Finance Service. Your Pension Report to Pensioners and Contributors

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1 Finance Service Your Pension 2008 Report to Pensioners and Contributors

2 Index Page Introduction Pension Fund Investment Panel Investments Pension Fund Accounts Summary Pension Fund Framework Membership Information Information for Members Contact Us Glossary

3 Introduction Welcome to the 2007/08 Pension Fund Leaflet. The leaflet provides an update of the London Borough of Redbridge Pension Fund. If further information is required please see the Contact Us section. Set out below is a brief summary of the topics covered within this leaflet. Investment Performance For the year ending 31st March 2008 the Fund s performance was 0.5% below the benchmark. The investment strategy is under regular review as the Council seeks improvement to the Fund s performance. Fund Value Over the financial year to 31st March 2008 the total asset investment value increased by 5.7m to 349.6m. Accounts Summary Fund income exceed Fund expenditure by 21.7m. This trend will continue and partially reflects the increase in contributions made to improve the funding level. Fund Membership Membership continues to grow with an increase of 4.9% in contributors as at 31st March Actuarial Valuation The latest actuarial valuation took place as at 31st March It showed that the value of the Fund s assets were sufficient to meet 74% of the Fund s liabilities. The next valuation is due at 31st March Changes The New Look Local Government Pension Scheme was introduced from 1st April 2008 which include: Employee contribution rates based on pay bands. Pensions calculated at 1/60 of pensionable pay for service after 1st April 2008, service prior to that date would continue to be calculated on the old basis of 1/80 plus lump sum. Option to exchange some of the retirement pension into an additional lump sum. The terms being 1 of annual pension converts to 12 of lump sum. The minimum age for early retirement with employer s consent increased to 55. Changes to the arrangements for members retiring on ill-health Death in Service lump sum increases to three times final salary Death after retirement lump sum will increase to be based on the balance of ten years pension payment. 1

Pension Fund Investment Panel The Pension Fund Investment Panel is made up of

The Panel are advised by the Director of Finance & Resources as well as by

Pension Fund Investment Panel Members as at 31st March 2008 Councillor Barden

Councillor Norman Labour Councillor Hoskins Lib Dem Substitute Members

Councillor Turner (Labour), and Councillor Bond (Lib-Dem).

Fund s investments and receive reports from the investment managers.

4 Pension Fund Investment Panel The Pension Fund Investment Panel is made up of five councillors, who are appointed annually by the Council. The Panel are advised by the Director of Finance & Resources as well as by pension professionals when required. Pension Fund Investment Panel Members as at 31st March 2008 Councillor Barden Conservative Councillor O Shea Conservative Councillor Chan Conservative Councillor Norman Labour Councillor Hoskins Lib Dem Substitute Members Councillor Huggett (Conservative), Councillor Fairley-Churchill (Conservative), Councillor Turner (Labour), and Councillor Bond (Lib-Dem). The Panel meet at least five times a year to consider the management of the Fund s investments and receive reports from the investment managers. During 2007/08, the Panel considered a wide range of investment issues such as: Performance of the Pension Fund Investments Review of Investment Strategy Corporate Governance Business Plan for 2008/09 2

Investments Contributions to the Pension Fund are invested until the money is required to pay pensions although the benefits payable are defined by Regulations and are not subject to the performance

The chart below shows the breakdown of these investments by asset class. Asset Allocation The Fund s equity portfolio consists of shares in a wide range of companies.

5 Investments Contributions to the Pension Fund are invested until the money is required to pay pensions although the benefits payable are defined by Regulations and are not subject to the performance of the fund. The market value of these investments has risen over the year by 1.7% to 349.6m despite the slow-down in global stock markets. The chart below shows the breakdown of these investments by asset class. Asset Allocation The Fund s equity portfolio consists of shares in a wide range of companies. The chart below shows the ten highest valued holdings together with the percentage of the equity portfolio. Holding Market Value Percentage Vodafone Group 9,023, % Glaxosmithkline 5,346, % BP Plc 5,304, % Royal Dutch Shell (Euro) 4,652, % Anglo American 4,414, % HSBC 4,032, % Royal Dutch Shell (UK) 3,846, % BAE Systems 3,815, % Royal Bank of Scotland 3,598, % BG Group 3,439, % 3

