Keele Superannuation Scheme. The 21 st Annual Members Assembly The University, the Trustees and KPMG 7 February 2017

Transcription

1 Keele Superannuation Scheme The 21 st Annual Members Assembly The University, the Trustees and KPMG 7 February 2017

2 Introduction Trustees Mary Clarke (Chair of Trustees) University Appointed Trustee Advisers KPMG LLP Richard Hennessy Scheme Actuary Tim Statham University Appointed Bankers National Westminster Bank plc Mike Stead Member Elected Brenda Bould Member Elected Solicitors Investment Managers Auditors DLA Piper UK LLP Standard Life Investments Limited BlackRock BMO Global Asset Management RSM UK Audit LLP University Claire Appleby Director of Human Resources, Student Support and Organisational Development Howard Bell Executive Support Officer Paul Buttery Interim Director of Finance and IT 1

3 Agenda Pensions landscape What has been happening? General Data Protection Regulation Mortality Projections Scheme developments from 1 August July 2017 Membership and assets Extract from Scheme accounts Review of investment performance Actuarial Valuation What is an actuarial valuation? Managing risks Scheme funding update Valuation timeline Pensions security How safe is my pension? Pension scams Summary and questions 2

4 Pensions Landscape

5 What has been happening? Actuarial Valuation, 31 March 17 HMRC increase State Pension, April 17 Received the go ahead for a new pension scheme, August 17 Provided members insufficient transfer information, November 17 Overseas transfer charge, March 17 tpr publish funding statement in relation to their expectations of 2017 valuations, May 17 HMRC increase State Pension Age, July 17 Carillion collapse, January 18 1 February April July October January 18 Government announce changes to automatic enrolment, December 17 European Union announce changes to data protection Same sex benefits, July 17 A50 UK trigger Article 50, March 17 UK general election, June 17 Consultation response to combating pension scams, August 17 USS Pension strikes, January 18 4

6 General Data Protection Regulation (GDPR) Breach Notification Data Protection Officer Increased Fines Individual s Rights Explicit Consent 5

7 Mortality projections Mortality study The Office of National Statistics publishes death data for England and Wales which forms the basis of the analysis of recent mortality trends. The Institute of Actuaries is responsible for conducting mortality investigations annually known as Continuous Mortality Investigation. An interesting trend has developed over the last 5 years MEDICAL INTERVENTION HEALTH ENVIROMENT LIFESTYLE LOOKING FORWARD? 6

8 Scheme developments

9 Scheme developments - Membership Membership Active members 0 0 Preserved members Pensioners Assets Invested assets 30,047,949 30,605,863 Insurance policies 1,494,000 1,385,000 AVC investments 378, ,161 Net current assets (52,986) (66,805) Totals 31,867,486 32,301,219 8

10 Scheme developments - Extract from Scheme accounts Year ended 31 July s s Fund at beginning of year 31,275 31,867 Total Employer contributions - normal - salary sacrifice - special 1, ,156 1, ,196 Member contributions - - Other income and transfers-in 2 - Total income 1,158 1,196 Benefits paid to members 1,576 1,579 Transfers-out Other (expenses and insurances) Total expenditure 1,800 1,965 Return on investments 1,234* 1,203* At end of year 31,867 32,301 *Adjusted due to rounding 9

11 Scheme developments - Review of investment performance The Trustees regularly monitor the Scheme investment performance and will make changes to the strategy if necessary. Over the year to 31 July 2017, the Trustees decided that no update was required to the investment strategy. The current strategy exposes the Scheme to an acceptable level of risk whilst also generating a good level of return relative to this risk. The charts below shows the asset allocation of invested assets as at 31 July 2017 and compares this to the previous investment strategy as at 31 July Asset allocation as at 31 July 2016 Asset allocation as at 31 July % Global Absolute Return Strategies Fund 14% Global Absolute Return Strategies Fund 26% 60% Fixed Income Global Opportunies Fund Real Dynamic LDI Fund 26% 60% Fixed Income Global Opportunies Fund Real Dynamic LDI Fund The Global Absolute Return Strategies Fund is made up of a diversified portfolio of return-seeking assets providing similar returns to equities but with reduced risk. The Fixed Income Global Opportunities Fund invests a wide range of bonds. This fund aims to generate a stable level of return for the Scheme. The Real Dynamic LDI (Liability Driven Investment) Fund is a fund where the assets are designed to behave in a similar way to the liabilities. Source: Trustee Report & Accounts 31 July

12 Scheme developments - Review of investment performance The table below summaries the performance of the Fund over the 12 month period to 30 June 2017: Fund performance % Year to 30/06/2017 Investment objective Global Absolute Returns Strategies Fund 3.7% 5.5% Fixed Income Global Opportunities Fund 4.6% 4.4% Real Dynamic LDI Fund 7.7% n/a The Global Absolute Returns Strategies Fund underperformed in comparison to the Investment objective over the year. Other pensions schemes with similar investments have also observed similar returns. The Trustees in conjunction with the Scheme s investment advisors are keeping this under review. The Real Dynamic LDI Fund also underperformed however this investment is for protection rather than for generating returns. This Fund closely matches the behaviour of the Scheme s liabilities and so provides the Scheme with additional security. It has been another volatile year for investors. Reasons for this volatility are concerns about the global economy, particularly the impact of Brexit both domestically and overseas. Source: Trustee Report & Accounts 31 July

