London Pensions Fund Authority Pension Fund Annual Report 2017-18 Contents
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London Pensions Fund Authority Pension Fund Annual Report 2017-18 Contents 1. Overview 1 1.1 Chairman’s welcome 2 1.2 Report from the Managing Director 4 2. Fund administration 5 2.1 At a glance 5 2.2 Membership 6 2.3 Workloads and targets 7 2.4 Pension payments 10 3. Investment review 12 3.1 Investment performance 12 3.2 Risk management 17 3.3 Risk indicators 18 3.4 Responsible investment 19 4. Governing the Fund 22 4.1 Governance highlights 22 4.2 Board, executive team and committees 23 4.3 Risk management 30 4.4 LPFA advisors and service providers 32 4.5 Statement from the Local Pension Board 33 5. Pension fund accounts 36 5.1 Auditor’s statement 36 5.2 Pension fund accounts 37 5.3 Notes to the pension fund accounts 39 5.4 Actuarial statement 65 6. Public policy statements 68 Annexes i Reporting and controls 68 ii Employers contributing to the Fund 70 iii Additional requirements from the CIPFA guide 72 About us Overview The London Pensions Fund Authority (LPFA) is the largest Local Government Pension provider in London. The pension fund has £5.6 billion of assets as at administration Fund 31 March 2018, and is responsible for the pension provision for 18,537 employees, who are working for not-for-profit, charity, private sector and local government employers, and 34,625 pensioners, many of whom worked for the Greater London Council or the Inner London Education Authority. review Investment Highlights of 2017-18 £5.6bn 84,466 the Fund Governing Pension fund assets as Total membership at 31 March 2018 18,537 142 fund accounts Pension Employees with The number of employers pension provisions who contributed to the Fund this year 34,625 Public policy statements Number of pensioners and dependants London Pensions Fund Authority | Pension Fund Annual Report 2017-18 1 1. Overview 1.1 Chairman’s welcome I am happy to report that we continued The Board and I were delighted to to deliver on our commitments during welcome two new Board members the year. Any thought that LPFA would during the year – Dr Barbara Weber have less to do following the formation and Nigel Topping – both with diverse of Local Pensions Partnership Ltd backgrounds and offering a wealth of (LPP) has proved to be unfounded. expertise to LPFA. Barbara has extensive experience in infrastructure On that note, I would like to thank Mike investment, which continues to be an Allen, who has retired after 36 years of investment focus for us. She is the service in pensions. Mike had been founding partner of B Capital Partners, with LPFA since its inception in 1989. an investment advisor for institutional Before becoming Managing Director in investors focused solely on 2016, Mike had held a number of roles It is with pleasure that infrastructure. Nigel is the CEO of within the business, which granted him ‘We Mean Business’ – a coalition of I present LPFA’s Annual invaluable insight into LPFA. During his organisations working on climate time as Managing Director, Mike was Report for 2017-18 change with thousands of the world’s instrumental in driving LPFA’s most influential businesses and collaboration with the Lancashire investors. His expertise on climate County Council to establish the LPP to change issues is invaluable as LPFA manage the assets, monitor liabilities focuses its attention on environmental, and undertake pension administration social and governance (ESG) factors, on behalf of LPFA and Lancashire and responsible investment. It is great County Pension Fund (LCPF). I wish to have them both on the team. Mike the best of luck in the future and LPP has managed to reduce hope he enjoys all that retirement has The relationship between LPFA and costs significantly while to offer. LCPF continues to thrive through our maintaining a consistent LPP collaboration. Abigail Leech’s We now have a new Managing Director level of service. appointment during the year as LPFA’s following Mike’s departure, and I would interim s151 officer is a testament to like to welcome Robert Branagh to that. Abigail is also the Head of Fund LPFA. Robert joins us with a wealth of LCPF and worked at the fund when the pensions and business knowledge and pooling arrangements with LPFA were has an impressive career with over being finalised. She works closely with 30 years’ experience working in UK the Board and LPP to ensure we meet pensions in both the private and public our obligations. sectors. This is an exciting time to join LPFA and the Board and I look forward to working with Robert as LPFA continues to move forward. 