devon lgps fund 2018 employer meeting · 2018-12-10 · devon county council is the administering...

Devon LGPS Fund2018 Employer Meeting

Welcome

Please take a set of hand outs

Help yourself to coffee or tea and biscuits

Take a seat, we’ll be starting at 10:20

Agenda

10.00 - Tea and Coffee

10:20 - Welcome & Introductions - Councillor Ray Bloxham

11:10 - Refreshments

12:15 - Q & A Session

11:25 – Pensions Admin Update - Dan Harris & Shirley Cuthbert

12:30 – Close - Mary Davis Followed by Buffet Lunch

12:00 – The 2019 Actuarial Valuation – Charlotte Thompson

10:30 - Investment Update - Mark Gayler

11:50 – Election of Employer Representatives – Mark Gayler

Investment Update

Mark Gayler

Assistant County Treasurer

Investments and Treasury Management

● Devon County Council is the Administering

Authority of the Fund and delegates

management of the Fund to the Investment &

Pension Fund Committee.

● Total size of fund = £4.086 billion (as at 31

March 2018).

● Over 200 employers paying into the fund.

● Over 100,000 members of the Pension

Scheme, comprising contributors, pensioners

and deferred pensioners.

● Funds invested into equities, bonds, etc. by

external investment managers.

● Actuarial review of the Fund every three years

to determine funding level.

Devon Fund Overview

● 2017/18 Annual Report now

available on-line

https://www.peninsulapensions.org.uk/

wp-content/uploads/2018/09/Pension-

Fund-AR-2018-Final.pdf

Annual Report and

Statutory Statements

https://www.peninsulapensions.org.uk/wp-content/uploads/2018/09/Pension-Fund-AR-2018-Final.pdf

1,400

1,800

2,200

2,600

3,000

3,400

3,800

4,200

4,600

20052006200720082009201020112012201320142015201620172018

£m

As at 31 March

Devon Pension Fund - Fund PerformanceTotal Value of Fund

● Total fund performance 2017/18 = +4.3%

● Annualised return of 6.6% per year over the last 10 years, slightly

below the Fund benchmark.

● Annualised Return from 1 April 2016 to 30 June 2018 = +11.3%

Fund Performance

2007

2010

2013

2016

0

1

2

3

4

5

6

7

8

FundPerformance

Benchmark

An

nu

alis

ed %

Re

turn

Fund Performance 2008 - 2018

Fund Performance

Performance to 31 March 2018

Latest Quarter 2017/18 3 Years 10 Years

% pa % pa

Fund -3.0 4.3 7.0 6.6

Benchmark -2.4 4.5 7.2 6.8

Relative Return -0.6 -0.2 -0.2 -0.2

-5

0

5

10

Return%

-45

-35

-25

-15

-5

5

15

25

35

45

2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20

£m

Surplus of Contributions over Benefit Payments

Fund Cashflow

Funding Position

2018 Indicative Actuarial PositionTotal Fund

Position 2013

Total Fund

Position 2016

Total Fund

Position 2018

Assets 2,985,387,000 3,310,834,000 4,202,679,000

Liabilities 3,588,546,000 3,938,512,000 4,567,041,000

Deficit (603,159,000) (627,678,000) (364,362,000)

Funding Level 83% 84% 92%

Deficit Recovery Period 25 years 22 years

Contributions:

Future Service Rate 13.6% 14.9%

Deficit Rate (notional) 5.2% 6.0%

Total 18.8% 20.9%

● 2018 position based on data from 2016 Valuation updated for

investment returns, inflation and salary increase assumptions.

● Not therefore a full valuation, but gives an indication.

Investment Strategy Statement

Contents:

• Investment Strategy and

Asset Allocation.

• Risk Management.

• Approach to pooling of

investments.

• The policy on social,

environmental and governance

considerations.

• The policy on stewardship and

the exercise of shareholder

rights including voting.

