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

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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

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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

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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

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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.

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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

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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

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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

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‘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