Dorset County Pension Fund. Annual Employers Forum. 27 November 2013

Transcription

1 Dorset County Pension Fund Annual Employers Forum 27 November 2013

2 Employers Forum 2013 Agenda Paul Kent (Fund Administrator) Welcome and update on the Dorset Fund Bob Holloway (DCLG) The latest on reform of the LGPS Alison Hamilton (Barnett Waddingham) Actuarial Valuation results Individual Employer sessions with Actuary

3 Paul Kent Pension Fund Administrator Dorset County Pension Fund

4 Background A look back to 2010 (last Actuarial Valuation) a very tough time for the global economy Collapse of Lehman Brothers Icelandic Banks Global Credit Crisis Madoff Fraud Western Economies in recession Quantitative Easing Extreme Volatility in Global Markets

5 What has happened since? Continued weakness in Western economies Eurozone Sovereign Debt problems Interest rates at historic low levels in US, UK, Europe Accelerated Quantitative Easing in US Japanese major economic reform However

6 What has happened since? Markets have been positive Dow Jones at all time highs FTSE 100 at post 1999 highs Property market recovering Market sentiment cautiously optimistic

7 FTSE 100 7,000 6,500 6,000 5,500 5,000 4,500 4,000 3,500 3,000 FTSE 100 March 2008 to September 2013 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13

8 Jul-13 Dow Jones Dow Jones Ind Average March 2008 to Sept ,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov-12 Mar-13

9 The Dorset Fund Market values have grown:

10 Jul-13 Mar-13 Dorset Fund Market Value Fund Value ( 000) March 2008 to September ,200,000 2,000,000 1,800,000 1,600,000 1,400,000 1,200,000 1,000, ,000 Mar-08 Jul-08 Nov-08 Mar-09 Jul-09 Nov-09 Mar-10 Jul-10 Nov-10 Mar-11 Jul-11 Nov-11 Mar-12 Jul-12 Nov

11 The Dorset Fund Market values have grown: Assets grew by over 500 Million in 3 years to March 2013 Performance has been good:

12 Dorset Fund Performance (to 31 March 2013) year 3 years 5 years Dorset Benchmark OLAs

13 Dorset Fund Performance (to 30 September 2013) year 3 years 5 years Dorset Benchmark OLAs

14 The Dorset Fund Market values have grown: Assets grew by over 500 Million in 3 years to March 2013 Performance has been good: Ranked 3rd from 100 local authority funds over 1 year Ranked 7 th from 100 local authority funds over 3 years

15 The Dorset Fund Strategic Review Fund reviewed strategy in 2011 after last Valuation Key feature managing risk Added Inflation protection Diversified Growth November 2013 started review in light of 2013 valuation Key feature remains managing risk Major change unlikely Focus on alternative assets

16 The Dorset Fund Changes to Pension Fund Committee membership. Challenge of bringing new members up to speed Development of Pensions Administration Strategy. Improved technology to better support Employers and Scheme members. Challenge of delivering the LGPS 2014 and all the changes that it encompasses New Fund specific website.

17 New Website

18 Paul Kent Pension Fund Administrator Dorset County Pension Fund

19 Dorset County Pension Fund Annual Employers Forum Local Government Pension Scheme 2014 Bob Holloway DCLG Workforce Pay & Pensions Division

20 Completing the 2014 Local Government Pension Scheme Scheme Governance Structural Reform Call for Evidence Conclusions

21 Things still to do :- Cost management Scheme Governance Transitional regulations Amending regulations!!!!!??????

22 Cost Management :- key principle of managing future costs Cementing agreement with Government :- 6.5% average employee contribution yield 13% employer contribution 19.5% total cost Micro manage excess costs (contrast with unfunded schemes) Internal arrangement + Treasury backstop Scheme Advisory Board role to recommend action Statutory consultation on draft regulations later in the year.

23 Scheme Governance Responsible Authority Scheme Manager Scheme Advisory Board Pension Board

24 Responsible Authority

25 Scheme Manager Scheme regulations must provide for a person responsible for administration Scheme manager may also be the responsible authority But in locally administered schemes, they may be different In the LGPS, there will be local scheme managers The draft LGPS Regulations 2013 designates scheme managers as the existing administering authorities in England and Wales

26 Scheme Advisory Board Scheme regulations must establish a national board To provide advice to the responsible authority on scheme changes At the responsible authority s request Also provide advice to local pension boards No conflict of interest Shadow scheme advisory board first meeting on 15 July Chaired by Joanne Segars, CEO of NAPF.

27 Pension Board Regulations must require scheme managers to establish a board. To assist the scheme manager Dual function :- Ensure compliance with scheme regulations and other legislation; Ensure compliance with Pension Regulator s codes of practice, etc No conflict of interest Equal numbers of employer and scheme member representatives Pension board may also be a Section 101 statutory committee

28 Scheme Governance :- Discussion paper published on 20 June Comments invited on 26 questions, for example :- Legal status of the scheme advisory board Funding of the scheme advisory board Should local pension boards be combined with S.101 Committees When should these new bodies become operational Closing date = 30 August (50 responses) Draft regulations on governance to follow In place for April 2014 But allowing lead-in time for implementation

29 Structural Reform Call for Evidence :- Clear statements from Ministers on need for structural reform :- Better deal for employers/taxpayers Better value for money a more cost-effective scheme. Getting more clout from the buying power of 150bn of assets A clear need to deal with deficits Improving investment returns Reduce investment fees Improve flexibility of investment strategies Greater investment in infrastructure Improve cost-effectiveness of administration Provide access to higher quality staffing resources Provide more in-house investment resource BETTER SCHEME DATA! Call for evidence published on 21 June. Closing date for comments = 27 September Consultation on options for change to follow later in the year.