Asset Allocation – 31/03/18

Investment Mandate and Current Managers2017/18

Target

Actual

31/03/18

Medium

Term Target

% % %

Global Passive Equities (State Street Global Advisors) 15.2 28.0

UK Passive Equities (UBS Asset Management) 19.8 -

Global Alternative Indices (UBS Asset Management) 8.0 8.6 8.0

Global Equities (Aberdeen Asset Management) 5.0 5.3 5.0

Global Emerging Markets (Aberdeen Asset Mgt) 5.0 4.5 5.0

Specialist Equity Funds (Various) 5.0 4.9 -

Low Volatility Equities - - 7.0

Global Small Cap Equities - - 5.0

Global Bonds (Lazard Asset Management) 6.0 5.2 -

Multi-Sector Credit (Wellington Management) 6.0 5.4 6.0

Corporate Bonds - - 6.0

Cash 1.0 2.4 1.0

Diversified Growth Fund (Baillie Gifford / Barings) 15.0 14.9 9.0

Property (Aviva Investors) 10.0 9.5 10.0

Infrastructure/Private Markets (Various) 4.0 4.3 10.0

100.0 100.0 100.0

35.0


Contents:

• Investment Strategy and Asset

Allocation.



investments.


environmental and governance

considerations.




Investment Pooling Proposals

Forging new futures by working together



Local Government Pension Scheme pooled investments – The

government will work with Local Government Pension Scheme

administering authorities to ensure that they pool investments to significantly reduce costs, while maintaining overall investment

performance. The government will invite local authorities to come forward with their own proposals to meet common criteria for

delivering savings. A consultation to be published later this year will

set out those detailed criteria as well as backstop legislation which will ensure that those administering authorities that do not come

forward with sufficiently ambitious proposals are required to pool investments.

July 2015 Budget Statement:


Northern Powerhouse £m Border to Coast £m

Greater Manchester 17,591 Bedfordshire 1,710

Merseyside 6,863 Cumbria 2,027

West Yorkshire 11,319 Durham 2,335

35,773 East Riding 3,677

Lincolnshire 1,756

Lancashire/LPFA £m Northumberland 1,067

Berkshire 1,650 North Yorkshire 2,400

Lancashire 5,831 South Yorkshire 6,277

LPFA 4,646 South Yorkshire PT 214

12,126 Surrey 3,194

Teeside 3,244

Wales £m Tyne and Wear 6,378

Cardiff 1,680 Warwickshire 1,638

Clwyd 1,395 35,918

Dyfed 1,914

Gwent 2,277 Midlands £m

Gwynedd 1,497 Cheshire 4,115

Powys 502 Derbyshire 3,694

Rhondda Cynon Taf 2,408 Leicestershire 3,128

Swansea 1,540 Nottinghamshire 4,079

13,213 Shropshire 1,513

Staffordshire 3,769

Brunel £m West Midlands 11,464

Avon 3,835 W Mids Transport 475

Buckinghamshire 2,206 Worcestershire 1,987

Cornwall 1,522 34,223

Devon 3,374

Dorset 2,301 London £m ACCESS £m £m

Environment Agency 2,877 31-33 London Boroughs 29,094 Cambridgeshire 2,284 Kent 4,539

Gloucestershire 1,709 (two yet to confirm) East Sussex 2,747 Norfolk 2,949

Oxfordshire 1,845 Essex 4,933 Northamptonshire 1,865

Somerset 1,434 Hampshire 5,137 Suffolk 2,198

Wiltshire 1,853 Hertfordshire ?? 3,581 West Sussex 2,976

22,957 Isle of Wight 479 33,687

London Pension Fund Authority

?



Brunel Pension Partnership

Participating Authority 1

Participating Authority 2 …

… Participating Authority 10

The Participating Authorities

The 10 Participating Authorities each decide their strategic asset allocations between the Portfolios (bold lines).

Participating Authorities have direct beneficial ownership of units in the Manager Operated Funds (dotted lines).

Management Contract between each Participating Authority, the Brunel Manager and the Brunel Oversight Board.

Brunel Oversight Board

Brunel client group

Manager Operated Fund 1

Manager Operated Fund 2

Brunel Manager decides on the Portfolios offered and the Manager Operated Funds/managers to be used for each Portfolio. Typically, between 1 and 3 Manager Operated Funds would be chosen for a given Portfolio, with the Brunel Manager specifying the proportions to be invested between those Manager Operated Funds (orange lines).

