YOURPENSION CONTACT POINTS FOR FURTHER INFORMATION. Pensions Administration Pensions Office Mercury House Mercury Gardens 4th Floor Romford RM1 3DS

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1 CONTACT POINTS FOR FURTHER INFORMATION Pensions Administration Pensions Office Mercury House Mercury Gardens 4th Floor Romford RM1 3DS YOURPENSION Report to Pensioners, Deferred Pensioners and Contributors Telephone: / 2981 / pensions@havering.gov.uk Pension Fund Investment Debbie Ford Pension Fund Accountant Town Hall Main Road Romford RM1 3BB Telephone: debbie.ford@havering.gov.uk Other useful contact details: Local Government Pension Scheme website: The Pension Service website: The Prudential Telephone: Published by London Borough of Havering Design and Print. Job No 7511

2 INTRODUCTION CONTRIBUTIONS TO THE FUND The Council operates a Pension Fund on behalf of its employees and pensioners under the provisions of the Local Government Pension Acts and Regulations, for the purpose of providing pension benefits to, largely, the employees of the Council. The Fund provides retirement pensions and lump sum retirement grants, death grants and spouse s or civil partners, nominated cohabiting partners and children s pensions. The Fund is financed by contributions from the Council, Council employees, other employers and members of the Fund, and by interest, dividends and other gains from investments. MEMBERSHIP OF THE FUND The membership of the Fund reported on the balance sheet as at 31 March 2009 was as follows: 31st March Contributing employees 5,723 5,803 Pensioners 4,746 4,587 Deferred pensioners 3,463 3,094 All Council employees who have a permanent or temporary contract of 3 months or more (except teachers, who are members of the Teachers Pension Scheme), automatically join the Fund from the first day of employment. Any member of the scheme can opt out by notifying the pension s office in writing. With effect from 1st April 2008 instead of paying a standard contribution rate there are different contribution rates for different pay bands. These new rates have been designed to give more equality between the cost and benefits of scheme membership. The new rates are between 5.5 and 7.5% of your pensionable pay. The rate you pay depends on which pay band you fall into. If you work part-time, your rate will be based on the whole time pay rate for your job, although you will only pay contributions on the pay you actually earn. If the job that you are employed in requires you to work term time only, your contribution rate is based on your whole time salary, but is only grossed up by the number of weeks per year that you are paid. Here are the pay bands from 1st April 2009: If your Whole Time Equivalent pay rate is: Your contribution Up to 12, % 12,601 and up to 14, % 14,701 and up to 18, % 18,901 and up to 31, % 31,501 and up to 42, % 42,001 and up to 78, % More than 78, % The pay bands will be adjusted annually each April in line with the retail price index as at the preceding September. If you pay tax and National Insurance, you will get tax relief on your contributions and pay a lower rate of National Insurance, so the actual cost to you is less. If you were paying a protected rate of 5% before 1st

3 April 2008, the rate you pay has been increased on a phased basis from 1st April 2008, bringing it into line with all other Scheme members by 1st April 2011 as shown in the following table: If you are were paying a protected rate of 5% From: Your contribution rate will be: 1 st April % 1st April % 1st April % or (if lower) the relevant rate from the pay band table 1st April 2011 The relevant rate from the pay band table The Council is required to make balancing contributions determined by the Fund s actuary (Hewitt Associates) to maintain the solvency of the Fund. The employers contribution for the London Borough of Havering employees was 21.7% of salary in 2008/2009. The Council s annual contribution is reviewed every three years. The latest review was based on data as at 31st March 2007 and will effect employer contribution for 2008/09, 2009/10 and 2010/11. MANAGEMENT OF THE FUND The overall direction of the Fund s Investment Strategy is delegated to the Council s Pensions Committee as detailed in the Governance Compliance Statement. The Pensions Committee also oversees the Fund s investment arrangements in line with regulations as detailed in the Statement of Investment Principles (SIP) and the Funding Strategy Statement (FSS). The Group Director Finance and Commerce supports the Pensions Committee and is responsible for the internal administration arrangements regarding monitoring of the external investment managers transactions and is also responsible for pensions administration. The Fund appointed five active managers in February 2005 with specific investment mandates. A review of the Fund s investment strategy took place during the spring/summer of 2008 following an asset liability study undertaken by the Fund s investment advisors (Hymans Robertson). The main changes resulted in the Fund aiming to reduce its asset allocation to Bonds and increase its allocation to Equities. Therefore the mandate with the Global Bonds manager (Westerns) was terminated in August The four managers remaining are Standard Life Investments (UK Equities Manager), Alliance Bernstein (Global Equities Manager), UBS Global Asset Management Property Manager) and Royal London Asset Management (Investment Grade Bond Manager). During 2009/10 the Fund is looking to appoint a passive Equities Manager and an Alternative Asset Manager.

