CORNWALL PENSION FUND ANNUAL REPORT FUTURE2008-09 ©iStockphoto.com

Cornwall Pension Fund Annual Report 2008-09 Contacts

Information about the Scheme and Membership

Pensions Section Human Resources Room 109 New County Hall Truro TR1 3AY 01872 322322 E-mail: [email protected]

Calvin Matthews Pensions Manager 01872 322304 [email protected]

Matthew Trebilcock Assistant Pensions Manager 01872 322246 [email protected]

Information about Pension Fund Investments and Strategic Issues

Pension Investments Section Finance Room 101 New County Hall Truro TR1 3AY E-mail: [email protected]

Jackie Shute Treasury and Investments Manager 01872 322212 [email protected]

John Hughes Fund Investments Officer 01872 323210 [email protected]

22964 1109 Contacts So, what of the future? CORNWALL PENSION FUND ANNUAL REPORT 2008-09 Information about the Scheme People have always tried to predict what the Contents and Membership future holds for us. Whether it is in science and technological Pensions Section advance, changes in how we live together and Chairman’s Statement 4 Performance of the Fund Human Resources our political structures or the natural world and Auditor’s Opinion 5 Annual global stockmarket commentary 14 Room 109 the Universe generally, there has been some great New County Hall Market values 16 predictions for the shape of things to come. Governance Truro TR1 3AY Income on the Fund 16 01872 322322 However, even with the contemplations from Committee some of the greatest minds over the ages, views General statistics 16 E-mail: [email protected] The Scheme of Delegation 7 of the future have often been amusingly - and Commentary 18 sometimes catastrophically - way off the mark. Role of the Committee 7 Calvin Matthews Movements in investment market indices Pensions Manager We can all look back with a smug smile asking Committee membership and attendance 8 during 2008-09 19 01872 322304 how could they have got it SO wrong! Scheme Membership Charts on equity and property unit trust holdings 20 [email protected] But we do this at our peril. Contributors and pensioners 8 As we have only recently discovered in the world Matthew Trebilcock Regulatory framework economic sphere, nothing is certain. Financial Statements Assistant Pensions Manager The Annual Report 9 01872 322246 The message from all this crystal ball gazing is Fund Account 22 [email protected] that we just don’t really know what the future The Scheme and benefits available 9 Net Asset Statement 23 holds for any of us. We should therefore seriously The regulations relating to the Fund’s Assets 9 prepare for our financial future even though it can Notes to the Financial Statements 23 Information about Pension Fund Regulation changes and developments Investments and Strategic Issues seem a lifetime away. in Cornwall 10 Actuarial Report 29 Investing in the Cornwall Pension Fund can give Work programme and future 11 Pension Investments Section us a great deal of future proofing regardless of Finance what that future may bring. Room 101 Regulatory Statements New County Hall Fund Management Funding Strategy Statement 33 Truro TR1 3AY E-mail: [email protected] Fund allocations 12 Governance Compliance Statement 46 Fund managers 13 Governance Policy Statement 50 Jackie Shute Fund managers’ attendance at Statement of Investment Principles 53 Treasury and Investments Manager Pensions Committee 13 01872 322212 Communication Statement and Timeframes 70 [email protected] Officer visits to fund managers’ offices 13 Custodian services 13 John Hughes Corporate governance 13 Fund Investments Officer 01872 323210 Myners Principles 13 [email protected] Socially Responsible Investment (SRI) 14

