WEST YORKSHIRE PENSION FUND ADMINISTERED BY CITY OF BRADFORD METROPOLITAN DISTRICT COUNCIL PENSION SCHEMES REGISTRY NUMBER 10041078 REPORT AND ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2016 CONTENTS Page SECTION 1 – FOREWORD ........................................................................................................................... 1 SECTION 2 – MANAGEMENT STRUCTURE .................................................................................................. 2 SECTION 3 – LOCAL PENSION BOARD ANNUAL REPORT ............................................................................. 6 SECTION 4 – PENSIONS ADMINISTRATION REVIEW .................................................................................... 9 SECTION 5 – FINANCIAL MANAGEMENT AND PERFORMANCE .................................................................. 14 SECTION 6 – INVESTMENT REPORT .......................................................................................................... 37 SECTION 7 – INVESTMENT MANAGEMENT AND STRATEGY ...................................................................... 44 SECTION 8 – INVESTMENT MARKETS ....................................................................................................... 46 SECTION 9 – ADDITIONAL VOLUNTARY CONTRIBUTIONS ......................................................................... 62 SECTION 10 – ACTUARY’S REPORT ........................................................................................................... 63 SECTION 11 – AUDITOR’S REPORT ............................................................................................................ 65 SECTION 12 – STATEMENT OF ACCOUNTS................................................................................................ 66 APPENDIX A – RESOLVING COMPLAINTS ................................................................................................. 99 APPENDIX B – FURTHER INFORMATION AND CONTACTS ....................................................................... 100 APPENDIX C – GLOSSARY OF TERMS ...................................................................................................... 103 APPENDIX D – PENSION ADMINISTRATIVE STRATEGY ............................................................................ 112 APPENDIX E – FUNDING STRATEGY STATEMENT .................................................................................... 132 APPENDIX F – GOVERNANCE COMPLIANCE STATEMENT ........................................................................ 162 APPENDIX G – COMMUNICATIONS POLICY ............................................................................................ 168 APPENDIX H – STATEMENT OF INVESTMENT PRINCIPLES ....................................................................... 174 APPENDIX I – RISK MANAGEMENT REPORT ........................................................................................... 190 APPENDIX J – PENSION BOARD KOWNLEDGE AND UNDERSTANDING FRAMEWORK .............................. 207 APPENDIX K – PENSION BOARD TERMS OF REFERENCE .......................................................................... 224 SECTION 1 – FOREWORD SECTION 1 – FOREWORD West Yorkshire Pension Fund (WYPF) is a local government pension scheme, founded in 1974. As at 31 March 2016 we had 278,951 members and 404 employers across the UK. Our largest employers are the five West Yorkshire Councils - Bradford, Calderdale, Kirklees, Leeds and Wakefield. Although the value of the Fund fell from £11.32 billion to £11.21 billion over the year, a decrease of £0.11 billion, the Fund remains one of the best funded within the local government pension scheme. Most of this decrease was a result of weak public equity markets, mitigated by good performance from alternative investments, particularly private equity. The Investment Advisory Panel reviews the asset allocation quarterly, and makes adjustments against the benchmark based on future expected returns. With effect from 1 April 2015 WYPF began administering the Lincolnshire Pension Fund (LPF) under a joint service agreement. After some early issues with the quality of data transferred from the private sector contractor, the project went well, and the cost savings for both WYPF and LPF are being delivered to plan. We have continued to develop our systems, train staff, both in Bradford and Lincoln, and improve the support and service to employers. The monthly web-based return for employers has been successfully extended to include all the LPF employers. This will improve the quality of data required for the actuarial valuation at 31 March 2016, and enable us to deliver the data to the actuary earlier than has been possible previously. In addition, we began delivering services