Welcome to the Norfolk Pension Fund Employers Forum 5 th July 2017 - - PowerPoint PPT Presentation

Welcome to the Norfolk Pension Fund Employers Forum 5th July 2017

Professional Development Centre, 144 Woodside Road, Norwich NR7 9QL

Agenda

Welcome & Introduction Nicola Mark - Head of the Norfolk Pension Fund Governance, Compliance and Good Practice in the LGPS Bob Holloway, Pension Secretary, Local Government Association Coffee Break Changes to the Norfolk Pension Fund’s Investment Strategy Gemma Sefton, Lead Actuary, Hymans Robertson Ask the Panel Bob Holloway, Gemma Sefton, Mark Alexander (Pensions Manager), Glenn Cossey (Chief Investment Manager) Any Other Business

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Welcome and Introduction

Nicola Mark Head of the Norfolk Pension Fund

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The ‘State of Play’

• Pension continues to be a ‘front page’ story – for many years
• A major issue for:
• Government (and Local Government)
• Employers
• Employees
• Pensioners
• The Pensions Regulator
• Many areas of interest and concern for pensioners:
• Major Public Sector Pensions reform following Lord Hutton's

Independent Public Service Pension Commission report

• New LGPS scheme implemented 1st April 2014
• ‘Freedom and Choice’
• 2015 Budget Statement: Efficiency and structure of assets
• Media coverage

The Local Government Pension Scheme (LGPS)

• LGPS is a defined benefit pension scheme
• Only funded scheme apart from MP’S
• Career average benefits for new accrual (since April 2014) but retains significant legacy

final salary linked obligations

• Administered by Counties, Metropolitans, Unitaries and London Boroughs
• 101 funds nationally – managed locally (89 in England and Wales)
• Regulated – Department Communities & Local Government (DCLG) + The Pensions

Regulator (TPR); oversight by HM Treasury

• Benefits are guaranteed by statute
• Surpluses/shortfalls in funding have in the past been a matter for Employers (cost-share

mechanism between Employers and Employees being part of the new 2014 scheme address costs going forward)

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The LGPS

National Scheme, locally administered

Local accountability:

• Pension Committee – Section 101 – board of quasi trustees
• New Local Pensions Board with oversight and assistance role (equal number of

Employer and Employee representatives) Great diversity of membership Great diversity of employers

Scheme Annual Report 2016

The LGPS in England & Wales:

• 89 Funds (11 more in Scotland)
• £217bn assets
• 5.3m Members
• 13,000+ employers
• Total membership grew by 134,000 (2.5%) to 5.3 members in 2016
• Assets £217bn (no change from 2015): pooled investment vehicles (43.6%); public equities

(34.6%); fixed interest / index linked (7.5%); property (7.8%); other asset classes (1%)

• LA net return on investment 2015/16 - 0.1%, reflecting difficult market conditions, and set

against the FTSE All Share Total Return of -3.9%

1 in 5 of the working population is in the public sector Quarter of largest 100 Pension Funds in UK are LGPS Funds Largest DB scheme in England and Wales (one of the largest in the world)

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The LGPS in Norfolk

• Administered by County Council as a statutory responsibility
• Also covers all 7 Borough/District Councils (Scheduled Bodies) and more

than 300 other employers with active membership (Admitted Bodies and Resolution Bodies)

• As at March 2017 the Fund had:
• 322 Contributing Employers
• 28,469 Contributing Scheme Members
• 23,220 Pensioners
• 34,216 Deferred members
• Valued at just under £3.5 billion at 31 March 2017
• 80% funded at last actuarial valuation (2016)

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The Norfolk Pension Fund

Facts, Figures and Changing Profiles

At March 2017

• £3.5 billion
• 322 Employers (and rising)
• 51 Councils (County, District, Town and Parish) *

Remainder vary widely (e.g. private sector, charities, non uniformed fire and police staff, non teaching staff in schools and colleges)

Membership 31 March 2015 31 March 2016 31 March 2017 Movement Active 27,638 28,030 28,469 Deferred 29,125 32,477 34,216 Pensioners 21,247 22,215 23,220 Totals 78,010 82,722 85,905

