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UNIVERSITY OF YORK PENSION FUNDContributing Members Annual Report Year-end 2016

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UNIVERSITY OF YORK PENSION FUND

WELCOME!Welcome to the Contributing Member’s Annual Report.

This year’s report provides an update on the changes that have happened through the year, and as ever, contains information about the position of the Fund at its year end of July for 2016. There’s also information about the Fund’s accounts and the performance of its investments. The Report also provides an update on the governance and administration activities of the Fund.

The Fund’s website remains a useful resource which is regularly updated and where you’ll find a number of documents of note, including the latest Scheme Guide and documents from the most recent Triennial Valuation.

The following documents are also available, but are not published on the Fund’s website:

§ The Statement of Funding Principles

§ The Statement of Investment Principles

§ The shorter Actuarial Reports as at 31 July 2015 and 31 July 2016

§ The Trustee’s Annual Report and Accounts

If you would like to see or receive a copy of a document which is not on the Fund’s website, please contact the Pensions Team.

If you have any questions about any aspects of the Fund, or would like further information on the accounts or rules, please do not hesitate to contact the staff in the Pensions Office.

We welcome your feedback on all areas of the Fund, so if you have suggestions for improvements or would like to see more information available on certain areas, please do get in touch and let us know.

Best wishes,

Gillian Hamilton Pensions Manager

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Registered Address: University of York Pension Trust Company Limited Heslington Hall, H/B30 Heslington, York, YO10 5DD

Telephone: 01904 32 4805 or 01904 32 4782 Website: www.york.ac.uk/pensions E-mail: [email protected] Twitter: @PensionsUoY

All information contained within this booklet is correct at time of going to press, but may be subject to change. In the event of any discrepancy between the information contained in this booklet and the overriding legislation that governs pensions or the Trust Deed and Rules of the University of York Pension Fund, the Trust Deed and Rules and overriding legislation will apply. The University of York Pension Fund and its staff are not authorised to give financial advice. Members requiring financial advice may wish to speak to an independent financial adviser.

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CONTENTSFUND GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Joint Negotiating Sub-Committee on the Modification of the Pension Fund . . . . . . . . . . . . . . . . . . 8

PROFESSIONAL ADVISERS . . . . . . . . . . . . . . . . . . . . . 9

ADMINISTRATION REPORT . . . . . . . . . . . . . . . . . . . 10New contribution rates . . . . . . . . . . . . . . . . . . . . . . . . . . 10New AVC provider . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Brexit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Nomination forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Lost pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Using your personal information . . . . . . . . . . . . . . . . . . .11

INVESTMENT AND FINANCIAL REPORT . . . . . . . . . .12Asset allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Income and expenditure . . . . . . . . . . . . . . . . . . . . . . . . . 15

SUMMARY FUNDING STATEMENT JULY 2016 . . . . 16Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16How the Fund operates . . . . . . . . . . . . . . . . . . . . . . . . . . 16How much money does the Fund need? . . . . . . . . . . . . 16Actuary’s report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17The PPF and Pensions Regulator . . . . . . . . . . . . . . . . . . 19

THE STATE PENSION . . . . . . . . . . . . . . . . . . . . . . . . . 20The new State Pension . . . . . . . . . . . . . . . . . . . . . . . . . . 20State Pension top-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

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FUND GOVERNANCEBOARD OF DIRECTORSThe University of York Pension Fund is administered by the University of York Pension Trust Company Limited. The Trustee Company has nine directors, who have met on three occasions during the financial year to the end of July 2016. The Directors for the year have been:

Independent ChairDirector AppointedMr I F Shepherd, Retired (ex-Scheme Actuary) 22 July 2010

Employer Nominated Directors – appointed by the University of YorkDirector AppointedDr D Duncan, Registrar 12 August 2010

Mr J Lindley, Finance Director 11 December 2014

Mrs P Lofthouse, HR Director 1 April 2012

Mr J Meacock, Director of Estates 1 April 2014

Member Nominated Directors – nominated and elected by the Fund membersDirector AppointedMrs H Adcock (IT Services) 13 March 2016

Mr N Beach, Retired (ex-Biology) 1 January 2002

Mr J Coates (Library & Archives) 13 March 2016

Mr P Foster, Retired (ex-Security) 1 July 2004

Mr T Franklin Retired (ex-Registrar’s and Planning) 13 March 2016

Mr B Hemingway, Retired (ex-Fund Administrator) 16 January 2012

Mrs T Issott-Parker, Finance 1 January 2002

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The Member Nominated Directors are elected by Fund members and each serve a term of four years. They retire by rotation and may be re-elected.

