Dorset County Pension Fund Annual Employers Forum 1 December 2015 - - PowerPoint PPT Presentation

Dorset County Pension Fund Annual Employers’ Forum 1 December 2015

Employers’ Forum 2015 - Agenda

Richard Bates (Fund Administrator) – Welcome and economic background Nick Buckland (Head of Treasury and Pensions) – Update on the Fund’s investments Alison Hamilton (Barnett Waddingham) – Actuarial update Karen Gibson (Deputy Pensions Benefits Manager) – Administration update

Richard Bates Pension Fund Administrator Dorset County Pension Fund

Outline of the session

• Economic update
• National context / CSR announcement

Economic update - interest rates

Economic update - growth

Economic update - unemployment

Inflation - CPI

Economic update - debt

Economic update - spending/GDP

National context - what we know so far

• Budget surplus to be achieved by 2019/20
• Departments asked to model 25% and 40%

real terms cuts

• Real-terms protection for health + £8bn

above inflation by 2020/21

• MoD increase 0.5% each year – 2% of GDP
• Education increase in line with pupil numbers

(cash protection per pupil)

• CSR published on 25 November alongside

the Autumn Statement

National context - Departmental spending forecasts

Local Govt spending

• The Local Government Departmental Expenditure Limit (LG

DEL) will reduce from £11.5bn in 2015/16 to £5.4bn in 2019/20; a 56% real terms decrease. Revenue Support Grant is included within the LG DEL and will be phased out by 2019/20.

• Locally financed expenditure is forecast to increase by £6.3bn

from £28.8bn in 2015/16 to £35.1bn in 2019/20; a 13% real terms increase.

£ billion Local Government DEL 11.5 9.6 7.4 6.1 5.4 Locally Financed Expenditure 28.8 29.0 31.5 33.6 35.1

National context - spending review timetable

We are now being told the settlement will be “very late”…

Nick Buckland Head of Treasury and Pensions Dorset County Pension Fund

Fund update

Growth in asset values Investment Strategy Performance Key issues for Pension Fund Committee National Agenda

Asset values – Fund values at year end (£M)

Asset values

Fund values have increased more than 4 fold since 1996 Doubled since 2009 (after Global Financial Crisis) Values fallen since end of March 2015 At 31st October 2015 - £2.28 Billion

Investment strategy

Long term objective to generate returns matching growth in liabilities, short term to match benchmark Equities main returns generator but diversify to reduce volatility Liabilities are also a major source of volatility Deficits can be closed in three ways:

Superior asset returns Increased employer contributions Lengthening recovery period

Investment strategy

No major changes to strategy this year Review due post Actuarial Valuation (this time next year) Activity this year

Replaced Global Equity managers

£500M transition due to complete mid December

Reviewed a number of manager arrangements Most re-appointed for three years One on “watch”

Asset Allocation – 31st October 2015

Asset Allocation

Equity allocation lower than LA average Allocation to Bonds and alternatives higher Passive core with specialist active managers Inflation risk specifically addressed (7/89 LGPS Funds do this) 9 asset classes

15 Fund managers (plus internal team)

Reviewed every quarter and formally every three years (minimum)

Fund performance

Fund performance

Fund has performed well since 2008-09 Global Financial Crisis Fund specific benchmark has been testing Benchmark is weighted average of asset allocation using index returns Outperformed LA average over all periods Best managers have been consistent – AXA Framlington (UK equities), Royal London (bonds) and CBREi (property) (as per last years slides)

Pension Fund Committee

Pension Fund Committee work

Busy year for Committee – background of uncertainty over future shape of LGPS Created Local Pension Board Role of The Pensions Regulator Replaced Global Equity managers Collecting award National Agenda

Greater separation for Funds? Pooling of Investments

Award winning

Dorset Fund named LGPS Fund of the Year 2015 Engaged Investor Awards

Pension Fund Committee work

Busy year for Committee – background of uncertainty over future shape of LGPS Created Local Pension Board Role of The Pensions Regulator Replaced Global Equity managers Collecting award National Agenda

Greater separation for Funds Pooling of Investments

National Agenda

• Restructure of LGPS

– On-going for several years – Call for Evidence 2014 – Merger of Funds? – Five Funds? – Passive only investments? – LGPS to fund National Infrastructure?

