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Derbyshire Pension Fund

Derbyshire Pension Fund. Annual General Meeting Chesterfield 12 November 2013. Steve McManus Investment Officer. Derbyshire Pension Fund AGM. Pension Fund Annual Report Available on the Council’s website or in hard copy on request 7 sections dealing with:

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Derbyshire Pension Fund

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  1. Derbyshire Pension Fund Annual General Meeting Chesterfield 12 November 2013 Steve McManus Investment Officer

  2. Derbyshire Pension Fund AGM Pension Fund Annual Report Available on the Council’s website or in hard copy on request 7 sections dealing with: • Management and Financial Performance • Investment Policy and Performance • Arrangements for the Administration of the Fund • Pensions Administration Strategy/Fund Activity • Fund account and net asset statement • Auditor’s Opinion • Actuary’s Statement

  3. Derbyshire Pension Fund AGM Membership of the Pension Fund is available to: All Local Authorities in Derbyshire Certain Admission bodies Derbyshire County Council is responsible for its Management. Responsibility is delegated from the Council to: Pensions Committee - Administration/Benefits Investment Committee - Investment of Fund

  4. Derbyshire Pension Fund AGM • Day to day management rests with the Director of Finance • Pensions Section - Administration of benefits • Investment Section - Investment Management

  5. Derbyshire Pension Fund AGM Membership 2011 2012 2013 Contributors 35,791 33,151 33,586 Pensioners 22,024 23,451 24,160 Deferred Pensioners 20,652 23,260 23,859 Total 78,467 79,862 81,605

  6. Derbyshire Pension Fund AGM Pension Fund Costs Costs per member 2012-13 Pensions Administration £14.03 Investments £48.44 Comparison of costs 2012-13 County Derbyshire Average Pensions Administration £24.90 £14.03 Investments £88.07 £48.44

  7. Derbyshire Pension Fund AGM Management of Investments Responsibility is delegated to the County Council’s Investment Committee comprising: 7 County Councillors 2 Derby City Councillors 2 Councillors representing the Local Government Association (Derbyshire) 2 Employee representatives attend as non-voting members 2 Independent Investment Advisers

  8. Derbyshire Pension Fund AGM Powers and Duties of the Investment Committee Based on Government Regulations Designed to ensure that the Fund is properly and effectively managed.

  9. Derbyshire Pension Fund AGM Main Duties To appoint managers, advisers etc. To monitor performance To determine an investment policy having regard to: The advisability of investing in a wide variety of investments The suitability of particular investments and types of investments The Regulations require that advice should be taken in carrying out the above duties.

  10. Derbyshire Pension Fund AGM Investment Management The Fund’s investment assets are managed: Internally by the in-house team Externally by specialist managers

  11. Derbyshire Pension Fund AGM Internal Management UK Bonds, International Bonds UK Equities Japanese Equities*, Asia Pacific Equities*, Emerging Market Equities* Private Equity, Infrastructure, Cash. (* through pooled investment funds)

  12. Derbyshire Pension Fund AGM External Management (a) European equities UBS Global Investment Management (discretionary) (b) North American equities Wellington Management International (discretionary) (c) Direct property Keneth Peters & Co. (agents and advisors)

  13. Derbyshire Pension Fund AGM • Investment Policy • “To invest the Pension Fund with the aim of maximising its returns subject to an agreed level of risk and having taken into account the Fund’s liabilities and its projected cash-flows”

  14. Derbyshire Pension Fund AGM Asset Category Benchmark Proportion Permitted Range Total Equities 64% +/-6% UK Equities 34% +/-5% Overseas Equities 30% +/-5% Bonds 24% +/-7% Fixed Income Bonds 16% +/-7% Real Return Bonds 8% +/-3% Alternative Assets 3% +/-3% Property 7% +/-4% Cash 2% 0-8%

  15. Derbyshire Pension Fund AGM Asset allocation at 31 March 2013 was as follows:

  16. Derbyshire Pension Fund AGM • The Pension Fund’s investment performance targets • To beat the actuary’s long term assumptions of returns (currently an investment return of 6.75%pa) • To outperform the Fund’s benchmark index return by ¼% over 1, 3, 5 and 10 year periods

  17. Derbyshire Pension Fund AGM Markets 2012-13 Equity Markets recovered strongly over the year: N America +19.3% Europe +18.0% UK +16.8% Pacific Ex Japan +18.1% Japan +14.3% Emerging Markets +7.4% Bonds returns were also good UK Government +5.2% Corporate Bonds +13.3% Index Linked Bonds +10.2% Returns from Property were subdued at 2.5%

  18. Derbyshire Pension Fund AGM Investment Performance 2012-13

  19. Derbyshire Pension Fund AGM Longer Term Performance (periods to 31 March 2013) Performance for the Fund over 3, 5 and 10 years to 31 March 2013 is shown below 3 years 5 years 10 years %p.a. %p.a. %p.a. Derbyshire 8.4 7.4 9.9 Benchmark Returns 8.5 6.9 9.6 Average Local Authority 8.1 6.5 9.4 Retail Price Index 4.1 3.2 3.3

  20. Value of assets at 31 March for the last 10 years

  21. Derbyshire Pension Fund AGM Economy - 2012-13 to date Austerity Measures (spending cuts/ job losses) High unemployment Eurozone Sovereign Debt Global economic growth - mixed Inflation Interest rates at historic lows Quantitative Easing and Tapering

  22. Derbyshire Pension Fund AGM Pensions are based on Number of years’ service Final salary – Current Scheme Career Average Salary – New Scheme w.e.f. 2014 No connection with investment performance Employers/Council Tax Payers do expect good performance - the Scheme has to be affordable and sustainable

  23. Derbyshire Pension Fund AGM Actuarial Valuation Undertaken every three years to determine the solvency of the Fund and to set the level of employer contributions. Last undertaken as at 31 March 2010. The actuarial value placed on the assets represented 81% of the value of the past service liabilities compared with 80% at the 2007 valuation. The 2013 Valuation is near completion. Initial results show Funding position has improved to 83%, but the absolute funding shortfall has increased from £500m to 563m.

  24. Derbyshire Pension Fund AGM Fund account and net asset statement Pension Fund - Fund Account 2011-12 2012-13 £’000 £’000 148,498 Contributions 142,799 (137,527) Benefits & Administration (130,399) 10,971 Net additions 12,400 67,886 Investment income 69,893 21,934 Change in market value 316,671 (3,520) Investment management expenses (3,953) 86,300 Net returns on investments 382,611 97,271 Net increase/(decrease) in the Fund 395,011 2,627,763 Net assets of the scheme at 1 April 2,725,034 2,725,034 At 31 March 3,120,045

  25. Derbyshire Pension Fund AGM Pension Fund Net Assets Statement as at 31 March 2012 2013 £’000 £’000 Investments 315,916 Fixed interest securities 293,470 1,491,823 Equities 1,767,534 203,339 Index-linked securities 237,657 426,853 Pooled investment vehicles 510,063 91,115 Properties 96,635 182,695 Cash deposits and short term loans 203,988 18,986 Other 13,538 2,730,727 Total investments 3,122,885 (15,636) Investment Liabilities (8,185) 9,943 Current assets and liabilities 5,345 2,725,034 Net assets of the scheme at 31 March 3,120,045

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