1. Hymans Robertson LLP and Hymans Robertson Financial Services LLP are authorised and regulated by the Financial Services Authority Suffolk County Council Pension Fund Employer Forum Jamie Clark 25 July 2012

2. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 2 Today’s discussion Funding update Where are we now? Look ahead to 2013 valuation LGPS reforms New scheme design Financial impact of reforms LGPS participation Opt-outs Auto-enrolment

3. Funding update

4. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 4 Actuarial valuation Funding position Liabilities Assets Funding level (100% = “fully funded”) Contribution rate Future Service Rate (benefits earned in future) Deficit contribution (benefits earned in past) Formal valuation every 3 years – next one due 2013

5. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 5 2010 valuation position This is whole fund – individual employer positions vary

6. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 6 Key factors that influence the valuation Market conditions Life expectancy Contributions in / benefits out Salary increases Membership profile Changes to the scheme Full picture will emerge at 2013 valuation

7. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 7 Market movements since 2010

8. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 8 Effect of market movements since 2010 Expected ActualExpectedActual AssetsLiabilities Adverse markets = a double whammy for the Fund

9. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 9 Funding level (whole fund) (£306m) March 2010June 2012 82% Funding Level 71% (£668m)

10. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 10 Outlook for 2013 Compared to 2010 valuation: Funding levels likely to be lower Deficits likely to be bigger (Theoretical) contribution rates likely to be higher Results will vary between employers Today’s update an estimate….full picture in 2013

11. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 11 Life expectancy Diverse employers Budget cuts Pay restraints Stretched assumptions Membership changes Pension reform What’s in the mix for 2013 valuation? Suffolk 2013 valuation Contribution stability

12. LGPS reform

13. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 13 Hutton’s main recommendations Keep “Defined Benefits” Protect accrued rights New CARE scheme for future accrual Revalue in line with earnings Link NRA to SPA Fixed cost ceiling Government set “reference scheme”

14. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 14 New LGPS from 2014 Existing SchemeProposed New Scheme Benefit TypeFinal SalaryCARE with CPI revaluation Accrual Rate1/60 th 1/49 th Retirement Age65State Pension Age Member Contribution Rate Average 6.5% Full-time equiv. pay Average 6.5% Actual pay Accrued rights protected (NRA, Rule of 85, final salary link) Protection for members within 10yrs of NRA at 1 April 2012 New “50/50” option to bolster LGPS participation

15. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 15 Financial impact on LGPS employers Taken in isolation... No impact on existing deficits (past service) Accrued rights to 2014 are protected Modest savings on new benefits (future service) c1.5%-2% of pay across whole fund Savings will vary by employer: Depends on membership profile Changes to member contributions Take up of “50/50” option BUT cannot take in isolation!

16. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 16 Impact on members No change to accrued rights Protection for members within 10yrs of NRA at 1 April 2012 All pension taken at same retirement age CARE more/less favourable to certain members Higher accrual rate (1/49th) / lower revaluation rate Bakes in more guarantee Favours those closer to retirement Better in some economic circumstances There will be winners and losers

17. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 17 What still lies ahead... Consultation on new scheme New scheme details to be thrashed out: Cost management mechanism (cap and collar) Hutton governance recommendations Implementation / administration Communication with members.....all within a very challenging timescale!

18. LGPS participation

19. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 19 Potential impact of LGPS opt-outs Issues for any member opting out: Less security, greater State dependency Lose employer contributions and other benefits Issues for the pension fund: Possible threat to sustainability in long term Possible cashflow / investment issues in short term What will help reduce LGPS opt-outs? New scheme “50/50” option Communication: members understanding value of their pensions

20. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 20 Auto-enrolment – what is it? Encouraging greater pension provision Auto-enrol members into a “qualifying scheme” LGPS is a qualifying scheme Minimum contribution levels Various key “staging dates” Policeman is The Pensions Regulator Responsibility lies with employers

21. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 21 Auto-Enrolment (simplified!) New starts Opt-outs Suffolk LGPS Existing A/E

22. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 22 Implementing Auto-Enrolment Staging dates Eligible jobholders Monitoring Communications Contributions HR/PayrollPenalties Early planning essential!

23. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 23 Summary Funding update Likely outlook - higher deficits and contribution rates........but won’t know full picture until 2013 valuation LGPS reform New scheme from 2014 No impact on current deficits Unlikely to mean lower contribution rates at 2013 LGPS participation Opt-outs in no-one’s interests Auto-enrolment on the horizon – employer responsible Early planning for A/E is vital

24. Thank you Any questions?

25. Appendix

26. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 26 How CARE works For example, Tom earns £20,000, so his pension in year 1 is worked out as: £20,000 x 1/49th = £408 The £408 that Tom earns in year 1 is revalued at the end of the next year. So at the end of year 2, this part of Tom's pension is £408 x 1.04 = £424. Maintaining your pension’s value Revalued by 4% each year Year 1 retirement pension Tom's pension for year 1 is £860 after 20 years' service. The pension continues to be revalued until you retire

27. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 27 Your pension at retirement Annual pension at retirement If Tom has a 4% salary rise each year, by adding all of the other years' pension pots together, he could expect a pension of £17,200 a year after 20 years' service. You receive a new pension ‘pot’ for each year you are a member Add up the pension you earned each year (after it has been revalued) to find your total pension Adding your other years’ pension pots.

28. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 28 Valuation timetable Early 2013: Pre-valuation meetings to discuss valuation process Summer 2013: All data requirements provided to actuary Data validated and declared “fit for purpose” Autumn 2013: Initial valuation results – whole fund Meetings to agree final valuation assumptions Final valuation results – individual employers Winter 2013: Agreement on final contribution rates for employers By 31 March 2014: Final valuation report (including Rates & Adjustments certificate)

29. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 29 AE: categorising workers Non-eligible job holders Entitled workers Non-eligible job holders 75 SPA 22 16 £5,564 Lower earnings threshold £8,105 Earnings trigger £42,475 Upper earnings threshold Age Earnings Opt-in to a scheme (LGPS) Opt-in to Qualifying Scheme (LGPS) Auto-enrol to Qualifying Scheme (LGPS) Qualifying Earnings Eligible job holders

30. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 30 BIG money penalties for non compliance Fixed penalty notice of £400 Prohibitive recruitment notice Based on number of workers – but in total no more than £50,000 Escalating penalty notice £50 to £2.500 per day for less than 250 workers £5,000 per day for 250 plus workers £10,000 per day for 500 or more workers

31. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 31 New public sector scheme designs Civil ServiceNHSTeachersLGPS 1/431/541/571/49 CPICPI + 1.5% paCPI + 1.6% paCPI Option to pay extra to retire 3 years before SPA Same plus one-off “choice” for protected members Same plus higher conts for higher accrual No rise in average conts, new “50/50” option Reference Scheme CARE SPA 1/60 + ave earnings 3.2% on contributions* Uniformity sacrificed *Except LGPS

32. 63 166 204 108 188 216 155 210 229 210 234 242 240 106 0 247 183 125 243 152 68 250 218 188 110 192 64 151 210 118 183 224 160 218 239 207 242 1 108 247 61 150 249 127 185 251 191 220 75 100 125 150 32 Will these reforms last 25 years*? Possible spanners in the works... Taxpayer savings don’t materialise SPA not keeping up with life expectancy Cost management (caps/collars etc) ineffective Envy (continuing decline in private sector pensions) Economy underperforming over long term Politics (either lack of will or too much interference) * Rt Hon Danny Alexander MP, November 2011