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Annual Pension Fund Meeting 25 July 2012 Review of the Year 2011-12

Suffolk County Council Pension Fund. Annual Pension Fund Meeting 25 July 2012 Review of the Year 2011-12. Geoff Dobson Head of Strategic Finance. TODAY’S AGENDA. Key Statistics Management of the Fund Funding Strategy Investment Performance Review of Investment Strategy

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Annual Pension Fund Meeting 25 July 2012 Review of the Year 2011-12

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  1. Suffolk County Council Pension Fund Annual Pension Fund Meeting 25 July 2012 Review of the Year 2011-12 Geoff Dobson Head of Strategic Finance

  2. TODAY’S AGENDA • Key Statistics • Management of the Fund • Funding Strategy • Investment Performance • Review of Investment Strategy • Future of the Scheme

  3. Key Statistics 2011-12 • Value of Fund at March 2012 £1,556m • … over £1.5 billion • Scheduled & Resolution Bodies 59 • Admitted Bodies 23 • … 82 employers • Employee members 17,872 • Pensioners 12,325 • Deferred 15,840 • … around 46,000schememembers • Average pension £4,470 • …around £4,500per year

  4. Key Statistics 2011-12 • Transactions with scheme members • Employer/employee contributions £91m • Pension benefits -£74m • … still cash flow positive • Investments • Investment income £28m • Investment return 2011/12 +1.7% • … disappointing investment return • Funding level at March 2012 72% • … deterioration on last valuation (2010)

  5. Management of the Fund Legal framework Superannuation Act 1972 LGPS regulations Guidance on best practice Regulation Communities & Local Govt department CIPFA Internal & external audit Governance Suffolk Pension Fund Committee

  6. Pension Fund Committee Suffolk Pension Fund Committee Responsibilities Investment strategy Funding strategy Scheme administration Representation 5 County Councillors 2 district Councillors Trade union representative Advisors Council officers Fund Actuary Investment Advisor Fund managers Specialist advisors (legal, voting etc)

  7. Management of the Fund Suffolk County Council Comm. & Local Govt Professional advisers Pension Fund Committee CIPFA Investment managers Auditors Stakeholders, employers & scheme members

  8. Funding Strategy 2010 Suffolk • Average county council funding level 78%. • Suffolk’s 2010 funding level 82% … better than most counties.

  9. Funding Strategy • Suffolk funding level 82% March 2010 • Suffolk funding level 72% March 2012 • Better than average local authority 66% March 2012 • Funding level at March 2013 …?

  10. Funding Strategy 2010 • Key principles at 2010 Valuation: prudence, stability and affordability • Prudence: ensure that Fund returns to fully funded position over medium to long-term (c.20 years) • Stability: ensure that employer contribution do not fluctuate too much year to year. • Affordability: ensure that employer contributions are affordable to minimise impact on budgets and council tax • Long-term stabilisation mechanism for major employers. • Contribution increases for major employers limited to 1% of pay per year for 3 years to 2013/14.

  11. Outlook for 2013 Valuation • Increase in Fund deficit • Increased cost of ongoing service • Impact of LGPS 2014 changes • … Too early to quantify impact on employer contributions • … Actuary will say more about this

  12. Investment Strategy 2011-12 { Equities 63%, biggest share of Fund. Diversification between asset classes reduces risk.

  13. Investment Managers 2011-12 10 managers reduces risk of individual manager’s underperformance

  14. Suffolk investment performance • Poor returns for 2011/12 … Returns over 3 years better. • Long-term performance still below target.

  15. Investment Performance: managers All active managers underperformed in 2011/12. Fund manager reviews/changes during 2012.

  16. Changes to Investment Strategy New asset allocations: Absolute return (+10%) Infrastructure (+5%) Timber (+2%) Reductions to equity allocations: UK Equities (-3%) Overseas equities (-14%) Changes to bonds allocations Gilts (-4%) Emerging market debt (+2%) Debt opportunities (+2%)

  17. Future Investment Strategy } Equities 45%, still biggest share of Fund.

  18. New investmentmanager structure New managers: Infrastructure (Partners Group, KKR) Absolute return (Pyrford, BlueCrest, Winton) Timber (Brookfield) Bonds (M&G)

  19. LGPS 2014 Timetable • Joint LGA/trade union proposals May 2012 • LGA consultation July 2012 • Government consultation autumn 2012 • Regulations by March 2013 • Implementation April 2014 … lots to do!

  20. Review of the Year 2011-12 Any Questions?

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