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


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



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



• Day to day management rests with the Director of Finance

• Pensions Section -Administration of benefits

• Investment Section - Investment Management



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



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



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



Powers and Duties of the Investment Committee

Based on Government Regulations

Designed to ensure that the Fund is properly and effectively managed.



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.



Investment Management

The Fund’s investment assets are managed:

Internally by the in-house team

Externally by specialist managers



Internal ManagementUK Bonds, International Bonds

UK Equities

Japanese Equities*, Asia Pacific Equities*, Emerging Market Equities*

Private Equity, Infrastructure, Cash.

(* through pooled investment funds)



External Management

(a)European equitiesUBS Global Investment Management (discretionary)

(b)North American equitiesWellington Management International (discretionary)

(c)Direct propertyKeneth Peters & Co. (agents and advisors)



• 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”



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%



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:



• 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



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%


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



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


Value of assets at 31 March for the last 10 years



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



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



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.



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



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

copyright © derbyshire county council 2006 derbyshire pension fund annual general meeting...

Documents

fund slide

county councillors

funds investment assets

day management rests

pensions administration14

types of investments

asia pacific equities

emerging market equities