13 Actuarial valuation

14 Actuarial valuations What is an Actuarial Valuation? Cash sums for non pensioners depend on the proportion of pension exchanged at retirement Increasing the inflation assumption will result in a more pronounced hump as benefits would increase at a faster rate An actuarial valuation involves: - Assessing the Scheme s Funding position - Determining if there is a deficit in the Scheme which the University needs to make good This is done by viewing benefits accrued as future cash flows and valuing them using various assumptions. The labilities of the Scheme are the present value of the expected cashflows for pensioners and non-pensioners Depending on the assumption used for life expectancy impacts how long the tail is due to the benefits being paid for a longer/shorter period 13

15 Managing risks The Pensions Regulator has put in place a number of Codes of Practice. These are guidelines which all pension schemes should adhere to. Below is a high level breakdown of the three key areas covered by the Codes. Covenant assessment Statutory objectives Protect the benefits of members Investment strategy Integrated Funding Framework Funding strategy Integrated Risk Management Scheme Funding Reduce the risk of situations arising which may lead to compensation being payable from the PPF Minimise any adverse impact on the sustainable growth of the University Scheme Governance 14

16 Actuarial Valuation Scheme funding update The Trustees are required by legislation to carry out a formal assessment of the Scheme s funding position every three years. The most recent formal valuation was carried out at 1 August 2014, the results are displayed in the table below: Actuarial Valuation as at 1 August 2014 Assets Liabilities Shortfall 28.4m 50.8m ( 22.4m) Funding level 56% The Trustees are required to use a prudent set of assumptions about future experience to value members benefits. The assumptions are recorded in a Statement of Funding Principles, agreed with the University. The Scheme Actuary calculates the value of members benefits in line with the Statement of Funding Principles, based on market conditions as at the valuation date. This value is compared to the value of the Scheme s assets at that date, to determine if the Scheme has a shortfall or surplus. Following the valuation, the University agreed to pay 996,400 per annum to remove the funding shortfall as agreed in the Schedule of Contributions. This figure will increase by 3.20% each 1 November, from 1 November The University is currently paying 1,061,200 per annum. This will be reviewed as part of the 1 August 17 valuation to ensure that it is sufficient. The 1 August 2017 actuarial valuation is currently underway, and the results will be shared with members in next years annual news letter. 15

17 Actuarial valuation Scheme funding update The charts below shows the development of KSS deficit since the 1 August The Actuary carries out a funding assessment each year in between formal valuations. The 1 August 2017 valuation is underway however the results have not yet ben finalised. The Schemes deficit as at the 1 August 2014 formal actuarial valuation was: 22.4m The Schemes deficit worsened between the last formal actuarial valuation as at 1 August 2014 and the annual update completed 1 August 2016 by: 14.6m The Schemes deficit is expected to have improved over the period 1 August 2016 to 31 July The 1 August 2017 valuation is currently underway. 16

18 2017 actuarial valuation illustrative timeline Agreement on assumptions process Valuation calculations Agree results and contributions Finalise report Deadlines Key features of the process will include: Assess University covenant; Agree on preliminary assumptions to use to calculate the Technical Provisions and Recovery Plan contributions; Communicate results to University and agree contribution plan; Prepare and sign off valuation documentation. 15 November 2017 Trustees consider appointment of covenant adviser 7 February 2018 Trustees to discuss preliminary valuation results and covenant advice at Trustee meeting Trustees and University meet to discuss and agree funding plan Actuary prepares final documents: AVR, SoC, SFP, Recovery Plan Aug 17 Sep 17 Oct 17 Nov 17 Dec 17 Jan 18 Feb 18 Mar 18 Apr 18 May 18 Jun 18 Jul 18 Aug 18 Sep 18 Oct 18 Nov 18 Dec 18 Valuation Date 1 August November 2017 Trustees to discuss assumptions at Trustees meeting (Trustee training included) Trustees to share initial results and proposed Recovery Plan with the University Finalise all documents with signatures by Trustee, University and Actuary Statutory deadline 1 November

19 Pension security

20 How safe is my pension? You are a member of a Defined Benefit pension scheme Your pension is calculated based on your pensionable service and final salary with the University; Your pension is guaranteed for life; A pension may be payable to your spouse on your death. What happens if there is not enough money to pay my pension? The University is required by law to make sure there is enough money to pay everyone s benefits as they fall due. Are there any risks to my pension? The main risk is if the University became insolvent and would no longer be able to support the Scheme; And if they do become insolvent? What happens to my pension? The Pension Protection Fund ( PPF ) acts as a safety net to provide a minimum level of benefits. 19

21 Pension scams Pension Liberation Fraud In 2014 the Pensions Regulator launched a campaign on pension fraud An increasing number of companies are acting illegally or immorally and target pension scheme members They often offer loans or other incentives, alongside incorrect information, to entice members This is pension liberation fraud Be aware! These companies make contact in various ways and use a variety of methods to draw information from you Please be vigilant in respect of your pension and be wary of providing any information Further information is included in the annual newsletter 20

22 Summary and questions

23 Summary The Trustees worked hard on your behalf in 2017; monitoring investment performance; reviewing and monitoring Scheme security funding amid volatile market conditions and changes to pensions legislation; and commenced the 1 August 2017 actuarial valuation. The deadline for completion is 15 months later, i.e. 1 November The Trustees are working alongside the University to ensure a smooth valuation process. Going forward in 2018 the Trustees will; ensure that the Scheme is compliant with the new GDPR regulations; complete the 1 August 2017 actuarial valuation. The Trustees will communicate the results of this to you in next year s annual newsletter; and continue to monitor and review the Scheme s investment strategy. 22

24 Any questions 23