Norfolk Pension Fund membership equates to 12% of adult Norfolk population (Norfolk

Insight / ONS data mid 2015) * 7 Borough/District Councils (Scheduled bodies), remainder Admitted Bodies and Resolution bodies

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The Norfolk Pension Fund

Facts, Figures and Changing Profiles

Membership Average Pensions in payment

February 2017: average annual pensions in payment were: Pension in own right

• £4,956 (£413 per month)

Dependants pension

• £2,745(£229 per month)

Average pension

• £4,680 (£390 per month)

Full Basic State Pension: New State Pension: £159.55 per week (£8,297 per year) Old State Pension: £122.30 per week (£6,360 per year)

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• Own budget
• No cross subsidy
• Savings remain in Fund
• Cost per member (CIPFA Benchmarking Club 2016)
• £17.85 Norfolk Pension Fund
• Administration and governance overhead
• 0.075% of the net assets of the Fund
• 1.96% of benefit payments
• Admin & governance staff to member ratio
• 1:2380
• Contributions and benefits 2016-17
• Income from contributions - £130m

(£102m employers/£28m employees)

• Investment income
• c. £62m
• Benefits paid
• c. £127m

The Norfolk Pension Fund

Efficiency and Value For Money

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Governance Management Arrangements

• All aspects of administration, including the strategic management of the assets of the Fund

and the administration of benefits are delegated to Pensions Committee

• Pensions Committee advised by
• Executive Director of Finance and Commercial Services, and Section 151

Officer (Simon George) and Pension Fund Team

• Actuary (Hymans Robertson)
• Investment consultants (Hymans Robertson)
• Pensions Committee has appointed 14 third party Investment Managers
• The Scheme benefits are administered for all participating employers

in-house (annual service and cost bench marking against national LGPS and private sector comparators)

• Pension Fund Investments are held in “Custody” by a Custodian Bank (HSBC)
• New regulations meant that from April 2015 a new Pension Board was established to support

the authority in ensuring efficient and effective management of the fund and compliance with regulation

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Pensions Committee

The Committee has 8 voting members Pensions Committee membership May 2017

Councillor Danny Douglas Councillor Cliff Jordan Councillor Judy Oliver Councillor Martin Storey Councillor Brian Watkins Councillor Alan Walters (Co-opted District Member) Councillor John Fuller (Co-opted District Member) Mr Steven Aspin (Trade Union Representative)

• 5 members from Norfolk County Council
• 2 representatives from District Councils
• 1 scheme member representative

Committee has overall delegated responsibility for management of Fund and act as ‘quasi trustees’ but ultimate responsibility rests with County Council as Administering Authority

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Norfolk County Councillors Cliff Jordan (Chairman) Leader of Norfolk County Council Danny Douglas Judy Oliver Martin Storey Brian Watkins Two District Councillors John Fuller Leader of South Norfolk District Council Alan Waters (Vice Chairman) Leader of Norwich City Council Staff representative Steve Aspin

The Trustees

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Pensions Oversight Board

• Local Pension Board’s were established as a requirement of the

Public Service Pensions Act 2013, and as defined in the LGPS 2013 regulations.

• The Pensions Oversight Board is not a decision making body. It

assists the Administering Authority in securing compliance with regulations and the efficient and effective management and administration of the scheme.

• The Pensions Oversight Board (the Norfolk Pension Funds’ Local

Pension Board) has 7 members: 1 Independent Chair (non voting) 3 employer representatives 3 scheme member representatives

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Pensions Oversight Board

Membership May 2017

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Chairman Kevin McDonald: Director of Pensions, Essex Pension Fund Employer Representatives Cllr Chris Walker: Levying/precepting employers (Poringland Parish Council) Vacant: Non levying/precepting employers Debbie Beck: Norfolk County Council Scheme Member Representatives John Harries: Active/deferred member Brian Wigg: Pensioner member Rachel Farmer: Trade Union The first meeting of the Board was held on Tuesday 14 July 2015.

