The Basics Proposed changes to the benefits Investment performance Prospects for the actuarial valuation Funding Strategy Statement

    3. The Basics A statutory scheme – regulated by ODPM A 1/80ths scheme Employees pay 6% Employers pay approximately 20% (on average) Normal retirement age 65 … or age 60 with 25 years service (rule of 85) Earliest retirement age 50

    4. Role of Administering Authority Collect income from employers and employees Pay pensions Invest surplus Set investment strategy Continual monitoring and review of investment management arrangements Explain and consult on our actions with stakeholders Major events Every 3 years – actuarial review Set employers’ contribution rates

    5. Proposed changes to the benefits Abolish rule of 85 – normal retirement age 65 for everyone No payment of pension for early retirement below age 55 But … phased in over 10 years And … government have rejected increasing employees’ contributions, so far

    6. Where are we now? 31 March 2004 Fund value Ł1.1 billion (as at 31 March 2003 Ł846m) Fund members 50,000 Pensioners 14,200 Actives 22,400 Deferreds 13,200

    7. Investment performance WM Results as at 31 March 2004 % per annum Surrey Median Rank Surrey B/mark 2003/2004 25.8 23.9 2 25.6 2002/2003 -20.4 -20.1 6 -20.5 2001/2002 0.3 -1.0 2 -1.3 2000/2001 -4.9 -7.5 2 -7.7 2000/2003 -8.8 -9.4 4 n/a 1998/2003 -2.0 -1.7 6 n/a 1993/2003 5.2 6.2 9 n/a

    8. Asset Allocation Strategy % % Equities 75 UK 45 Overseas 30 Bonds 20 Property 5

    9. Investment Management Arrangements % Passive Core 20 Active Specialist Management 60 UK equities 25 Global equities 15 Bonds 15 Property 5 Satellite High Conviction Equities 20

    10. Prospects for the actuarial valuation In 2001 … Average County Pension Fund solvency 91% Likely to reduce to around 70-75% in 2004 Why? … FTSE All Share index down 11% People living longer Little benefit from abolition of 85 year rule

    11. Prospects for the actuarial valuation - Surrey 2001 Valuation … Surrey County Council Pension Fund solvency 75% 2004 Valuation … Solvency likely to reduce to around 60% Employers’ contributions likely to rise by 1.5 – 2% of pensionable pay in 2005/06 Possible similar increases in 2006/07 and 2007/08 Why? … Investment returns below actuary’s assumptions People living longer Little benefit from abolition of 85 year rule

    12. Valuation issues Assumptions on returns from equities Length of period over which to spread deficit Future funding strategy Final report due early December 2004

    13. Funding Strategy Statement A new statutory responsibility Purpose To establish a strategy to identify how employers’ liabilities are best met in future To support regulatory requirement to maintain as nearly constant a contribution rate as possible To take a prudent longer term view of funding the liabilities No surprises

    14. Funding Strategy Statement (2) Over the next 6 months Consult with all employers Develop Funding Strategy Statement Discuss with actuary in light of draft valuation results Implement strategy principles Present to AGM Publish Funding Strategy Statement by 31 March 2005

    15. Finally … Celebrate some successes … Second decile performance in 2003/04 Consolidated 4 years of good performance And from our private equity investment Bon Marche: over 100% return on investment Fat Face: a growing presence on the High St

    16. Questions ?

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