Cornwall Pension Fund Annual Report 2008-09 3 Chairman’s statement The twelve month period to 31st March 2009 There were a number of changes in fund One initiative underway is the pursuance of an was a challenging time for any institution or management during the year. Legal and General Asset Review. This will involve an external review of organisation where finance had a high profile. were appointed as passive global equity managers the current asset structure in terms of the level of It was disappointing to see the growth of the and we expect to be funding them shortly and risk being taken and whether this is appropriate for previous years lost over such a short period of possibly using them as transition managers. We are the scheme, taking account of its liabilities. time. Conversely, it was pleasing to note that pleased with this appointment and the flexibility In 2009-10, we are experiencing even more the diversity of our portfolio enabled the Fund offered within the mandate will ensure the Fund changes, With a newly structured Council and to weather the turbulent times better than some is well placed to make any further changes to many new faces amongst officers and Members, others, which were more heavily invested in the structure of the fund managers. In addition, came a new Pensions Committee – a committed equities. we also made a commitment to enter into a and enthusiastic group focusing on the tasks ahead The crisis in the financial markets presented fund UK Financing Fund with M & G. Other changes of them. Various ways of training are in hand and managers with unprecedented difficulties in included an investment in an All Asset Deep Value we are exploring differing ways of meeting the the positioning of their portfolios; the dramatic Fund, which was entered into part way through the fund managers. year but terminated shortly afterwards, as a result collapse of the financial sector in particular Ahead of us lie further legislative changes. of the retirement of key staff. Another fund that caught some of our equity managers off-guard. Changes relating to cost sharing are likely to have terminated during the year was the Hermes Focus We were, however, fortunate that at least one a significant impact on the Fund in terms of the Fund, which was liquidated as a result of a review of of our equity managers had expected poor balance of risk borne by both employers and their partnership structure. results from this sector and consequently was employees; and if one thing is for certain in the able to avoid significant losses. Other managers The ‘New Look’ Pension scheme, introduced in April LGPS, it is that change is inevitable! were less fortunate and fundamental analysis of 2008, brought with it many changes, including Clearly we do not know what the future holds and long term factors distracted from the extreme the introduction of tiered contribution rates. I am how events impacting on the Fund will unfurl. All volatility felt in the short term. Central Bank bail- pleased to report it was implemented smoothly we can do, therefore, is to try and plan, reduce out packages were necessary for many banks, and members of the Fund were well informed risk and increase stability. We look forward to an which in turn damaged equities significantly. The about the changes. exciting year ahead. Fund, unfortunately, had holdings in Freddie Mac Another ‘new’ during the year was the joining of and Fannie Mae at the time they were taken into ClubVita, the longevity comparison club. This conservatorship in September, which damaged membership enables us to obtain detailed analysis Councillor Morwenna Williams returns. In addition, the Fund had exposure to RBS of pensioner longevity specific to Cornwall Pension Chairman of Pensions Committee at the time that the UK government purchased its Fund, thus enabling us to build more accurate stake. assumptions into the valuation process soon to be The drastic action taken by central banks globally, upon us, in March 2010. The issues around valuing by cutting interest rates, was helpful in easing some the Fund in the midst of the worst financial crisis for of the blockages in the financial system. However, almost a century will undoubtedly place significant it was when the Bank of England went further and pressure on contribution rates going forwards. introduced a programme of quantitative easing To lessen the impact, we are working hard with through the Asset Purchase Facility, in the first our actuary, in the lead up to March, to ensure as quarter of 2009, that the bond markets reacted much stability as we can for employers, whilst still significantly. protecting the interests of the Fund.

