Annual Report 2019/20
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2019 -20 Annual Report The Nottinghamshire Local Government Pension Scheme administered by Classified as Confidential Contents Chairman’s Foreword 3 Scheme Management 5 List of Active Fund Employers 9 Governance Compliance Statement 15 Nottinghamshire Pension Fund Funding Strategy Statement 20 Investment Strategy Statement 37 Financial Performance 49 Actuary’s Statement as at 31 March 2020 55 Independent Auditor’s Report 58 Pension Fund Accounts, Net Assets Statement and Notes 62 The Pension Fund Accounts 63 Notes to the Accounts 65 LGPS Central (LGPSC) Pool 90 Scheme Administrative Arrangements 93 Joint Administration Strategy and Service Level Agreement 100 Communications Strategy Statement 120 Risk Management Strategy 127 Classified as Confidential Chairman’s Foreword expected to improve this to 100% within a period of 19 years. The 2019 valuation This year the Pension Fund accounts were produced an average employer contribution prepared amidst the outbreak of the Novel rate of 21.6%. Coronavirus (COVID-19) global pandemic. This impacted global financial markets with During the year the Fund has increased significant volatility in valuations both before investment over the year in the areas of and after year end, increasing the uncertainty infrastructure, private equity, credit and of fair value assessments at 31 March 2020. property. Work continues with LGPS Central The property valuation was reported on the Ltd, the multi-asset investment pool basis of ‘material valuation uncertainty’ as the Nottinghamshire has formed with eight other valuers did not consider there was sufficient Midlands based funds. Investments under market evidence to fully inform opinions and Pool management increased significantly there was increased uncertainty in the during the year as the Fund’s Corporate valuation of private assets. Bonds transitioned to LGPS Central’s Bond fund during the year. Additionally, £90m of Against this backdrop, the Fund delivered a Emerging Market equity investments were negative portfolio return of 6.4% for the year. transferred to the LGPS Central Emerging The Fund has a target annual return of 5.8%, Markets Equity Fund. but this anticipates volatility and these exceptional figures are within the bounds of Focussing on fund administration, the actuarial prudence. The annual reduction was Nottinghamshire Pension Fund continues to recovered in the following quarter. The Fund see changes in employer membership as will continue to be managed carefully through employers such as academies look to the uncertain period ahead focussing on long consolidate into single employers rather than term returns. Over the last five years, the Fund each school being classed as an individual has returned 4.6% p.a. employer. Nottinghamshire Pensions Office and the The service has continued to support scheme Investments Team enacted their COVID employers to meet their statutory response plan on 17 March, which anticipated requirements through the Administration a move to working from home due to the initial Strategy which outlines the responsibilities lockdown. The teams have been working from and procedures to be followed by employers. home since the 23 March and have been We must emphasise that the administration following national guidelines on prioritising and service is not just the responsibility of the maintaining services to scheme members and administering authority but is dependent on pensioners. effective joint working with all scheme employers. Timeliness and accuracy are an Following the easing of the lockdown important element of delivering a high-quality restrictions the teams have continued to work service to scheme employers and our scheme from home but have moved and adapted to a members. Legislation dictates the minimum more normal service as possible over the time standards that pension schemes should meet. of the pandemic. The Pensions Regulator continues to require The results of the triennial revaluation as at 31 all Administration Authorities to evidence good March 2019 were published on 31 March practice by reporting on various activities 2020. These showed an improved position including data quality which is essential in the with the Actuary estimating that the value of administration of pension benefits to the Fund was sufficient to meeting 93% of its members. We take this responsibility very expected future liabilities (87% at the previous seriously. valuation). The certified contribution rates are Classified as Confidential A number of projects have been progressing over the financial year to improve aspects of the scheme administration through introducing technology, along with continuing work on the scheme requirements of HMRC’s guaranteed minimum pension (GMP) reconciliation project, as well as other legislative changes over the coming year. Further developments around improving data and service to members are planned. In accordance with the Investment Strategy Statement, the Fund continues a long-term responsible investment approach, actively engaged with equity holdings by exercising voting rights and engaging with companies through its investment managers, our pooling partners LGPS Central and membership of the Local Authority Pension Fund Forum (LAPFF). This engagement approach continues to highlight and improve the resilience of corporate strategies at global resource companies in the wake of climate change agreements. More details of our engagement can be found on the Pension Fund website in the Investments section. Looking forward we will continue to engage with our employer partners and fund members to ensure that we fulfil our obligation to deliver the future secure pensions for our LGPS members. Cllr Eric Kerry Chairman of the Nottinghamshire Pension Fund Committee Classified as Confidential Scheme Management The Governance Compliance Statement sets out the governance arrangements of the Nottinghamshire County Council is the pension fund and covers: Administering Authority for the Local Government Pension Scheme (LGPS) within • the delegation of authority to the Nottinghamshire. The LGPS is a statutory Nottinghamshire Pension Fund scheme administered by individual pension Committee funds. The benefits within the scheme are • the functions and responsibilities of this determined by regulation and are guaranteed committee by statute. The pension fund exists to help • the representation of members, defray the cost of paying the pension benefits. employers and trade unions Members make contributions to the Fund as • specified in the regulations and employers stakeholder engagement make contributions as determined by the • compliance with best practice. Fund’s actuary as part of the triennial The members of the Nottinghamshire Pension valuation of the Fund. All new employees are Fund Committee are drawn from the County brought into the scheme automatically, unless Council, other large fund employers, trades a positive election not to participate is unions, and the members themselves, and received from the employee. they have responsibility for determining the investment strategy, asset allocation, and The Authority administers the pension fund for management arrangements for the Fund in over 300 participating employers and order to meet the long-term funding objective approximately 143,000 members. The of achieving and then maintaining sufficient employers include the County Council, the assets to cover 100% of the Fund’s projected City Council, District Councils and accrued liabilities. organisations which used to be part of local government (such as Nottingham Trent The Nottinghamshire Pension Fund University, Colleges, Police civilian staff and Committee separately approves the Funding Academies). They also include organisations Strategy Statement and the Investment which satisfy the conditions to participate in Strategy Statement, the most recent versions the LGPS and have been admitted to the of which are included in this Annual Report. Fund by the Authority. In general, these organisations are non-profit making, or are The Funding Strategy Statement (FSS) sets undertaking a service which was, or could be, out the aims and purpose of the Pension Fund carried out by a local authority. and the responsibilities of the administering authority as regards funding the scheme. Its The annual report includes the accounts and purpose is to explain: the published policies as well as information on the performance of the fund. The accounts • how the costs of the benefits provided of the fund are set out over the following under the Local Government Pension pages. The CIPFA Code of Practice on Local Scheme (LGPS) are met through the Authority Accounting in the United Kingdom Fund. 2018/19 requires: • the objectives in setting employer • A fund account showing the changes in contribution rates. net assets available for benefits • A net assets statement showing the • the funding strategy that is adopted to assets available at the year end to meet these objectives. meet benefits • Supporting notes. Classified as Confidential The funding objectives are to: The following principles underpin the Fund’s investment activity: • set levels of employer contribution that will build up a fund of assets sufficient • The Fund will aim to be sufficient to to meet all future benefit payments from meet all its obligations on a continuing the Fund. basis. • build up the required assets in such a • The Fund will be invested in a way that employer contribution rates diversified range of assets. are kept as low and as stable