UK Equities Core Portfolio

Other Brunel Portfolios …

Brunel Manager

(FCA authorised Investment Manager)

Board



Transition costs

• Costs will be spread over transition period

Asset Group Assets to

Transition (£b)

Transition Costs

(£m)

Transition Costs

(%)

Passive Equities 4.7 3.0 0.01%

Active Equities 7.4 16.7 0.08%

Fixed Interest 5.5 6.1 0.03%

Alternatives 3.7 5.3 0.02%

LDI 0.9 0.4 0.00%

Other 1.2 - -

Plus Tax Costs - 10.0 0.04%

TOTAL 23.3 41.5 0.18%



Fee Savings – Annual Rate by 2025/26 - £27.8m

Core model Assets under management (AUM, £m, at 31 March

2016)

Running annual rate of net saving in FY25

£m bps of projected AUM in FY25

Avon 3,739 3.5 6.8

Buckinghamshire 2,164 6.1 20.4

Cornwall 1,464 1.1 5.6

Devon 3,299 5.2 11.3

Dorset 2,273 3.7 11.8

Environment Agency 2,954 2.8 7.4

Gloucestershire 1,687 0.7 3.0

Oxfordshire 1,824 1.1 4.2

Somerset 1,592 1.5 6.6

Wiltshire 1,826 2.1 8.3

Combined Pool 22,822 27.8 8.9




Transition Plan

● Passive Equities already transitioned.

● Active UK and Low Vol Equities due to

transition Nov/Dec 18

● Remaining asset classes due to transition on

a phased basis between April 2019 and

August 2021

Asset Allocation – 31/07/18

Investment Mandate and Current Managers2018/19

Target

Actual

31/07/18

Medium

Term Target

% % %

Global Passive Equities (Brunel/LGIM) 18.7 28.0

UK Passive Equities (Brunel/LGIM) 17.2 -

Global Alternative Indices (Brunel/LGIM) 8.0 9.0 8.0

Global Equities (Aberdeen Asset Management) 5.0 5.9 5.0

Global Emerging Markets (Aberdeen Asset Mgt) 5.0 4.3 5.0

Specialist Equity Funds (Various) 5.0 5.1 -

Low Volatility Equities - - 7.0

Global Small Cap Equities - - 5.0

Global Bonds (Lazard Asset Management) 6.0 5.1 -

Multi-Sector Credit (Wellington Management) 6.0 5.1 6.0

Corporate Bonds - - 6.0

Cash 1.0 1.6 1.0

Diversified Growth Fund (Baillie Gifford / Barings) 13.0 14.3 9.0

Property (Aviva Investors) 10.0 9.1 10.0

Infrastructure/Private Markets (Various) 6.0 4.6 10.0

100.0 100.0 100.0

35.0


Contents:

• Investment Strategy and Asset

Allocation.



investments.


environmental and

governance considerations.




Stewardship and Responsible Investment

• The Pension Fund has a fiduciary duty

to seek to obtain the best financial

return that it can for its members.

• Wide range of ethical issues means an

all-encompassing divestment policy

has the potential to breach fiduciary

duty.

• BUT the Fund has a requirement to

manage risks in relation to

Environmental, Social and Governance

(ESG) issues, such as fossil fuels.


• Focus on engagement with companies on

Environmental, Social and Governance (ESG)

issues.

• The Fund is a member of the Local Authority Pension

Fund Forum which conducts engagement on behalf

of member funds.

• The Committee has agreed to become members of

the International Investors Group on Climate Change.

• Commitment to responsible stewardship of

shares in ownership. The Committee has

been long standing supporters of the UK

Stewardship Code and has now strengthened

its approach to stewardship with the aim of

becoming Tier 1 signatories to the Code.


• Investment managers are expected to take ESG issues

into account in making investment decisions.

• Investment managers are expected to engage with

companies they are invested in and exercise their votes

at company meetings such as AGMs.