4 Cornwall Pension Fund Annual Report 2008-09 Auditor’s opinion Independent auditor’s report to the Members of relevant legal and regulatory requirements and pension fund accounts and related notes and Cornwall Council International Standards on Auditing (UK and consider whether it is consistent with the audited Ireland). pension fund accounts. This other information I have audited the pension fund accounts for comprises the remaining elements of the Pension the year ended 31 March 2009. The pension I report to you my opinion as to whether the Fund Annual Report. I consider the implications fund accounts comprise the Fund Account, the pension fund accounts present fairly, in accordance for my report if I become aware of any apparent Net Assets Statement and the related notes. The with relevant legal and regulatory requirements misstatements or material inconsistencies with pension fund accounts have been prepared under and the Code of Practice on Local Authority the pension fund accounts and related notes. the accounting policies set out in the Statement of Accounting in the United Kingdom 2008, the My responsibilities do not extend to any other Accounting Policies. financial transactions of the pension fund during information. the year and the amount and disposition of the This report is made solely to the members of fund’s assets and liabilities, other than liabilities Basis of audit opinion Cornwall Council in accordance with Part II to pay pensions and other benefits after the end of the Audit Commission Act 1998 and for no I conducted my audit in accordance with the of the scheme year. I also report to you whether, other purpose, as set out in paragraph 49 of the Audit Commission Act 1998, the Code of Audit in my opinion, the information which comprises Statement of Responsibilities of Auditors and of Practice issued by the Audit Commission and the commentary on the financial performance Audited Bodies prepared by the Audit Commission. International Standards on Auditing (UK and included within the Pension Fund Annual Report, Ireland) issued by the Auditing Practices Board. Respective responsibilities of the Responsible is consistent with the pension fund accounts. An audit includes examination, on a test basis, of Financial Officer and auditor That information comprises the section entitled evidence relevant to the amounts and disclosures “Performance of the Fund”. The Responsible Financial Officer is responsible in the pension fund accounts and related notes. for preparing the pension fund accounts, in I review whether the governance compliance It also includes an assessment of the significant accordance with relevant legal and regulatory statement published in the Pension Fund Annual estimates and judgments made by the Authority requirements and the Code of Practice on Local Report reflects compliance with the requirements in the preparation of the pension fund accounts Authority Accounting in the United Kingdom of Regulation 34(1)(e) of the Local Government and related notes, and of whether the accounting 2008. In preparing this pension fund accounts, the Pension Scheme (Administration) Regulations 2008 policies are appropriate to the Authority’s Responsible Financial Officer is responsible for: and related guidance. I report if it does not meet circumstances, consistently applied and adequately • selecting suitable accounting policies and then the requirements specified by the Department disclosed. of Communities and Local Government or if the applying them consistently; I planned and performed my audit so as to obtain statement is misleading or inconsistent with other all the information and explanations which I • making judgments and estimates that were information I am aware of from my audit of the considered necessary in order to provide me with reasonable and prudent; financial statements. I am not required to consider, sufficient evidence to give reasonable assurance nor have I considered, whether the governance • keeping proper accounting records which were that the pension fund accounts and related notes statement covers all risks and controls. Neither am I up to date; are free from material misstatement, whether required to form an opinion on the effectiveness of • taking reasonable steps for the prevention and caused by fraud or other irregularity or error. In the Authority’s corporate governance procedures detection of fraud and other irregularities. forming my opinion I also evaluated the overall or its risk and control procedures adequacy of the presentation of information in the My responsibility is to audit the pension fund I read other information published with the pension fund accounts and related notes. accounts and related notes in accordance with

Cornwall Pension Fund Annual Report 2008-09 5 Auditor’s opinion Opinion In my opinion: - the pension fund accounts and related notes present fairly, in accordance with the Code of Practice on Local Authority Accounting in the United Kingdom 2008, the financial transactions of the Pension Fund during the year ended 31 March 2009, and the amount and disposition of the fund’s assets and liabilities as at 31 March 2009, other than liabilities to pay pensions and other benefits after the end of the scheme year; and - the information given in the commentary on financial performance included within the Pension Fund Annual Report is consistent with the pension “Atomic fund accounts. energy might be as good as our present-day explosives, but Lee Budge it is unlikely to produce anything very much District Auditor more dangerous.” 3-4 Blenheim Court Winston Lustleigh Close Churchill Matford Exeter 1939 EX2 8PQ