• Chancellor’s July budget announcement
• Subsequent announcement 25 November

Autumn statement

National Agenda

• July budget statement

– Small print of budget book “The government will work with Local Government Pension Scheme administering authorities to ensure that they pool investments to significantly reduce costs, while maintaining overall investment performance. The government will invite local authorities to come forward with their own proposals to meet common criteria for delivering savings.” – Consultation to set out detailed criteria, revised Investment Regulations and Backstop Legislation, due later in year.

South West Funds

• Dorset part of South West Investment Officers group

– Dorset, Avon, Cornwall, Devon, Gloucestershire, Somerset, Wiltshire & Environment Agency.

• Met in August to discuss pooling of investments
• Quickly agreed proposals “in principle”
• Worked with advisers to assess

– Cost/benefits – Meeting Government Requirements

• “Like minded” and “Like sized”
• “Project Brunel”

South West Funds (Project Brunel)

• Early proposals discussed with Committees
• Agreement “in principle”
• Well advanced proposals
• Keen to learn from London LGPS funds
• Open to potential structures
• Perhaps a bit small (circa £19 Billion)

– Discussing with 2/3 additional Funds

Pooling of Investments

• 25 November – Autumn Statement
• Consultation issued
• Criteria

– Governance – Cost/savings – Size (circa £25 Billion) – Infrastructure

• Response by 19 February
• South West proposals still look sound

Pooling of Investments

• Plenty of work still to do
• Will take a number of years

– Government acknowledge this

• Aim to improve (or not reduce) Investment returns
• Reduce costs
• Improve resilience, ensure Funds have robust teams
• Local accountability remains

– Asset allocation stays with local Funds – Up to 90% of return derived from asset allocation

• Watch this space…

Nick Buckland Head of Treasury and Pensions Dorset County Pension Fund

UK - Actuarial Advisory Firm of the Year UK - Pensions Advisor of the Year

Dorset County Pension Fund

Employer forum – actuarial update

Alison Hamilton FFA, Partner

1 December 2015

Agenda

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Monthly Funding Level changes in the period to 30 September 2015 Current : 84%

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2013 results

82% funded

September 2015 (estimate)

84% funded

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Administration Update

1st December 2015

Today

• Administration, why it matters
• Update of the past year
• Challenges ahead

– for us – for employers

• Reminders

Administration Matters

The Past Year

Membership

2013/14 2014/15 Active members 23,997 25,697 + 1,700 Deferred Members 19,641 21,084 + 1,443 Pensioners 16,842 17,583 + 741

50/50 membership = 70

Tasks Processed Retirements 2080 Deferred Benefits 1802 Estimates 1745 Correspondence 2313 Death Benefits 531 1st November 2014 to 31st October 2015

Issues for Employers

LGPS amending regulations

Ill Health & IDRP Review

• Not reviewed in 2014 changes
• The Administration & Communications

advisory group has been looking at this for some time

• Proposals are with DCLG & Government

Actuaries

• Treasury must approve any changes
• A consultation will follow

Legislation Changes

Exit Payment £95k Cap

Legislation Changes

Legislation Changes

End of Year Process 2016

Reminders

Reminders

Reminders

Your fund

• Very positive Employer

feedback

• Automatic for new

employers

• PAS to be reviewed
• Over 50% of forms now submitted by

Your Fund

Reminders

We have a lot to be proud of in Dorset

• Year End completed!
• Excellent administration
• Employer support and communication
• Experienced staff
• Employer engagement
• Increasing membership
• Local presence
• Data Quality
• Very few complaints

The Local Government Pension Scheme

www.yourpension.org.uk/Dorset

The Local Government Pension Scheme Further Information:-

www.lgpsregs.org www.lgps.org.uk www.lgps2014.org www.yourpension.org.uk/dorset The Pensions Section, Dorset County Council, County Hall, Dorchester, Dorset. DT1 1 XJ Tel: 01305 224845 Email: pensionshelpline@dorsetcc.gov.uk Communications team: lgpsemployers@dorsetcc.gov.uk

Dorset County Pension Fund Annual Employers’ Forum 1 December 2015