Mr Beach stood down the position of Pensioner Member Nominated Director from 21 December 2015, with the position being filled on 13 March 2016 by Mr Franklin. Mrs Issott-Parker and Mr Hemingway stood down from 23 January 2016, with their positions as Member Nominated Directors being filled on 13 March 2016 by Mrs Adcock and Mr Coates.

The Secretary of the Fund is Miss G Hamilton, Pensions Manager, who is also responsible for the administration of the Fund.

There are two co-opted attendees of the Board of Directors who are nominated by the Member Nominated Directors. These may be either pensioner representatives or contributing members. The co-opted attendees can attend all meetings of the Pension Fund and its Sub-Committees. These positions are used to retain the knowledge of previous Member Nominated Directors or to enhance the knowledge of future Member Nominated Directors. These positions are currently held by:

RepresentativeMr K Whitehead

Mr N Beach (from 22 December 2015)

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JOINT NEGOTIATING SUB-COMMITTEE ON THE MODIFICATION OF THE PENSION FUNDRecommendations for alterations and additions to the rules are made to the Trustee by a Joint Negotiating Sub-Committee. There have been three meetings of the Sub-Committee during the year-end to July 2016. The members of that Sub-Committee are:

Employer representativesRepresentativeDr D Duncan, Registrar

Mr J Lindley, Finance Director

Mrs P Lofthouse, HR Director

Mr J Meacock, Director of Estates

Employee representativesRepresentativeMr P Foster, Retired (ex-Security)

Mr R Hide, Physics

Mrs Y Lund, Finance

Ms S Price, Finance

Mr I Wright, Physics

During the financial year, Mrs Lund, Ms Price and Mr Wright have stepped down from membership of the Sub-Committee. Contributing members of the Fund who would like to be considered to stand as an employee representative on the Sub-Committee should contact the Fund Administrator or any of the other employee representatives.

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PROFESSIONAL ADVISERS

ActuaryMr D Joy First Actuarial Mayesbrook House Lawnswood Business Park Leeds LS16 6QY

AuditorsBHP, Chartered Accountants Bathurst House 86 Micklegate York North Yorkshire YO1 6LQ

BankersHSBC plc 13 Parliament Street York North Yorkshire YO1 8XS

BankersLloyds Banking Group 3rd Floor Lisbon House 116 Wellington Street Leeds LS1 4LT

CustodianJP Morgan 1 Chaseside Bournemouth BH7 7DA

Insurance brokersMercer Marsh Benefits Mercer Ltd Four Brindleyplace Birmingham B1 2JQ

Investment adviserMr R Slater Deloitte Total Reward and Benefits Limited Saltire Court 20 Castle Terrace Edinburgh EH1 2DB

Investment managerAberdeen SVG Private Equity Managers Limited Georges Court 54-62 Townsend Street Dublin 2 Ireland

Investment managerSchroder Investments Limited 31 Gresham Street London EC2V 7QA

SolicitorsWalker Morris LLP Kings Court 12 Kings Square Leeds LS1 2HL

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ADMINISTRATION REPORT

NEW CONTRIBUTION RATESDuring the financial year, new contribution rates came into force in the upper and lower tiers for both the employers and members of the Fund. The employer contribution rate increased from 14.95% to 16.00% of pensionable salaries from 1 October 2015. Members in the upper tier saw their contributions increase from 7.25% to 8.75% of pensionable salaries, whilst members in the lower tier saw their contributions increase from 3.75% to 5.25% of pensionable salaries from 1 April 2016.

NEW AVC PROVIDERMoney purchase additional voluntary contributions (AVCs) in the Fund are no longer provided through Clerical Medical, and are now provided by Aegon. AVCs are a flexible, tax efficient way of saving more for your retirement. Once you have set up an AVC policy, you can increase, decrease, stop or re-start your contributions depending upon your circumstances. Your AVC policy can be used in a number of ways, including taking it as a tax free cash lump sum (subject to limits), or drawing it as a pension.

