1. 1 Annual Pension Fund Meeting 25 July 2012 Review of the Year 2011-12 Suffolk County Council Pension Fund Geoff Dobson Head of Strategic Finance

2. 2 TODAY’S AGENDA 1.Key Statistics 2.Management of the Fund 3.Funding Strategy 4.Investment Performance 5.Review of Investment Strategy 6.Future of the Scheme

3. 3 Value of Fund at March 2012 £1,556m … over £1.5 billion 2.Scheduled & Resolution Bodies 59 Admitted Bodies 23 … 82 employers 3.Employee members17,872 Pensioners 12,325 Deferred15,840 … around 46,000 scheme members 4.Average pension£4,470 …around £4,500 per year Key Statistics 2011-12

4. 4 1.Transactions with scheme members Employer/employee contributions £91m Pension benefits-£74m … still cash flow positive 2.Investments Investment income £28m Investment return 2011/12 +1.7% … disappointing investment return 3.Funding level at March 2012 72% … deterioration on last valuation (2010) Key Statistics 2011-12

5. 5 Management of the Fund Legal framework Superannuation Act 1972 LGPS regulations Guidance on best practice Regulation Communities & Local Govt department CIPFA Internal & external audit Governance Suffolk Pension Fund Committee

6. 6 Pension Fund Committee Responsibilities Investment strategy Funding strategy Scheme administration Representation 5 County Councillors 2 district Councillors Trade union representative Advisors Council officers Fund Actuary Investment Advisor Fund managers Specialist advisors (legal, voting etc) Suffolk Pension Fund Committee

7. 7 Suffolk County Council Comm. & Local Govt Professional advisers Auditors Pension Fund Committee Stakeholders, employers & scheme members Investment managers CIPFA Management of the Fund

8. 8 Funding Strategy 2010 Average county council funding level 78%. Suffolk’s 2010 funding level 82% … better than most counties. S uffolk

9. 9 Funding Strategy Suffolk funding level 82% March 2010 Suffolk funding level 72% March 2012 Better than average local authority 66% March 2012 Funding level at March 2013 …?

10. 10 Funding Strategy 2010 Key principles at 2010 Valuation: prudence, stability and affordability Prudence: ensure that Fund returns to fully funded position over medium to long-term (c.20 years) Stability: ensure that employer contribution do not fluctuate too much year to year. Affordability: ensure that employer contributions are affordable to minimise impact on budgets and council tax Long-term stabilisation mechanism for major employers. Contribution increases for major employers limited to 1% of pay per year for 3 years to 2013/14.

11. 11 Outlook for 2013 Valuation Increase in Fund deficit Increased cost of ongoing service Impact of LGPS 2014 changes … Too early to quantify impact on employer contributions … Actuary will say more about this

12. 12 Investment Strategy 2011-12 Equities 63%, biggest share of Fund. Diversification between asset classes reduces risk. {

13. 13 Investment Managers 2011-12 10 managers reduces risk of individual manager’s underperformance

14. 14 Suffolk investment performance Poor returns for 2011/12 … Returns over 3 years better. Long-term performance still below target.

15. 15 Investment Performance: managers All active managers underperformed in 2011/12. Fund manager reviews/changes during 2012.

16. 16 Changes to Investment Strategy New asset allocations: Absolute return (+10%)Absolute return (+10%) Infrastructure (+5%)Infrastructure (+5%) Timber (+2%)Timber (+2%) Reductions to equity allocations: UK Equities (-3%)UK Equities (-3%) Overseas equities (-14%)Overseas equities (-14%) Changes to bonds allocations Gilts (-4%)Gilts (-4%) Emerging market debt (+2%)Emerging market debt (+2%) Debt opportunities (+2%)Debt opportunities (+2%)

17. 17 Future Investment Strategy } Equities 45%, still biggest share of Fund.

18. 18 New investment manager structure New managers: Infrastructure (Partners Group, KKR) Absolute return (Pyrford, BlueCrest, Winton) Timber (Brookfield) Bonds (M&G)

19. 19 LGPS 2014 Timetable Joint LGA/trade union proposals May 2012Joint LGA/trade union proposals May 2012 LGA consultation July 2012LGA consultation July 2012 Government consultation autumn 2012Government consultation autumn 2012 Regulations by March 2013Regulations by March 2013 Implementation April 2014Implementation April 2014 … lots to do!

20. 20 Review of the Year 2011-12 Any Questions?