6 Pension Fund Accounts Summary The Audit Commission audited the Pension Fund Accounts in the summer of In the Auditor s opinion, the statement of accounts fairly presents the financial position of the London Borough of Redbridge Pension Fund as at 31st March An extract from the statements is shown below: Income million Employee Contributions 5.8 Employer Contributions 21.1 Transfer Values received 3.1 Investment Income 13.6 Total Income 43.6 Less Expenditure million Pensions & Benefits 17.6 Transfer Values Paid 2.1 Investment & Admin Fees 2.2 Total Expenditure 21.9 Excess of income over expenditure 21.7 million The excess income has been re-invested to pay future pension benefits, although the payment of benefits is defined by Regulations and is therefore not dependent upon the performance of the fund. The Final Accounts are published on the Council s web-site or can be obtained by writing to the Corporate Accounting Section whose address is listed on page 9. 4

7 Pension Fund Framework There are a number of documents setting out the Pension Fund Framework some of which are outlined below: 1. Statement of Investment Principles (SIP) The Council is legally required to publish a SIP, which sets out the Council s policy on pension fund investments and management. This is available at and is summarised below: Investment Objective To minimise the long term cost of funding with an appropriate level of risk and volatility. Investment Performance The Panel sets performance targets for the Fund and the Fund s investment managers. Strategic Benchmark The strategic asset allocation is broadly split 65% equity investments, 30% bonds and 5% property. Social, Environmental and Ethical Consideration The Panel believes that companies should be encouraged to pursue better business practices. However non-financial issues should not take precedence if it is likely to have a negative impact on financial return. Corporate Governance The Panel encourages good corporate governance in the companies in which it invests. Votes are submitted for shareholdings in the FTSE All Share UK companies. Myners Principles The Pension Fund is working towards compliance with the principles. 2. Funding Strategy Statement (FSS) The Council is legally required to publish its FSS, which is available at and is summarised below: Purpose The purpose of the FSS is to establish a clear and transparent fundspecific strategy, to identify how employer s liabilities are best met going forward and to seek to maintain a stable contribution rate. 3. Actuarial Valuation The latest actuarial valuation took place as at 31st March It showed that the value of the Fund s assets was sufficient to meet 74% of the Fund s liabilities compared with 65% as at the 2004 valuation. 5

4. Governance Compliance Policy Statement As the administrating authority the Council is required by the Local Government Pension Scheme Regulations to publish a governance compliance policy

8 4. Governance Compliance Policy Statement As the administrating authority the Council is required by the Local Government Pension Scheme Regulations to publish a governance compliance policy statement, this is available at 5. Communications Policy Statement As the administrating authority the Council is required by the Local Government Pension Scheme Regulations to produce a statement on communications with members and employing authorities. This statement is available at 6

Membership Information The London Borough of Redbridge Pension Fund membership extends to include the following employers: Redbridge Homes Chadwell Heath School Little Heath School Mayfield School

9 Membership Information The London Borough of Redbridge Pension Fund membership extends to include the following employers: Redbridge Homes Chadwell Heath School Little Heath School Mayfield School Redbridge College SRG Training Solutions Ursuline High School Housing 21 London & Quadrant Morrisons Redbridge Theatre Membership Numbers The Pension Fund membership, in total, increased by 835 during the year. Contributor membership increase by 4.9% and the number of pensioners and deferred members rose by 1.8% and 18.7% respectively. The number of pensioners and deferred members is increasing faster than the number of contributing members; this trend is expected to continue as the Fund matures. 7

Information for Members Contribution Rates Employee New entrants and most current members pay a contribution rate ranging between 5.5% and 7.5% of pensionable pay to the scheme.

10 Information for Members Contribution Rates Employee New entrants and most current members pay a contribution rate ranging between 5.5% and 7.5% of pensionable pay to the scheme. Members who were employed by the Council, prior to 1st April 1998 and who were paying 5% will pay a contribution rate of 5.25% from 1st April 2008, increasing to 6.5% by 1st April Employer The actuary calculates individual employer contribution rates for each employer participating in the fund. Increasing Your Pension Benefits Your pension benefits can be improved in a number of ways, listed below. Further information is available from the Pensions Group, in Human Resources. Details of which can be found in the section Contact Us. Purchasing Additional Membership Additional Voluntary Contributions (AVCs) Right to Aggregate LGPS Membership The regulations regarding the transfer of LGPS Membership between Local Government authorities changed with effect from 1st April Membership will no longer be transferred on the day to day basis, but on a cash equivalent basis based on the value of your LGPS benefits at the time of transfer. Further information will be available from the Pensions Group, in the Human Resources Service. Life Cover For Contributing Members Members of the LGPS benefit from life cover. If you die in service (or within the first ten years of receiving a pension if you retired after 1st April 2008) a payment called a death grant is payable to your nominated beneficiary/(s). For contributing members this equates to three years of pensionable pay. If you are married, entered into a civil partnership or have nominated a co-habiting partner, your partner will receive a pension at a rate of 1/160th of your total membership multiplied by your final salary. Nomination forms are available from the Pension Group. 8

