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Welcome to the Norfolk Pension Fund
Employers Forum
28 June 2016
The ‘State of Play’
• Pension provision a ‘front page’ story• A major issue for:
Government (& Local Government) Employers Employees Pensioners
• Many areas of interest and concern for pensioners: Major Public Sector Pensions reform following Lord Hutton's Independent Public Service Pension Commission report New LGPS Career Average scheme implemented 1st
April 2014 Wider pensions reform & additional regulatory oversight of LGPS Focus on efficiency and structure of assets 1
AgendaWelcome & Introduction
Nicola Mark - Head of the Norfolk Pension Fund
Triennial ValuationGemma Sefton - Hymans Robertson (Fund Actuary)
Coffee BreakAdministration Update
Mark Alexander – Pensions ManagerAny other business
2
Background(1)The Local Government
Pension Scheme (LGPS) LGPS is a defined benefit scheme
Only funded scheme apart from MP’s
Career Average benefits for new accrual (since April 2014) but retains significant legacy final salary linked obligations
Administered by Counties, Unitaries and London Boroughs
101 funds nationally – managed locally (89 in England & Wales)
Regulated – Department Communities & Local Government (DCLG) + TPR (increasing oversight by HMT – Government’s Actuaries Department)
Benefits are guaranteed by statute
Surpluses/shortfalls in funding have in the past been a matter for Employers
(cost-share mechanism between Employers and Employees being part of the new 2014 scheme which addresses costs going forward)
3
The LGPSNational scheme, locally administeredLocal accountability –n Pension Committee – Section 101 - board of quasi trusteesn New Local Pensions Board with oversight and assistance role (equal number of
Employer and Employee representatives)
Great diversity of membershipGreat diversity of employers – 11,801 Employers nationally(up by 1,130)
The LGPS in England & Wales:89 Funds (11 more in Scotland)£ 217.2bn*5.1 m Scheme Members (annual increase of 144,000)*
2013 2014 2015
Active Members 1.75m 1.819m 1.870
Deferred Members 1.65m 1.723m 1.798
Receiving benefits 1.40m 1.459m 1.487
1 in 5 of the working population
is in the public sector
*Data – LGPS 2015 Annual Report
NB, Data for Scottish funds not included here
Quarter of largest 100 Pension Funds
in UK are LGPS
Background(2)
The Local Government Pension Scheme (LGPS)
Administered by County Council as a statutory responsibility
Also covers all 7 Borough/District Councils (Scheduled Bodies) & 254 employers (2016) – up by 29 new employers with active membership (Admitted Bodies and Resolution Bodies)
The Norfolk Fund at March 2015:- 2016 27,638 Contributors 28,030 21,247 Pensioners 22,215 29,125 Deferred Pensioners 32,477
and is valued at just under £2.9 billion at 31 March 2016 (subject to external audit)
79% funded at last actuarial valuation (2013) next valuation 2016
The Norfolk Pension FundFacts, Figures and Changing Profiles
At March 2016: £2.9 billion 262 Employers (up from 181 in March 2014, 152 March 2013)
63 Councils (County, District, Town and Parish) * Remainder vary widely (e.g. private sector, charities, non uniformed
fire and police staff, non teaching staff in schools and colleges)
Membership 31 March 2014
31 March 2015 31 March 2016 Movement
Active 27,254 27,638 28,030 +392
Deferred 26,776 29,125 32,477 +3,352 Pensioners 20,887 21,247 22,215 +968Totals 74,917 78,010 82,722 4,712
Norfolk Pension Fund membership equates to 1 in 10 of adult Norfolk population* 7 Borough/District Councils (Scheduled bodies), rest Admitted Bodies and Resolution bodies
The Norfolk Pension FundFacts, Figures and Changing Profiles
MembershipAverage Pensions in payment:
January 2016: average annual pensions in payment were:
Pension in own right: •£5,055 (£421 per month)
Dependants pension: •£2,731 (£228 per month)
Average pension: •£4,760 (£397 per month)
Reform - LGPS asset pooling
10
The background
Fund merger seemed likely?
Brandon Lewis at NAPF
DCLG / LGA call for
evidence
Hymans Research for
DCLG
First good data on investment costs
+ international comparisons
Criticism of LGPS inv. costs but bad
data
Compared fund merger with
investment pools. Quantified
possible cost savings. Analysis of performance.
Consultation objectives: 1) managing
deficits; & 2) investment
efficiency
Hymans/CEMinvestment cost benchmarking
May 2013 June – Sept 2013 Nov – Dec 2013
FT article
11
The background
SAB analysis of CfE responses & letter to minister
DCLG consultation
London Councils give London CIV
green light
Themes:-use of asset
pooling? -use of passive?-use of in-house?
Consider options for managing deficits
Jan 2014 Feb 2014 May/July 2014
Collective Investment Vehicle for London
Boroughs.Voluntary
participation.
