Pension News. Audit Commission Pension Scheme Newsletter Issue 18

Transcription

1 Pension News Audit Commission Pension Scheme Newsletter Issue 18 January 2014

2 Chair of Trustees report Welcome to the Trustees annual update on the Audit Commission Pension Scheme (ACPS). In this newsletter you will find news about the ACPS financial activities for the year ended 31 March 2013 and events in the current financial year. It also includes membership statistics and other information concerning the ACPS and your benefits. I am pleased to report our fund gave a solid performance over the year. Its overall return was 12% for the year. As explained in a special edition of Pension News in March 2013 the composition of the Trustee Board has now reduced from nine members to seven and this took effect from 1 April On page 11 you will find the current membership of the Board together with an announcement that Neil Swift has been appointed a trustee. We welcome Neil to the Trustee Board. Punter Southall were appointed as the ACPS administrator from 1 April 2013 and I am pleased to report that the transition process from the in house team was successfully undertaken. This was due, in large part, to the collaboration between the Commission s Pensions Department and Punter Southall. Further information about the ACPS s administration can be found on page 12. The ACPS Pensions Manager, Nick Redman, retired at the end of September I am most grateful to Nick for his dedication to the ACPS during a period of intense workload and wish him well for the future. I hope you will find this newsletter both interesting and informative. The Trustees would welcome any feedback on its contents. Please provide this to the Punter Southall administration team for the Trustees to consider. Contact details are given on page 12. Sue Timbrell MBE Chair of the Trustees 2

3 The material contained within this newsletter is for general information purposes only. Although every care has been taken in producing the content, it is not legally binding. Full details of the ACPS are set out in the Trust Documentation section of the ACPS Member Website, Should the newsletter content conflict with the Rules of the ACPS, the Rules will take precedence. Contents Actuarial Valuation 4 Trustees Report and Accounts for the year to 31 March Investment Report 6-7 Membership movements 8 Changes to the ACPS 8 Pension Liberation Fraud Campaign 9 Tax Changes from 6 April The ACPS Member Website 10 Who manages the ACPS? 11 Contact address 12 Noticeboard 12 3

4 Actuarial Valuation ACPS funding position The ACPS s financial position, or funding level, is the percentage of the ACPS s assets measured against its liabilities. The last formal valuation of the ACPS was carried out by the Actuary as at 31 March 2011, and an updated position has been estimated as at 31 March 2012 and 31 March What was the position at the 31 March 2011 actuarial valuation? What was the indicative position at 31 March 2012? What was the indicative position at 31 March 2013? Assets 665m 724m 812m Liabilities 641m 787m 864m Surplus/(Deficit) 24m ( 63m) ( 52m) Funding level 104% 92% 94% Note: the assets and liabilities shown above do not include the value of the Scheme s AVCs for this reason the asset value is slightly different to that shown in the Trustees Report and Accounts and elsewhere in this newsletter. The Commission continues to contribute 17% of pensionable salaries to cover future build-up of benefits, life assurance premiums, and administrative expenses (plus an amount equivalent to the SMART contributions). Why is the position worse at 31 March 2012 and 31 March 2013? The main reason for the decrease in the funding position from 31 March 2011 to 31 March 2012 was the fall in the yields from investments, used to value the ACPS liabilities, which led to those liabilities increasing significantly. Between 31 March 2012 and 31 March 2013, the position improved due to the strong performance of the ACPS investments. Please note that the estimates as at 31 March 2012 and 31 March 2013 are not as accurate a calculation as carrying out a full valuation and are purely indicative. Crown Guarantee Under the terms of the Crown Guarantee, the Department for Communities and Local Government (DCLG) has agreed to top up the assets of the ACPS if at the start of the ACPS year the Actuary believes that the assets have fallen below 150% of the benefits that are expected to be paid to members in that year. With payments running at around 30 million each year the ACPS assets are clearly sufficient to cover benefit payments currently. While the position is reviewed each year under the terms of the Guarantee, no payments are expected from the DCLG in the foreseeable future. Next Valuation The Guarantee means the ACPS no longer needs a full valuation every three years. However, it is important that the position is monitored on a regular basis. Following discussions between the Trustees, DCLG, the Commission and the Actuary it has been decided that the next full valuation should be carried out as at 31 March 2015 to tie in with the planned closure of the Commission in March There will be an update at 31 March 2014, similar to that completed in 2012 and 2013, on which the Trustees will report in next year s Pension News. 4