30 Any Questions?

31 Dorset County Pension Fund 2013 Actuarial Valuation Employer meeting November 2013

32 32 Agenda

33 33 Purpose of valuations

34 34 Triennial Funding Valuation

35 35 How do we do it?

36 36 How do we do it?

37 37 Assumptions

38 38 Assumptions Inflation RPI

39 39 Assumptions Inflation (CPI)

40 40 Assumptions Inflation (Pay)

41 41 Discount Rates

42 42 Discount Rates

43 43 Discount Rates / Equity Returns

44 44 Discount Rates / Equity Returns

45 45 Change in Employer Contribution

46 Gilt and Bond Returns Spot Yield 3.14% Smoothed Yield 3.27% Spot Yield 4.03% Smoothed Yield 4.08% 46

47 Equity Returns Spot Yield 3.35% Smoothed Yield 3.38% Average of 1% more than RPI pa Central Assumption of 0% over RPI 47

48 Financial Assumptions - Summary Smoothed Investment Returns 31 March March 2010 Central Assumptions %pa %pa Equity type investments 7.1% 7.8% Gilt type investments 3.3% 4.5% Bond type investments 3.9% 5.5% Property type investments 6.2% 5.6% Financial Assumptions 31 March March 2010 %pa %pa Central Discount Rate 6.0% 6.8% Pay Increases Long Term 4.2% 4.7% Short term 2.7% 0% for those over 21k Retail Price Inflation 3.5% 3.5% Pension Increases 2.7% 3.0% 48

49 49 Statistical Assumptions

50 Valuation Data - Liabilities Key Stats This Valuation Average Number of Members 2013 % 2010 % Average Age Retirement Age Actives 23,369 36% 24,556 41% Pensioners 16,745 26% 14,034 24% Deferred Members 24,453 38% 20,823 35% Total Members 64, % 59, % Actual Pay/Pensions (000) (000) % Change Actives 382, ,417 (4%) Pensioners 75,667 56,886 33% Average Pay/Pensions % Change Actives 16,383 16,306 0% Pensioners 4,519 4,053 11% Pensionable Pay at This Valuation FT Females 28% FT Males 21% PT Males 4% PT Females 47% 50

51 Assets and Fund Accounts Assets at This Valuation m Revenue Accounts Year to March 2013 March 2012 March 2011 Total (000) (000) (000) (000) UK Equities 588 Expenditure Retirement Pensions 70,789 64,587 58, ,914 Overseas Equities 505 Retirement Lump Sums 17,615 19,194 18,178 54,987 Death Benefits 2,090 1,944 1,773 5,807 UK Gilts 121 Leavers benefits 4,654 5,276 9,062 18,992 Corporate Bonds 282 Expenses 1,443 1,248 1,402 4,093 Overseas Bonds - Other Expenditure Cash 97 Total Outgo 96,591 92,249 88, ,793 Income Employees Ctbns 24,535 24,956 26,471 75,962 Property 162 Employers Ctbns 80,979 70,624 72, ,071 Other assets - Transfer Values 8,396 18,308 12,078 38,782 Alternative assets 181 Other Income Investment Income 26,743 24,071 19,681 70,495 Total 1,936 Total income 140, , , ,310 Property / New money for investment 17,319 21,639 22,064 61,022 Alternatives 18% Fund Value Assets at Start of Year 1,656,615 1,559,400 1,411,866 1,411,866 Global Bonds 15% Global Equities 56% Cashflow 44,062 45,710 41, ,517 Change in value 235,173 51, , ,467 Assets at End of Year 1,935,850 1,656,615 1,559,400 1,935,850 Annual Returns Approx Rate of Return (per annum) 15.7% 4.8% 8.8% 9.7% UK Gilts and Cash 11% 51

52 Intervaluation Experience Intervaluation Experience Actual Expected Investm ent Return 9.7% pa 6.8% pa Pay Increases ** 1.7% pa 2.4% pa Pension Increases 3.5% pa 3.0% pa ** includes short term overlay De aths 1,095 1,174 Pension Ceasing 4,498k 5,407k 2013 Mortality Table best fit to experience by amounts SAPS 1 Tables 52

53 Valuation Results Whole Fund Funding Level Valuation Results % of Pay 83% 82% 81% 80% 79% 78% 77% 76% 40% 35% 30% 25% 20% 15% 75% Last Valuation This Valuation 10% 50/50 Funding Level 79% 81% 81% Ongoing Cost 13.8% 14.0% 13.3% Total Rate 25 years 18.5% 19.8% 19.1% 10% 53

54 Individual Employer Results Average age Reduction in payroll Outsourcings If 2010 contribution rates were stepped If 2010 deficit recovery contribution rates expressed as % payroll or cash amounts Experience Funding position at 2010 Size of employer

55 55 Next Steps

56 Dorset County Pension Fund Annual Employers Forum 27 November 2013