4 GOVERNANCE COMPLIANCE STATEMENT On the 30th June 2007, a new regulation was added to The Local Government Pension Scheme Regulations 1997 to require LGPS administering authorities to prepare, publish and maintain statements of compliance against a set of practice principles on scheme governance and stewardship. The Governance Compliance statement is available on the Council s website at (Within Council and Democracy, Finance, Havering Pension Fund ) INVESTMENT STRATEGY The Council has in place an Investment Strategy, which consists of two documents The Statement of Investment Principles and the Funding Strategy Statement. 1. Statement of Investment Principles The Local Government Pension Scheme regulations require the administrating authority to prepare and publish a Statement of Investment Principles (SIP). This Statement sets out the Council s policy on a range of matters relating to the investments and management of the Pension Fund and is regularly reviewed and updated. 2. Funding Strategy Statement The Council also produces a Funding Strategy Statement which encompasses the aims and purposes of the fund, and the overall investment strategy. Both of these statements have been published on the Council s website at (Within Council and Democracy, Finance, Havering Pension Fund ) The Council undertakes regular reviews of the above policy statements and will consider any comments you may have for future reviews. Please forward comments to the contact point designated at the back of the booklet. INVESTMENTS The market value of the investments as at 31st March 2009 fell by 24.7% to million compared to 2007/08. The pie chart below shows the breakdown of the Pension Fund in terms of asset class. 2% Overseas Bonds 11% UK Index Linked Bonds 7% Property 1% Derivative Contracts 28% UK Equities A report commissioned by the Government, The Myner s Report, recommended ten principles of best practice in managing Pension Fund investments. The Council s SIP outlines the Pension Fund s compliance with these principles. 22% Cash/Other 9% Cash/Other 20% Overseas Equities

5 INVESTMENT PERFORMANCE The Council uses The WM Company to monitor the investment performance of the Fund and the Fund Managers. Each fund manager is given a performance target to achieve, compared to a benchmark. The table that follows shows the fund s performance against the tactical Benchmark, which is the combination of each manager s individual benchmark and is shown over one, three and five years. The total fund return for the year to 31st March 2009 at -25.4% under performed the Tactical Benchmark by -8.0% Year 3 Year 5 Year The performance of the Pension Fund Investments will not affect pension benefits to scheme members as benefits are guaranteed by Statutory Regulations irrespective of performance. Fund Benchmark The fund has been exposed to unprecedented market volatility during 2008/09 in the wake of the credit crunch, sub prime mortgages and plummeting stock markets. Main detractors from performance were attributable to stock selection in UK and overseas equities. EXTRACT OF ACCOUNTS Financial statements were prepared in accordance with guidelines as set out in the new Statement of Recommended Practice (SORP) as revised in May An extract from the Pension Fund Accounts is shown below: Net Asset Statement 31/03/09 31/03/ Market value of investments Current assets less liabilities Net Assets 262, ,908 Income and Expenditure Statement 2008/ / ,136 5,472 20,411 19,491 1,889 4,178 10,953 11,686 38,689 40,827 Income Employee contributions Employer contributions Transfer values received Income from investments Total Expenditure Pensions and benefits Transfer values paid Administration expenses Investment management expenses Total Surplus available for investment Change in market value of investments Net increase/ (decrease) in Fund 262, , (146) (23,720) (22,719) (1,347) (1,660) (542) (580) (1,185) (1,153) (26,794) (26,112) 11,895 14,715 (98,151) (31,955) (86,256) (17,240) Note: Transfer values are received or paid when a contributor joins the Fund from another pension scheme or leaves it, and opts to transfer their pension in or out. The Audit Commission s appointed auditors PricewaterhouseCoopers LLP carried out an audit of the Pension Fund Accounts and the audited accounts are available on the Council s web site at (Within Council and Democracy, Finance, Havering Pension Fund Annual Report).