• Voting at company AGMs delegated to investment

managers. Where there is an issue of concern the Fund

will discuss with the investment manager how they intend

to vote.

• Pooling will result in more resource to monitor ESG risks,

the exercise of voting rights, and the carbon footprint of

the Fund’s investments.

• The Pension Fund has a long term horizon over which to invest.

• Investments need to be managed to meet liabilities over the long term.

• Negative cashflow (contributions less benefits) needs to be factored into investment strategy.

• The Fund needs to adapt to a changing world.

• Investments will be pooled with other LGPS Funds from April 2018.

• Long term performance is still the overriding objective.

Looking Ahead

Presented by

Dan Harris

Head of Peninsula Pensions

Shirley Cuthbert

Employer and Communications Manager

Peninsula Pensions

Administration Update

• Peninsula Pensions Restructure

• Performance and Statistics

• Challenges Ahead

Agenda

• Peninsula Pensions was formed in 2013

• Over 400 employers

• Gloucestershire Fire and Rescue Service

and Avon and Somerset Police

• Approximately 190,000 members across

both funds

Peninsula Pensions Restructure

Key functions provided include:

• Providing guidance, information and

support to employers and members

• Calculation of pension benefits

• Payment of pensions

• Adherence to HMRC and other regulatory

bodies requirements

• The number of scheme members and

employers is growing…

• 12% increase in membership since 2013

• Regulation changes

• Workloads are increasing

In 2018, the service was restructured into

three specialist functions:

• Member Services

• Technical and Compliance

• Employer and Communications

Member Services

• Provides member services for LGPS, Police and

Fire schemes

• LGPS benefit teams are now split by employer with

the aim of improving employer focus

• The Police and Fire team are responsible for

processing benefits administered under Service

Level Agreements

Technical and Compliance

• Pensioner Payroll

• Systems Development

• Technical and Training:

• procedure notes and training

• training and accreditation programme for staff

• quality assurance scheme for accredited staff

• technical queries

• administer the Annual Allowance exercise and

other projects

Employer and Communications

• Client management

• Increased engagement, training and support

• Review employer performance data

• Administer the process for admitted bodies and new

employers

• Improve communications with employers and members

• Increase the use of self-service portals and the website

Performance and Statistics

Administration Performance

2011 2012 2013 2014 2015 2016 20170

10000

20000

30000

40000

50000

60000

70000

80000

0

10

20

30

40

50

60

70

80

90

100

Vo

lum

e o

f w

ork

co

mp

lete

d

Task

s co

mp

lete

d w

ith

in t

arge

t ti

mes

cale

(%

)

Year

• Cost per member £16.06 vs £20.14 (LGPS average)

• Cost per pensioner £4.57 vs £5.54 (LGPS average)

CIPFA Benchmarking 2016/17

• Backlog

• Exit Credits

• 2019 Valuation

Challenges Ahead

2019 Actuarial Valuation

Charlotte Thompson

Investment Manager

Investments and Treasury Management

● Compliance with legislation.

● Set Employer Rates

● Determine money needed to met accrued

liabilities

● Calculate Funding Level

● Monitor experience V assumptions

● Achieve goal of paying benefits

Why another valuation?

r

▪ Actual cost of the Scheme will

depend on the pensions actually

paid

▪ A valuation is an estimate of how

much money will be needed

▪ Estimate is based on

assumptions on how much the

pensions will be plus the

probabilities of benefits being

paid

Overview of a Valuation

Liabilities – all a bit of a guess

• Investment Return

• Inflation

• Pay increases

• Pension increases

• Pay rises

• Life expectancy

• Retirement age and

cause

Clean Data please…..

Timetable• 31/03/2019 – Valuation day

• April 2019 end of year data from employers

• End of June – Data submitted

• Early July – finalise data with Actuary

• Mid September – Officer meeting with Actuary –

high level fund results

• End October/November – employer meeting with

Actuary, opportunity to meet the actuarial team

and discuss results

• 31/03/2020 – valuation sign off

• 01/04/2020 – new employer rates

Questions?

devon lgps fund 2018 employer meeting · 2018-12-10 · devon county council is the administering...

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