to Berkshire and Buckinghamshire Fire and Rescue Authorities from 1 April 2016. In the July Budget 2015, the Chancellor announced the Government’s intention to work with the Local Government Pension Scheme (LGPS) administering authorities to ensure that they pool investments to significantly reduce costs while maintaining overall investment performance. On 25 November the Investment Reform Criteria and Guidance was issued, which sets out the criteria to be applied to the pooling of LGPS assets. Authorities were invited to submit their initial proposals for pooling by 19 February 2016. WYPF, having agreed to pool with Greater Manchester and Merseyside, duly submitted its proposals by the deadline. The submission and the Minister’s response are on the WYPF website. This is going to make a considerable difference to the way investments are managed in the future. On behalf of the Joint Advisory Group and the Investment Advisory Panel I would like to thank all the staff who continue to ensure WYPF is at the forefront of changes and developments, and ensure it continues to be very well run. I hope you enjoy reading the Annual Report and Accounts, and find them useful and informative. Councillor Andrew Thornton Chairman, Joint Advisory Group and Investment Advisory Panel 1 SECTION 2- MANAGEMENT STRUCTURE SECTION 2 – MANAGEMENT STRUCTURE Members of the WYPF Joint Advisory Group Bradford Council Councillor A Thornton Councillor G Miller Councillor S Lal Chairman Deputy Chair Calderdale Council Councillor B Metcalfe Councillor S Baines MBE Councillor J Lynn Kirklees Council Councillor E Firth Councillor N Mather Councillor H Richards Leeds Council Councillor P Davey Councillor P Harrand Councillor N Dawson Wakefield Council Councillor D Jones Councillor J Speight Councillor R Forster Trades Union Representatives I Greenwood OBE – UNISON Tristan Chard – GMB Liz Bailey – UNISON Scheme Member Representatives Kenneth Sutcliffe Wendy Robinson West Yorkshire Council Representative Stuart McKinnon-Evans Director of Finance– BMDC Members of the WYPF Local Pension Board Employer Representatives Councillor M Slater Councillor K Groves John Morrison Chairman Member Representatives Gary Nesbitt – GMB Colin Sykes -Unison Mark Morris - Unite Mick Binks - Unison 2 SECTION 2- MANAGEMENT STRUCTURE Members of the WYPF Investment Advisory Panel Bradford Council Councillor A Thornton Councillor G Miller Chairman Calderdale Council Councillor B Metcalfe Councillor S Baines MBE Kirklees Council Councillor E Firth Councillor H Richards Leeds Council Councillor P Davey Councillor P Harrand Wakefield Council Councillor G Stokes Councillor L Shaw Trades Union Representatives West Yorkshire Pension Fund I Greenwood OBE – UNISON Rodney Barton -Director (Deputy Chairman) Tristan Chard – GMB External Advisors Liz Bailey – UNISON Noel Mills Mark Stevens West Yorkshire Council Scheme Member Representatives Representative Doug Meeson - Stuart Imeson Director of Resources and City Gerald Hey Development - Leeds City Council 3 SECTION 2- MANAGEMENT STRUCTURE Appointed service providers and advisers Actuarial Services Aon Hewitt 25 Marsh Street Bristol BS1 4AQ AVC Providers Equitable Life Assurance Society P O Box 177 Walton Street Aylesbury, Buckinghamshire HP21 7YH Scottish Widows P O Box 902 15 Dalkeith Road Edinburgh EH16 5BU Prudential Lancing BN15 8GB Appointed Persons for Stage 1 Rodney Barton, Director WYPF Internal Dispute Resolution City of Bradford Metropolitan District Council Procedure (IDRP) WYPF Ground Floor, Aldermanbury House, 4 Godwin Street, Bradford BD1 2ST Appointed Persons for Stage 2 Kersten England Chief Executive Internal Dispute Resolution City of Bradford Metropolitan District Council Procedure (IDRP) City Hall, Bradford BD1 1HY 4 SECTION 2- MANAGEMENT STRUCTURE Appointed service providers and advisers (continued) IDRP Medical Adviser Santia Occupational Health Santia House Parc Nantgarw, Cardiff CF15 7QX Auditors Mazars LLP Gelderd Road Gildersome Leeds LS27 7JN Banking and Custodial Services HSBC 8 Canada Square, Canary Wharf London E14 5HQ Legal Adviser Dermot Pearson Acting City Solicitor City of Bradford Metropolitan District Council City Hall, Bradford BD1 1HY Pensions Computer Services Civica Plc Vanguard House Dewsbury Road Leeds LS11 5DD 5 SECTION 3 – LOCAL PENSION BOARD ANNUAL REPORT SECTION 3 – LOCAL PENSION BOARD ANNUAL REPORT West Yorkshire Pension Fund Pension Board Annual Report Foreword West Yorkshire Pension Fund’s Pension Board was established in April 2015 to fulfil the requirement of the Pension Act 2013. During this first year the Board met three times and Pension Board members attended a number of training events held internally and externally to West Yorkshire Pension Fund on issues relating to local government pension