5 Trustees Report and Accounts We set out below a brief summary of the key information from the ACPS s audited accounts for the year ending 31 March You can download the full annual report from the ACPS Member Website, The value of the ACPS s assets as at 31 March 2013 was million. This had increased over the year by 88.3 million from million. These figures include money purchase funds in respect of members additional voluntary contributions (AVCs). Money movements during the year Benefits Transfers out and payments to leavers Life assurance premiums Administrative expenses Total What was paid out? 26.1 Million 1.8 million 0.3 million 0.9 million 29.1 million Contributions Transfers in from other pension schemes Other income Total What came in? 15.2 million 0.05 million 0.05 million 15.3 million What was the return from investments? Investment Income - Increase in market value of investments million Investment management expenses million Total million The value of the ACPS (including AVCs) at 31 March 2012 was million Deduct 29.1 million, add 15.3 million, and add million Equals the value of the ACPS at 31 March 2013 of million 5

6 Investment report The Trustees primary objective in investing the ACPS s assets is as follows: a funding objective currently this objective is to ensure that the Scheme is fully funded, and expected to meet all benefit payments as they fall due from its assets and the contributions set out on the schedule of contributions. Assets will be taken at market value. Liabilities will be valued on the method and assumptions shown in the Statement of Funding Principles for the Scheme. As the Scheme benefits from a Crown Guarantee and there is no obligation on the UK Government to contribute to the Scheme the funding objective will be reviewed and possibly revised at regular intervals, and in particular at each funding valuation to reflect the UK Government s decision on whether or not to pay contributions should this be necessary to reach full funding. During the year, fund manager F&C Investments ( F&C ) set up a bespoke fund, for exclusive use by the ACPS, to hold all of the ACPS s invested assets. In addition, the entirety of the ACPS s liability matching portfolio was transferred from Schroders Investment Management Limited ( Schroders ) to F&C. As at 30 September % ( million) of the ACPS s assets were held in a liability matching portfolio. This portfolio is designed to increase/decrease in value when the ACPS s liabilities increase/decrease. The portfolio also contains some exposure to equities, with the aim of increasing the ACPS s investment returns. 77% ( million) of the ACPS s assets were invested in Diversified Growth Funds. Diversified Growth Funds invest in a range of different asset classes and aim to: - exploit investment opportunities (by allocating funds to the most attractive asset classes); - control risks through investing in a range of asset classes; - produce stable investment returns in all economic environments. As at 30 September 2013, the actual underlying holdings in the ACPS s Diversified Growth Funds were distributed as follows: Equities 35.6% Bonds 35.0% Cash 16.0% Alternative assets 11.7% Other 1.7% 6

7 The Trustees keep their investment strategy, and the managers appointed to deliver it, under regular review. Below we show the investment managers currently used by the ACPS and the amount of money being managed as at 30 September Baillie Gifford & Co managed 99.7 million of ACPS assets in a diversified growth fund. Baring Asset Management managed 95.3 million of ACPS assets in a diversified growth fund. BlackRock Investment Management Limited managed million of ACPS assets in a diversified growth fund. Standard Life Investments Limited managed 98.5 million of ACPS assets in a diversified growth fund. Pyrford International Limited managed 94.6 million of ACPS assets in a diversified growth fund. Ruffer LLP managed 94.8 million of ACPS assets in a diversified growth fund. F&C Investments hold million of ACPS assets in a bespoke fund. This included all of the Diversified Growth Fund investments listed above ( million) and million in a liability matching portfolio. The value of the ACPS s invested assets fell (by approximately 50m) between 31 March 2013 and 30 September The primary reason for this was the fall in the value of the liability matching portfolio. This portfolio is designed to change in value broadly in line with increases / decreases in the ACPS s liabilities. As the value of the liabilities fell significantly over the period, so did the value of the liability matching portfolio. Changes to the liability matching portfolio Following a review of the ACPS s liability matching portfolio, conducted by the Trustees last year, it was decided that the liability matching portfolio would be transferred from Schroders to F&C. At this time, F&C also set up a bespoke fund that is used to manage the liability matching portfolio and hold all of the ACPS s Diversified Growth Fund investments. The transfer was successfully implemented in March The new liability matching portfolio provides the following benefits to the ACPS: F&C utilises a broader range of assets to match liabilities, in order to produce a better return for the ACPS. F&C has the ability to rebalance the ACPS s assets, to ensure the ACPS remains in line with its investment strategy. The new liability matching portfolio provides greater protection against inflation and interest rate risks. 7