11 National Fraud Initiative The London Borough of Redbridge is participating in an exercise to promote the proper spending of public money. The London Borough of Redbridge is required by law to protect the public funds it administers. It may share information provided to it with other bodies responsible for auditing or administering public funds in order to prevent and detect fraud. The Audit Commission currently requires us to participate in its anti-fraud initiative. For this initiative, we are providing details of pensioners so that they can be compared to information provided by other public bodies. This will ensure, for example, that no pensions are being paid to persons who are deceased or no longer entitled, and that occupational pension income is being declared when housing benefit is applied for. Sometimes wrong payments are made because of a genuine error. Previous exercises have uncovered instances of pensioners receiving too little pension, resulting in the payments being increased. These exercises, therefore, help promote the best use of public funds. You do not need to do anything but you may be contacted again in the future if the exercise suggests you are not receiving the correct amount of pension. Further information is available on our website. However, if you do have any questions, you should contact Maria Bailey, Pensions Team Leader, contact details as set out in the Contact Us section, who can also provide hardcopies of information available on our website. 9

Contact Us London Borough of Redbridge Pension Enquiries Accounting & Investment Queries Human Resources Corporate Accounting London Borough of Redbridge London Borough of Redbridge 6th Floor, Lynton

12 Contact Us London Borough of Redbridge Pension Enquiries Accounting & Investment Queries Human Resources Corporate Accounting London Borough of Redbridge London Borough of Redbridge 6th Floor, Lynton House 2nd Floor, Lynton House 255/259 High Road 255/259 High Road Ilford Ilford Essex IG1 1NN Essex IG1 1NN Other Useful Contacts London Government Pension Scheme Web Site Details of any legislative changes can also be found on the Government s website The Pension Service Website Provides advice on state retirement pension, paying your entitlement and how to access other pension-related entitlement services. The Occupational Pension Advisory Service (OPAS) OPAS is a not-for-profit organisation that seeks to help any member of the public who has a problem, complaint or dispute with their occupational or private pension arrangement. OPAS Headquarters 11 Belgrave Road London SW1V 1RB Telephone: Website: 10

Glossary LGPS: Local Government Pension Scheme Actuarial Valuation: This is a statutory requirement that must be undertaken every three years.

the existing assets and future contributions are sufficient to meet future benefit payments. Asset Allocation: The apportionment of a fund s assets between asset classes and/or world markets.

13 Glossary LGPS: Local Government Pension Scheme Actuarial Valuation: This is a statutory requirement that must be undertaken every three years. The main purpose is to review the financial position of the Fund and determine the rate at which the Council, and other employing bodies participating in the Fund should contribute, to ensure that the existing assets and future contributions are sufficient to meet future benefit payments. Asset Allocation: The apportionment of a fund s assets between asset classes and/or world markets. The long-term strategic asset allocation of a fund will reflect the fund s investment objectives. Deferred Member: No longer an active contributor but has an entitlement to benefits at retirement age. Transfer Value: These relate to when a contributor joins the Fund from another pension scheme or leaves the scheme Market Value: The price at which an investment can be sold at a give date Pensionable Pay: Basic pay plus certain contractual elements such as a bonus or shift allowance, etc. Ordinary overtime and reimbursement of expenses are not pensionable. Pension Benefits: When you retire you are entitled to an immediate pension (and a tax free lump sum for service prior to 1st April 2008). Pension benefits are calculated on an employee s total membership that consists of: period for which member has paid contributions any additional membership purchased period of any membership purchased by transfer of pension benefits from another pension scheme. 11

14 Notes 12

LONDON BOROUGH OF REDBRIDGE PENSION FUND INVESTMENT PANEL

LONDON BOROUGH OF REDBRIDGE PENSION FUND INVESTMENT PANEL ANNUAL REVIEW 2007 2008 Contents Page Executive Summary 1 Introduction 2 Pension Fund Membership 2 Fund Performance 3 Draft Pension Fund Accounts