Annual Report 2013
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City of Westminster Superannuation Fund Annual Report 2012-2013 City of Westminster Superannuation Fund Annual Report 2012/13 Contents Introduction 1. Management & Performance 2. Investment Policy & Performance 3. Scheme Administration 4. Actuarial Information 5. Pension Fund Accounts 6. Contacts & sources of further information 7. Glossary 2 City of Westminster Superannuation Fund Annual Report 2012/13 Introduction The Superannuation Fund is part of the national Local Government Pension Scheme (LGPS) and is administered by Westminster Council. It is a contributory defined benefit pension scheme established by the Superannuation Act 1972, which provides for the payment of benefits to employees and former employees of the City of Westminster Council and the admitted and scheduled bodies in the Fund. The Fund is funded by contributions from employees, the Council, the admitted and scheduled bodies and returns from the Fund’s investments. The contributions are set by the Fund’s actuary at the actuarial valuation which is carried out every three years. The benefits payable from the Fund are set out in the Local Government Pension Scheme regulations and in summary are: • A guaranteed pension based on final salary and length of service; • Option to take up to 25% of pension as a tax-free lump sum at retirement; • Death and survivor benefits; • Early payment of pensions in the event of ill health; • Pension increases in line with Consumer Price Inflation (CPI). A new LGPS scheme will be introduced with effect from 1st April 2014. This will continue to be a defined benefit scheme, but instead of final salary, it will be a Career Average Revalued Earnings (CARE) scheme, so that a scheme member’s pension will be based on their earnings throughout their career, rather than solely on their final salary. Consultation is on-going on the detailed regulations required to implement the scheme, as well as a consideration of future governance arrangements for the LGPS as a whole. This annual report starts with the Management and Performance section which explains the governance and management arrangements for the Fund, as well as summarising the financial position and the approach to risk management. The Investment section follows and details the Fund’s investment strategy, arrangements and performance. This is followed by Scheme Administration which sets out how the administration of the scheme’s benefits and membership is undertaken. Section 4 outlines the funding position of the Fund with a statement from the Fund’s actuary and section 5 provides a summary of the Fund’s annual accounts. The report concludes with a list of contacts in section 6 and a glossary of some of the more technical terms in section 7. 3 City of Westminster Superannuation Fund Annual Report 2012/13 1. Management and Performance Governance Arrangements Westminster Council has delegated decision making powers in respect of pension matters to the Superannuation Committee (the Committee). The Committee is made up of six elected representatives of the Council – five from the administration and one opposition party representative. Members of the admitted bodies, representatives of the Trade Unions and one co-opted member may attend the committee meetings but have no voting rights. The Committee meets at least four times a year and has the following terms of reference: 1. To agree the investment strategy having regard to the advice from the Fund Managers and the independent adviser. 2. To monitor performance of the Fund and of the individual Fund Managers. 3. To determine the Fund management arrangements, including the appointment and termination of the appointment of the Fund Managers, Custodians and Fund Advisers. 4. To agree the Statement of Investment Principles, the Funding Strategy Statement, the Business Plan for the Fund, the Communications Policy Statement and the Governance Compliance Statement and to ensure compliance with these. 5. To approve and publish the pension fund annual report. 6. To prepare and publish a pension administration strategy. 7. To make an admission agreement with any admission body. 8. To ensure compliance with all relevant statutes, regulations and best practice within both the public and private sectors. 9. To determine questions and disputes pursuant to the Internal Disputes Resolution Procedures. 10. To determine any other investment or pension policies that may be required from time to time so as to comply with Government regulations and to make any decisions in accordance with those policies other than decisions in respect of the Chief Executive, Chief Officers and Deputy Chief Officers of the Council which fall within the remit of the Appointments Sub- Committee. The Committee obtains and considers advice from the Director of Corporate Finance & Investments, the Section 151 Officer and as necessary from the Fund’s appointed actuary, advisors and investment managers. 