8 Membership movements The change in the membership of the ACPS in the last five years is shown below Pensioners Deferred Active March March March March March 2013 With regret We were very sorry to hear of the deaths of the following members since the last newsletter: Brian Coverley Michael Charnick Jennifer Gilmour Barbara Conradi Paulette Roberts Sue Beaumont Nimrod Morris William Werry Martin Sims Janet Williams Brian Simpson Peter Woods Neil Depledge Lyn Humphreys Pauline Barratt Changes to the ACPS Member contributions With effect from 1 April 2012, member contribution rates were due to increase by 0.5%. As part of a package of measures designed to improve staff morale, it was agreed to suspend the member contribution increase due on 1 April 2012 with the Commission making up the shortfall in contributions in the period 1 April 2012 to 31 March With effect from 1 April 2013 member contribution rates were due to increase by 1.5% in accordance with increases already agreed. However, it was again agreed to suspend the member contribution increase due on 1 April 2013 with the Commission making up the shortfall in the contributions. 8

9 Pension Liberation Fraud Campaign Pension Loans or cash incentives are being used alongside misleading information to entice savers as the number of pension scams increases. This activity is known as pension liberation fraud and it is on the rise in the UK. In rare cases, such as terminal illness, it is possible to access funds before age 55 from your current pension scheme. (For members that joined the ACPS before 6 April 2006, benefits can be taken from age 50). But for the majority, promises of early cash will be bogus and are likely to result in serious tax consequences. If you are over the minimum age you can ask the ACPS Trustees to pay your pension early. Your benefits would be reduced to take account of the early payment. The Pensions Regulator (in conjunction with HMRC, The Pensions Advisory Service and Action Fraud) has recently launched an information campaign to make consumers, Trustees and pension professionals aware of pension liberation fraud, i.e. pension offers that claim to be able to provide loans or release tax-free cash before the minimum age normally allowed by your pension scheme. The Pensions Advisory Service (TPAS) has published factsheets, which outline the risks and point out warning signs for members. The short factsheet titled Predators stalk your pension is enclosed with this Newsletter. Further information and the longer version factsheet can be found on TPAS website Tax Changes from 6 April 2014 In his 2012 autumn statement the Chancellor announced further changes to the tax treatment of pension schemes. These will affect a proportion of ACPS members and members will need to work out if they are in this category. The lifetime allowance This is the maximum amount of pension savings an individual can build up in registered pension schemes without incurring additional tax charges. The current standard lifetime allowance is 1.5 million. Benefits may be paid above this value but this may lead to an extra tax charge, called a lifetime allowance charge. The Government has announced that the standard lifetime allowance will be reduced to 1.25 million from 6 April HMRC will value a pension from a defined benefit scheme, such as the ACPS, by multiplying it by a factor of 20, before then adding on any cash lump sum, for the purpose of checking if the lifetime allowance has been exceeded. All benefits from registered pension schemes (which include personal pensions and additional voluntary contribution AVC funds) must be included in the test against the lifetime allowance. State pensions are not included. For a member whose only pension is that which is due to be paid from the ACPS and who has not paid AVCs, the lifetime allowance from 6 April 2014 is broadly equivalent to a pension of 54,340 per annum. The annual allowance There is also a maximum allowance of pension build up that you can have in registered pension schemes, in any year that can benefit from tax relief. This is known as the annual allowance and is currently 50,000. The Government has announced that the annual allowance will be reduced to 40,000 from 6 April If the value of your pension savings in any year (including the year of retirement) go over the annual allowance, you may have to pay a tax charge (known as the annual allowance charge). 9