If you’re interested in finding out more or taking out an AVC, there’s lots of information about how to do so on our website: www.york.ac.uk/admin/hr/pensions/uoy.htm#tab5.

BREXITThe UK’s decision to leave the EU has resulted in market volatility.

The Pensions Regulator has issued a statement to trustees warning against taking any knee jerk reaction, and reminding them that actions should be focussed on the longer term.

To ensure the Fund remains on track to meet its long term objectives, the Trustee considers the risks posed to the University covenant, investment strategy and funding strategy. Given the current uncertainty,

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the Trustee will be considering whether any action is required.

NOMINATION FORMSCopies of nomination forms are available for you to download from the Fund’s website. Completing a nomination form allows you to let the Trustee know your wishes for who you would want to receive any lump sum that would be payable in the event of your death.

Completing a form only takes a few minutes, but can make the process of administering an Estate much easier on those left behind. If you haven’t completed a nomination form within the last three years, please complete a nomination form. If you don’t have internet access or access to a printer, please contact the Pensions Team using the details at the start of this booklet, and we’ll send a paper copy out to you.

LOST PENSIONSIf you have lost track of any pension savings built up elsewhere, there is a new, free tracing service available.

www.gov.uk/find-pension-contact-details

USING YOUR PERSONAL INFORMATIONThe Trustee and the Scheme Actuary will only use your personal information for the administration and financial management of the Fund. It will only be shared with third parties where there is a legal obligation on us to do this or where it is necessary for the proper administration of the Fund. For information on how your information is used, how we maintain the security of your information and your rights to access information we hold on you, please contact the Trustee care of the Fund Administrator.

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INVESTMENT AND FINANCIAL REPORTResponsibility for the implementation of the investment principles was held by the Trustee, who approved the investment strategy during the year.

Subject to complying with the agreed strategy, which specifies the target proportions of the Fund which should be invested in the principal market sectors, day-to-day management of the Fund’s asset portfolio, which includes full discretion for stock selection, is the responsibility of the investment manager. The Fund’s assets have been managed by Schroder Investment Management and Aberdeen Asset Management during the year under review.

ASSET ALLOCATIONWe show below the asset allocation for the period under review.

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%UK

equityGlobal equity

Corporate bonds

Gilts Private equity

Property GTAA Cash Ground rent

Fund 2016

Benchmark 2016

Fund 2015

Benchmark2015

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MEMBERSHIPThe three year non-admission period that had been in place for employees of the University of York came to an end on 31 July 2016, and the waiting period for employees of the other participating subsidiary companies ended on 24 December 2016. New entrants into the Fund during the financial year were entered discretionally. Subsequent to the financial year-end we have once again begun to welcome new entrants into the Fund.

Membership by category

1,300

1,200

1,100

1,000

900

800

700

600

500

400

300

200

100

0Contributors Deferred Pensioners Widow/ers Dependants

2016

2015

Num

ber

of m

embe

rs

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Contributing members by tier

700

600

500

400

300

200

100

02016 2015

Upper tier

Lower tier

Num

ber

of m

embe

rs

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INCOME AND EXPENDITUREDetailed below is an abridged version of the income and expenditure of the Fund to 31 July 2016. Full details are published in the Fund’s Annual Report and Accounts, which is available to members upon request.

Income2015 2016

Investment income £2,189,372 £2,620,389

University standard contributions £3,426,338 £3,266,165

University deficit contributions £250,000 £41,666

University augmentation £39,994 £0

Employee standard contributions £1,333,273 £1,352,889

Employee AVCs £68,154 £62,704

Transfer values received £0 £0

Other income £42,683 £720

Totals £7,349,814 £7,344,533

Expenditure2015 2016

Pensions paid £3,363,073 £3,612,205

Administration expenses £277,322 £250,584

Transfers paid £31,856 £52,320

Lump sums paid upon retirement £1,103,451 £1,280,986

Death benefits £42,683 £22,738

Life assurance £70,814 £64,389

Refund of contributions £4,271 £4,315

Investment management expenses £159,406 £171,933

Other expenditure £2,694 £3,463

Totals £5,055,570 £5,462,933

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SUMMARY FUNDING STATEMENT JULY 2016INTRODUCTIONThis statement is being sent to you on behalf of the Trustee of The University of York Pension Fund (the “Fund”).