4 City of Westminster Superannuation Fund Annual Report 2012/13 The current membership of the Superannuation Committee is as follows: Councillor Suhail Rahuja (Chairman) Councillor Edward Baxter Councillor Antonia Cox Councillor Patricia McAllister Councillor Dr. Cyril Nemeth Councillor Ian Rowley Governance Compliance Statement The Local Government Pension Scheme (Administration) Regulations 2008 require Pension Funds to prepare, publish and maintain a governance compliance statement; and to measure its governance arrangements against a set of best practice principles. This measurement should result in a statement of full, partial or non compliance with a further explanation provided for any non- or partial-compliance. The key issues covered by the best practice principles are: • Formal committee structure; • Committee membership and representation; • Selection and role of lay members; • Voting rights; • Training, facility time and expenses. The Fund’s published statement can be found in the Pension Fund section of the following website: http://www.westminster.gov.uk/pensionfund Scheme Management and Advisers The City of Westminster, the London Borough of Hammersmith & Fulham and the Royal Borough of Kensington & Chelsea councils have combined certain parts of their operational areas to provide a more efficient service and greater resilience. One of the areas that have joined together is the treasury and pension teams of the three boroughs. The combined team was formed in February 2012 and is responsible for the management of the pension fund investments and the treasury operations across the three boroughs. The team is based at Westminster’s offices. The three pension funds continue to be managed separately in accordance with each Council’s strategy and so each continues to have sovereignty over decision making. However, officers 5 City of Westminster Superannuation Fund Annual Report 2012/13 are continually seeking to improve efficiency and resilience and to minimise the cost of running the Pension Funds, in line with the tri-borough working aims. Officers Tri-Borough Pensions Team Jonathan Hunt Alex Robertson Nicola Webb Contact details are provided in section 6 of this document. External Parties (as at 31 March 2013) Investment Adviser Deloitte Investment Managers Majedie Asset Management State Street Global Advisors (UK) State Street Global Advisors (International) Insight Investment Management Legal and General Hermes Custodian & Bankers Bank of New York Mellon Actuary Barnett Waddingham Auditor KPMG Legal Adviser Eversheds Scheme Administrators LPFA AVC Providers Aegon Equitable Life Assurance Society Financial Summary and performance The investment return in 2012/13 was positive both in absolute terms and relative to the Fund’s benchmark. The return was 15.2%, which was 1.7% above the benchmark set for the Fund. During the year, the contract with Newton Investment Management was terminated and the funds invested in a passive world equity pooled fund with Legal General Investment Management. The Schroders property holdings with West End of London Property Unit Trust and Legal and General Investment Management were sold during the year. The Investment Policy and Performance report in section 2 provides more detail on the Fund’s investments and 6 City of Westminster Superannuation Fund Annual Report 2012/13 performance. The Fund has since made an investment in the Standard Life Long Lease Property Fund. The table below shows how the value of the Fund’s investments have increased over time by showing the total value at 31st March every year for the last ten years: The table below summarises the investment performance of the total Fund and individual managers for the one and three year periods to 31 March 2013 (gross and net of fees). Last Year (%) Last 3 Years (% p.a.)1 Since inception (% p.a.)1 Fund B’mark Net Fund B’mark Net Fund B’mark Net Gross Net1 Relative Gross Net1 Relative Gross Net1 Relative Majedie2 20.9 20.5 16.8 3.7 12.0 11.6 8.8 2.8 10.3 9.9 5.9 4.0 SSgA UK 16.8 16.8 16.8 0.0 8.9 8.8 8.8 0.0 5.9 5.8 5.7 0.1 SSgA 15.5 15.5 15.5 0.0 n/a n/a n/a n/a 7.8 7.8 7.9 -0.1 International LGIM – Passive3 n/a n/a n/a n/a n/a n/a n/a n/a 13.6 13.4 13.6 -0.2 Insight – Non Gilt 12.6 12.4 11.3 1.1 8.7 8.4 7.8 0.6 6.3 6.0 5.8 0.2 Insight - Passive 3.6 3.5 3.6 -0.1 6.0 5.9 6.0 -0.1 7.0 6.9 7.2 -0.3 Hermes4 3.8 3.4 0.3 3.1 n/a n/a n/a n/a 3.9 3.5 4.4 -0.9 Total Fund 15.2 14.9 13.5 1.4 10.5 10.2 10.5 -0.3 5.5 5.2 5.6 -0.4 Source: Majedie, SSgA, LGIM, Insight, Hermes and BNY Mellon.