10 Protection There are already various ways of protecting existing allowances, and two new types of protection will be introduced with these tax changes. HMRC have also consulted on amendments to some of the existing legislation. As these matters are complex in nature, we would encourage you to take appropriate financial advice if you believe your benefits may be affected by the changes in legislation. Further Information You can find more information about the lifetime allowance and the annual allowance in the guidance to individuals on the tax reliefs and charges section of the HMRC website: The ACPS Member Website During July 2012 a new open access website, was launched for members of the ACPS giving information and providing a means of keeping in touch with developments. The ACPS Member Website address is The ACPS Member Website contains: Key features of the ACPS. Forms for download. Voluntary Contributions. Current actuarial factors. Trustee profiles. The Definitive Trust Deed and Rules and subsequent amending deeds. Trust Documentation. Information about the Crown Guarantee. Copies of previous newsletters available for download. Annual pension increases. Please use the following address for enquiries: enquiries@acpensions.co.uk 10

11 Who manages the ACPS? Announcement of appointment to the Trustee Board Neil Swift was appointed as a Commission-nominated trustee on 4 June 2013 and is a member of the Audit & Risk Committee. Neil has been at the Audit Commission for over ten years and is currently Associate Controller - Corporate Resources and a member of the Executive Team. He is the Finance Director for the Commission. Current Trustee Board Chair and Independent Trustee The Law Debenture Pension Trust Corporation plc. (represented by Sue Timbrell) Member Nominated Trustees Derek Elliott Pensioner Grant Patterson Deferred Pensioner Phil Parkin Pensioner Commission Appointed Trustees Bharat Shah Deputy Chairman of the Commission Neil Swift Associate Controller Corporate Resources - appointed 4 June 2013 Steve Warren former Technical Director for the Audit Practice Secretary to the Trustees Collette Taylor Punter Southall Ltd Guarantor The Secretary of State for Communities and Local Government Investment Managers Bankers Baillie Gifford & Co Lloyds Bank plc Baring Asset Management Limited (account closed June 2013) BlackRock Investment Management Ltd Bank of Scotland plc Pyrford International Limited (account opened March 2013) Ruffer LLP Standard Life Investments LLP F&C Management Ltd ACPS advisers Lead Actuary Richard Akroyd, Towers Watson Ltd Auditors KPMG LLP Investment adviser Lane Clark & Peacock LLP Legal adviser Hogan Lovells International LLP ACPS Administrators Punter Southall Ltd 11

12 Contact Address If you need more information about your own benefits or if you have a question about anything in this edition of Pensions News, you should contact Punter Southall. The address to use for correspondence is: The contact telephone numbers are: Punter Southall Marion Patrick: Queen s Quay Richard Harvey: Queen Square Office Number: Bristol BS1 4LU enquires@acpensions.co.uk Before contacting the Administrator, you may wish to see if your question is answered on the ACPS Member Website:- Noticeboard The Trustees have been asked to include the following statement in this newsletter: Message from ACES: ACES (Audit Commission Ex Staff) is a forum for former Audit Commission and District Audit staff to keep in touch. Most communication is via to members or via our new facebook page of the same name. This year, the former District Auditor s Society transferred its residual funds and the Hurle Hobbs Trophy, a Georgian silver flagon, pictured below, to ACES. The Hurle Hobbs Trophy was gifted to the District Auditor s Society in the 1950s for the express purpose of an annual golf competition. ACES are continuing the tradition of the annual golf event but have now placed the trophy itself at CIPFA s London office for safekeeping. The next meeting of ACES will take place on 26 June 2014 in Stratford upon Avon on the same day as the annual golf event. We would love to see those of you who can make it. ACES are always keen to recruit new members. If you are interested in joining please contact the Secretary of ACES, Alison Rigg at alisonrigg14@gmail.com or ring her on or go to the facebook page. Membership is free. 12