Update on Investment Pooling - ACCESS

ACCESS (a collaboration of central, eastern and southern shires) with assets of £33bn – all of which are managed by third parties. c3,000 employers c900,000 members Strong performing funds and potential for substantial benefits for a group of successful like-minded authorities collaborating and sharing their collective expertise. 75% of the assets are invested across 12 managers and 71 different managers used across the authorities.

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Summer Budget 2015

• “pool investments to significantly reduce costs, while maintaining
• verall investment performance”
• “sufficiently ambitious” proposals
• October 5th 2015 - Conservative Party Conference
• “…we’re going to work with councils to create .. half a dozen British

wealth funds spread across the country,”

• “It will save hundreds of millions in costs, and, crucially, they’ll invest

billions in the infrastructure of their regions.”

• Autumn Statement – followed by pooling criteria and guidance

(November 25th 2015)

• “up to 6 British Wealth Funds …at least £25 billion of Scheme assets

each”

• “reduce costs while maintaining overall investment performance”
• “wider ambition of matching the infrastructure investment levels of

the top global pension funds”

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Reminder of background…

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Principles

The participating authorities reflect a strong commitment to the project and share an approach to achieve common objectives based on a clear set of guiding principles.

Democratic accountability and fiduciary responsibility are vital

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Meantime our LGPS management and oversight continues

‘The bit in the middle’

Investment

Collection of contributions Year End support to ER’s (CARE system) Member data maintenance Retirements, Leavers, Joiners, Deaths, Pensions payroll, Divorce, Redundancy, Individual Transfers, Benefits statements, Annual allowance, Lifetime allowance, AVC’s, (third party), AVC’s(scheme), GMP (Guaranteed Minimum Pension calculations)

Administration

Section 101 Committee Pensions Boards (oversight Regulation, & Compliance Statutory Accounts, Banking, Monitoring, Payments/Receipts, Budgeting TPR Compliance Ill Health monitoring (£) and insurance, IAS/FRS17 Reporting, SF3 Contribution Monitoring, Liability monitoring, Covenant reporting and monitoring, Outsourcing/in sourcing Support, Employer merger (colleges/academies, and housing associations) New Employers (contractors, mutual, academies), Employer ceasing (manage flight path), Triennial valuation, Funding Strategy, Ill-Health insurance, Longevity monitoring, Employer annual returns, Transfer reconciliations, Liens & charges Employer funding plans, Relationship with Actuary, Tax Employer Training, Employer Budgets, Scheme changes Auditors – internal, external and Employer Recharges, Committee Reporting, Member Training, Bonds Bulk Transfers Employer communications Control reports, Stock lending, Foreign exchange Collateral monitoring, Rebalancing Cash flow monitoring Member Training Employer insolvency events

Manager monitoring, Investment performance, Engagement,, Voting, Investment, Partnership drawdowns and distributions, Advisory boards, Transition, Manager selection, Cost analysis & Review, Cash transfers Committee Reporting, Consultant relationship Drawdowns & distributions Tax filing, compliance &

• ptimisation (UK & overseas)

Investment management agreements, Custodian relationship Commission recapture Class action recoveries Local enforcement of ownership rights (class actions)

STAKEHOLDERS

Employees, Deferreds, Retired Members, Employers, Elected Members, DCLG, HMRC, TPR

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Running a LGPS Pension Fund

An overview…

TPR

t

Pension Boards

REFORM

REGULATION AND OVERSIGHT

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Retired Members Forum 2017

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Contacts

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Nicola Mark 01603 222171 07771 674 633 Head of the Norfolk Pension Fund nicola.mark@norfolk.gov.uk Glenn Cossey 01603 228978 07917 094 158 Chief Investment Manager glenn.cossey@norfolk.gov.uk Alex Younger 01603 222995 Investment and Actuarial Services Manager alexander.younger@norfolk.gov.uk Mark Alexander 01603 495781 Pensions Manager mark.r.alexander@norfolk.gov.uk Jo Quarterman 01603 223950 Business Development and Project Manager jo.quarterman@norfolk.gov.uk