6 COMMUNICATION POLICY STATEMENT The Local Government Pension Scheme regulations require the administration authority to prepare and publish a written statement covering communications with scheme members, representatives, prospective members and employing authorities. This Statement has been published on the Council s website at (Within Council and Democracy, Finance, Havering Pension Fund ) WHISTLE BLOWING The Pensions Committee continue with the arrangements of complying with the Whistle Blowing Requirements of the Pensions Act as agreed on 7th June It urges anyone to inform the correct authorities of any known wrong doings. The process for reporting breaches of the law to the pension s regulator is available on the Council s website at: (Within Council and Democracy, Finance, Havering Pension Fund ) PENSION ADMINISTRATION The Council s pension administration section is responsible for all aspects of scheme membership including payment of benefits, processing joiners and leavers, administering scheme member and employer contribution records and administration of the Council s Additional Voluntary Contributions (AVC) scheme. FURTHER SCHEME DETAILS The current Local Government Pension Scheme (LGPS) is a final salary scheme with pension s payable being based on the best of the last three year s pensionable pay and the number of years of reckonable service. Pensions are increased annually in line with the Pensions Increase Review Orders (which is usually in line with the Retail Price Index). However if you retired on grounds of Redundancy of Efficiency before age 55, any increase is only payable from age 55. The scheme also pays a death benefit in the form of a lump sum and a pension to the spouse, civil partner, or nominated cohabitee of a member who dies in service. Generally a pension is also paid to the spouse, civil partner or nominated cohabitee of a member who dies after retirement, or with a deferred pension. Please note: you can only nominate a cohabitee if you were an active member of the LGPS on or after 1 April 2008, and you will need to complete the relevant form, obtainable from the pension s office.

7 INFORMATION FOR CONTRIBUTING MEMBERS Annual Benefit Statements Annual benefit statements are produced by the Pensions Office for members of the scheme with more than 3 months membership, which provide details of the member s own pension benefit entitlements. Death Grant As a contributing member of the LGPS, should you die in service, a death grant is payable. This is currently equal to three years pensionable pay. You are able to indicate who you would like to receive any death grant that may become payable in the event of your death by completing an Expression of Wish form. By completing and returning this form, the Pensions Office can usually pay the Death Grant on production of the death certificate. If the form is not in place it is likely that the Authority will require your personal representatives to obtain Grant of Probate or Letters of Administration before any payment is made, which will cause a delay in payment. Purchasing Additional Pension Members of the scheme can now pay additional regular contributions (ARCs) to increase their pension in order to improve their retirement benefits. This has replaced the previous option of purchasing added membership. For those members who were buying additional membership, contracts will continue to be honoured until the contract is either completed or you decide to cease making payments. Additional Life Cover In addition to the Death Grant provided by the scheme you can purchase additional life cover from Prudential. If you are interested in this option you should contact the Prudential direct. Contact details can be found at the back of this booklet. For further information on any of the above information for contributing members please contact the Pensions Office (contact details can be found at the back of this booklet). If you have not completed an Expression of Wish form you can obtain one from the Pensions Office. Ways to increase your retirement benefit Additional Voluntary Contributions (AVCs) Your pension benefits can be improved by paying AVCs into a Group AVC plan in order to build up an AVC Fund. Your AVC will be used to buy you a pension at the time of your retirement, or can in most cases be taken as additional tax free cash. The Council has arrangements with both the Prudential and Standard Life who provide a range of AVC fund options. AVC contributions attract tax relief.

8 INFORMATION FOR DEFERRED PENSIONERS Deferred Annual Benefit Statements For your security, please remember to inform the Pensions Office in writing if you change your address. Death Grant If you die before your pension is in payment a death grant is payable. You are able to indicate who you would like to receive any death grant that may become payable in the event of your death by completing an Expression of Wish form. By completing and returning this form, the Pensions Office can usually pay the Death Grant on production of the death certificate. If the form is not in place it is likely that the Authority will require your personal representatives to obtain Grant of Probate or Letters of Administration before any payment is made, which will cause a delay in payment. If you have not completed an Expression of Wish form you can obtain one from the Pensions Office. INFORMATION FOR PENSIONERS Re- employed Pensioners If you are receiving a pension from Havering, then take up further employment in an organisation that operates the LGPS, you must notify the Pensions Office immediately (contact details can be found at the back of this booklet). National Fraud Initiative The Council actively participates in the Audit Commission National Fraud Initiative which identifies potential fraud via data matching information on the systems of various organisations including all local authorities. Death Grant If you die under the age of 75 and have been receiving your pension for less than 5 years (10 years if you left employment or retired after 1 April 2008) a death grant is payable. You are able to indicate who you would like to receive any death grant that may become payable in the event of your death by completing an Expression of Wish form. By completing and returning this form, the Pensions Office can usually pay the Death Grant on production of the death certificate. If the form is not in place it is likely that the Authority will require your personal representatives to obtain Grant of Probate or Letters of Administration before any payment is made, which will cause a delay in payment. If you have not been receiving your pension for 5 years and have not completed an Expression of Wish form you can obtain one from the Pensions Office. INFORMATION FOR ALL MEMBERS AND PENSIONERS Pensions Sharing on Divorce Changes to the Welfare Reform Act now include Pension Benefits as an asset to be taken into account for Divorce purposes. Therefore, any cases lodged into Court will require certain information regarding your benefits. You will need to put your request for information in writing to the Pensions Office (contact details can be found at the back of this booklet).