The primary purpose of this statement is to update you on the financial development of the Fund. We have also provided extra information about the Fund and its operation.

HOW THE FUND OPERATESThe University of York pays contributions to the Fund so that the Fund can pay benefits to the Fund members.

The money to pay for members’ pensions is held in a fund, separate from the University. It is not held in separate funds for each individual member.

There has not been any payment from the Fund to the University since the date of the last Statement. Legislation would only permit a payment to the University once the Fund had enough assets to secure the accrued benefits with an insurance company.

HOW MUCH MONEY DOES THE FUND NEED?Estimates are carried out by the Scheme Actuary on a regular basis. Using this information, the Trustee can agree with the University the level of future contributions.

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ACTUARY’S REPORTThe last actuarial valuation of the Fund was carried out as at 31 July 2014. At that date, the ongoing funding position was:

Value of assets £132.5m

Value of liabilities £121.9m

Surplus £10 .6mFunding level 109%

The latest actuarial report by the Scheme Actuary showed the estimated funding position as at 31 July 2016 was:

Value of assets £154.0m

Value of liabilities £151.7m

Surplus £2.3m

Funding level 102%

The previous Statement noted that as at 31 July 2015, the funding level was estimated to be 105% with a surplus of around £7m. There has therefore been a deterioration in the funding position over the period, although the Fund is still in surplus.

The main reason for the deterioration between 31 July 2015 and 31 July 2016 is the change in assumptions used to value the liabilities, reflecting further falls in bond yields over the period, which led to a higher value being placed on the Fund liabilities as at 31 July 2016 compared to 31 July 2015. This has been partly offset by the good investment returns on the Fund’s assets over the period.

The next formal actuarial valuation of the Fund is due as at 31 July 2017, but it may take until 31 October 2018 before the results of that valuation are finalised.

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As part of the actuarial valuation, the law also requires an assessment to be made of the extent to which the assets would cover the liabilities of the Fund if the Fund were to be wound up. The last valuation, as at 31 July 2014, showed that the Fund’s assets represented approximately 59% of the cost of securing the Fund’s benefits with an insurer.

If the Fund were to wind up, the law requires the University to make a payment to the Fund that would enable the Trustee to secure 100% of members’ benefits with an insurance company. At 31 July 2014, the estimated amount required to achieve this was £92.3m. Inclusion of this information does not imply that the University is thinking of winding up the Fund.

If the University became insolvent, the Pension Protection Fund (PPF) might be able to pay compensation to members.

If you are thinking of leaving the Fund for any reason, you should consult a professional adviser, such as an independent financial advisor, before taking any action.

The University of York is the Principal Employer. The Trustee’s objective is to be able to pay the pensions both now and in the future. The success of the Fund relies on the University’s continuing support to:

§ pay future running expenses of the Fund;

§ meet any funding shortfall.

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THE PPF AND PENSIONS REGULATORThe PPF has been set up to compensate scheme members in the event of the failure of the sponsoring employer of an underfunded scheme. For details of the compensation payable by the PPF, please refer to the PPF website at www.ppf.gov.uk.

The Pensions Regulator (tPR) is the UK Regulator for work-based pension schemes. TPR has certain powers it can use if it has concerns about a scheme’s funding, but it has not used any of these powers in relation to this Fund.

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THE STATE PENSIONTHE NEW STATE PENSIONIf you reached State Pension age before 6 April 2016, you will continue to receive the basic State Pension and any earnings-related pension you are receiving.

If you will reach State Pension age on or after 6 April 2016, you will be entitled to the new State Pension. Your State Pension will be based on your National Insurance record. There have been further changes to State Pension age, affecting individuals born after 5 April 1960. To find out your State Pension age and to obtain an estimate of your State Pension, go to: www.gov.uk/check-state-pension.

STATE PENSION TOP-UPIf you are a man born before 6 April 1951 or a woman born before 6 April 1953, then you may be able to top up your State Pension. This option is time limited; it will only be available until 5 April 2017.

You can find out more about how much this will cost you and how much you could receive here: www.gov.uk/state-pension-topup.

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ALTERNATIVE FORMATSIf you require this document in an alternative

format, please call us on 01904 32 4805. We are able to supply large print, braille and spoken word tapes and CDs of all our documents.

york.ac.uk/pensions [email protected] @PensionsUoY

34531 – york.ac.uk/design-print-solutions

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