Forced fund merger ruled out.Instead consulted on asset pooling
and greater use of passive
Pre-election pause
12
Summer Budget 2015
“pool investments to significantly reduce costs, while maintaining overall
investment performance”
“sufficiently ambitious” proposals
13
October 5th 2015 - Conservative Party Conference
“…we’re going to work with councils to create .. half a dozen British wealth funds spread across
the country,”
“It will save hundreds of millions in costs, and, crucially, they’ll invest billions in the infrastructure
of their regions.”
14
Autumn Statement – followed by pooling criteria and guidance (November 25th 2015)
“up to 6 British Wealth Funds … at least £25 billion of Scheme assets each”
“reduce costs while maintaining overall investment performance”
“wider ambition of matching the infrastructure investment levels of the top global pension funds”
15
25th November 2015Criteria for pooling published
not a consultationConsultation on
Investment Regulations: liberalisation to facilitate CIVsBackstop legislation for funds not participating in pools
Submit proposalsInitial 19 February 2016 Detailed 15 July 2016
16
Investment Pooling : ACCESSACCESS (a collaboration of central, eastern and southern shires) with assets of £33bn – all of which are managed by third parties.
c3,000 employers
c900,000 members
Strong performing funds and potential for substantial benefits for a group of successful like-minded authorities collaborating and sharing their collective expertise.
75% of the assets are invested across 12 managers and 71 different managers used across the authorities.
17
PrinciplesThe participating authorities reflect a strong commitment to theproject and share an approach to achieve common objectives basedon a clear set of guiding principles.
Democratic accountability and fiduciary responsibility are vital
Q2(a) Collective Investment Vehicle
19
Legal owner of assets: CIV
Beneficial owner: Individual Funds
July 18 Submission – detailed proposals to Government
1. Commitment2. Transition3. Government & decision making4. Costs and savings5. Scale6. Infrastructure7. Implementation Plan
20
ACCESS pool goes live 1st April 2018
Next stepsOngoing • Further information days with operators eg London CIV
and third party suppliers• Further analysis of operator “build” vs “rent” options• Legal and tax advice as required• Work with cross-pool group e.g. infrastructure solutions • Detailed plan for implementation phase• Individual committee approval of ACCESS proposals
17th June • Draft submission for officer review27th June • Fifth meeting of Chairs – sign off draft submissionEarly July • Further government feedback15th July • Submit ACCESS proposal to governmentAugust • Feedback from govt & further detailed workSeptember • Chairs sign off “rent”, “build” or “rent to buy” CIVOctober • Commence implementation
21
‘The bit in the middle’
Investment
Collection of contributionsYear End support to ER’s
(CARE system)Member data maintenance
Retirements, Leavers, Joiners, Deaths,
Pensions payroll, Divorce, Redundancy,
Individual Transfers, Benefits statements,
Annual allowance, Lifetime allowance,
AVC’s, (third party), AVC’s(scheme),
GMP (Guaranteed Minimum Pension calculations)
AdministrationSection 101 Committee
Pensions Boards (oversight Regulation,& Compliance
Statutory Accounts,Banking, Monitoring, Payments/Receipts,
BudgetingTPR Compliance
Ill Health monitoring (£) and insurance,IAS/FRS17 Reporting, SF3 Contribution
Monitoring, Liability monitoring,Covenant reporting and monitoring, Outsourcing/in sourcing
Support,Employer merger (colleges/academies, and housing associations)
New Employers (contractors, mutual, academies),Employer ceasing (manage flight path), Triennial valuation,
Funding Strategy, Ill-Health insurance, Longevity monitoring,Employer annual returns, Transfer reconciliations, Liens & charges
Employer funding plans, Relationship with Actuary, TaxEmployer Training, Employer Budgets, Scheme changes
Auditors – internal, external and EmployerRecharges, Committee Reporting, Member Training, Bonds
Bulk TransfersEmployer communications
Control reports, Stock lending, Foreign exchangeCollateral monitoring, Rebalancing
Cash flow monitoringMember Training
Employer insolvency events
Manager monitoring, Investment performance,
Engagement,, Voting, Investment, Partnership
drawdowns and distributions, Advisory boards, Transition,
Manager selection, Cost analysis & Review, Cash
transfersCommittee Reporting,Consultant relationship
Drawdowns & distributionsTax filing, compliance &
optimisation (UK & overseas)Investment management
agreements,Custodian relationshipCommission recaptureClass action recoveries
Local enforcement of ownership rights (class actions)
STAKEHOLDERSEmployees, Deferred’s, Retired Members, Employers, Elected Members, DCLG, HMRC, TPR
LGPS management & oversight continues
Running a LGPS Pension FundAn overview ………………..
TPRt
Pension Boards
REFORMREGULATION AND OVERSIGHT
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