2 London Pensions Fund Authority | Pension Fund Annual Report 2017-18 Overview LPP’s evolution can deliver intergenerational benefits, I have enjoyed seeing LPP mature as the Fund supports housing for This year also saw LPFA over the past two years and in turn, London’s younger population. enter the Private Rented the relationship between LPFA and Pontoon Dock is part of a £1.2bn Sector (PRS) housing LCPF evolve. This is reflected in property portfolio managed by LPP, market as we invested in a administration Fund our collaboration on the pooling which includes core property ‘build to rent’ development in programme, and I was pleased to see investments across the UK. Pontoon Dock. Investment Berkshire Pension Fund (administered in this London housing Climate change by Royal Borough of Windsor and scheme highlights how Climate change is becoming a Maidenhead) become LPP’s newest pension funds can deliver systemic risk – one that needs to investment, asset liability and risk intergenerational benefits, be part of any investment approach, management client. LPP and as the Fund supports and one that pension funds need to Berkshire continue to work together housing for London’s consider when investing. In 2017, the to ensure the asset transition runs younger population. Board put in place our climate change smoothly. I look forward to seeing review Investment policy to set out our expectations of this partnership prosper. our asset managers. An initial review Investment highlights of our investment portfolio, identifying As mentioned above, infrastructure climate change characteristics, has continues to be a significant focus shown we are on track to fully for LPFA as we look to diversify implement our policy by 2020. our portfolio and support growth I look forward to another busy and in our communities. GLIL, the successful year as LPFA continues infrastructure platform of which to serve as an example of what can we were a founding partner, has be achieved through partnership the Fund Governing expanded with new investments in and collaboration for the benefit of Clyde Wind Farm, new rolling stock our members, employers and the with South West Trains and a wider sector. significant equity stake in Anglian Water Group. This year also saw LPFA enter the Private Rented Sector (PRS) housing Sir Merrick Cockell market as we invested in a ‘build to LPFA Chairman rent’ development in Pontoon Dock. Pension fund accounts Pension Investment in this London housing scheme highlights how pension funds Public policy statements London Pensions Fund Authority | Pension Fund Annual Report 2017-18 3 1. Overview continued 1.2 Report from the Managing Director I am delighted to join LPFA at an audiences and will accommodate exciting time for both the local those who decide to opt out of government and broader pensions e-communications. community, and I am eager to get to I’d like to echo Merrick’s remarks on work with Sir Merrick and the Board. the prosperous and evolving We will be exploring new opportunities relationship with LPP, which is proving to work with employers to ensure we mutually beneficial. We will continue to continue to deliver an improved and work in partnership with LPP to ensure stable funding level and a sustainable service quality remains high and our pension for our members. investment outlook remains strong. I am pleased to see the Fund in such The next 12 months are also about a good position; Mike Allen leaves expanding our role in the wider Local behind a strong legacy on which to Government Pension Scheme (LGPS) build. However, we must remain community, as we collaborate with vigilant and continuously monitor colleagues in other funds to align our long-term funding requirements, standards of reporting, transparency market conditions and cash flow to of fees and overall best practice. ensure we maintain the quality and Our focus remains on looking for sustainability of the Fund. further pooling opportunities and We would like to acknowledge your cross-pool initiatives. As Merrick Over the next year, we patience and support as we continue highlighted, GLIL is a prime example of will continue to work in to move our communications online. LGPS funds working together for the partnership with LPP to Going digital ensures we can provide benefit of members and the wider ensure service quality you with up-to-date information community. efficiently and sustainably and allows remains high and our I trust you’ll find our Annual Report you to access your details with ease. investment outlook informative; it is clear we have a lot I am pleased to see around 7,500 remains strong. to look forward to in 2018. active members are now using LPFA’s online self-service and I look forward to strengthening our communications with members, employers and wider stakeholders going forward. Robert Branagh LPFA Managing Director However, we recognise this may not be the best medium for all our 4 London Pensions Fund Authority | Pension Fund Annual Report 2017-18 2.