23 November 2009

6 Cornwall Pension Fund Annual Report 2008-09 Governance Committee Any decisions or actions taken by the Committee, The Committee retains responsibility for the Members or officers, in respect of the pension following items: fund assets and their management, must • The Fund’s investment strategy The Scheme of Delegation comply with The Local Government Pension Cornwall Council has set up a Pensions Committee Scheme (Management and Investment of Funds) • The Statement of Investment Principles to exercise its functions as the Administering Regulations. • Approval of all policies Authority for the Local Government Pension • The appointment of investment managers, Scheme. Under the Local Authority (Functions Role of the Committee consultants and the custodian & Responsibilities) (England) Regulations 2000, • Approval of the Annual Business Plan the responsibility for the Local Government The Pensions Committee exercises the functions • Approval of Annual Report and Accounts Pension Scheme lies with the full Council, who of Cornwall Council as administering authority have delegated responsibility to the Pensions for the Local government Pension Scheme in • Acceptance of the triennial valuation report Committee. This responsibility includes managing Cornwall. The Pensions Committee comprises produced by the Fund Actuary the investments of the Fund. voting members representing the Council, the • Appointment of AVC providers major employers, further education colleges, and The Pensions Committee has agreed to delegate the employee unions. The Committee is supported The Committee delegates to the Corporate Director certain of its responsibilities for managing the by two professional advisers and officers who for Corporate Support responsibility for Fund’s investments to the Fund Administrator principally oversee how the Scheme is run and • Managing and monitoring the investment (Corporate Director for Corporate Support). This how the assets of the Fund are managed. A large managers, consultants and custodian Scheme of Delegation sets out the limits of that part of the work involves monitoring how the fund • Managing the Fund’s cash assets directly held delegation. managers perform and the investments which they by the Council The Committee has also delegated day-to- are responsible for. • Transferring assets between the Council, the day management of the Fund’s investments to The main requirement in managing the Fund investment managers and custodian professional investment managers. Legally binding and reducing any risk, as far as possible, is to • Accounting for all investment transactions agreements govern the relationship between the make sure the assets are spread over different • Within limits, authorising expenditure from the Council and the investment managers. asset classes, in different countries and between Fund fund managers. We need to get the balance right Irrespective of whether or not the Committee • Paying the fees of the investment managers between the desire for improved returns and the decides to delegate a function to an officer, it is and the custodian essential that those making a decision receive possible `risk` of those returns dropping due to investment conditions. In addition, the Committee • When necessary, exercising the Funds’ voting proper advice from suitably qualified people or rights* organisations (usually the Fund Administrator or acknowledges the responsibility as a major the Fund’s investment consultants and advisers). shareholder. The task of exercising voting rights is • Admitting organisations into the Pension delegated to fund managers who report back to Scheme * Nothing in this Scheme of Delegation can override the Committee on the actions taken at the next • Under exceptional circumstances, taking urgent the responsibility of Members and officers to meeting. The Committee will also consider pension decisions regarding management of funds comply with the Council’s Constitution, Financial issues as they arise. in the event that existing fund managers are Regulations, or Standing Orders. unable to fulfil their responsibilities * * after consulting the Chairman and Vice Chairman Cornwall Pension Fund Annual Report 2008-09 7 Governance Committee membership and attendance Following the local elections on 4th June 2009 Scheme membership there was a change in the membership of the During the year ended 31st March 2009 there Pensions Committee. The new Committee are: were four meetings of the Pensions Committee. In Contributors and pensioners addition, there was one annual general meeting Cllr M Williams (Chairman) open to employers in the Scheme and one training On 31 March Cllr D Holley (Vice Chairman) event. The training event was a whole day event, 2005 2006 2007 2008 2009 Cllr D Biggs shared with Members and officers from Devon Contributors County Council. In addition, the fund advisers with Cllr M Eathorne-Gibbons officers attended meetings with fund managers at Cornwall County Cllr J Kenny Council 10,504 11,118 11,007 11,169 11,495 their offices in London. These are reported back to Cllr P Lyne the Pensions Committee. A record of committee District Councils and Isles of Scilly 2,539 2,534 2,505 2,497 2,412 attendance during the year is shown below. Cllr C Ridgers Cllr R Teverson Other Organisations 2,090 2,265 2,231 2,189 2,714 No. of meetings Cllr T Williams Total Number of attended Contributors 15,133 15,917 15,743 15,855 16,621 Cllr M Burley 3 Cllr J Wood

Cllr R Hichens 3 Mr A Stott (member nominated representative) Pensioners Cllr A Bunce 2 Ms S Foster Receiving Benefits 6,915 7,093 7,468 7,815 8,229 Cllr A Carlyon 3 (member nominated representative) Deferred Benefits 6,144 7,370 9,094 10,715 11,989 Cllr J Currie 3 Mr M Owen Total Number of Cllr P Lyne 4 (colleges’ representative) Pensioners 13,059 14,463 16,562 18,530 20,218 Cllr M Nicholls 4 Vacancy Cllr E Parkin 4 (larger business employers’ representative) During the year the number of employees in the Cllr B Rawlins 4 Scheme increased by 766 (4.8%) to 16,621.The number Cllr T Williams 3 of pensioners being paid increased by 414 (5.3%) to Cllr A Mitchell 4 8,229. (district councils’ The number of early retirements through redundancy representative) or for reasons of efficiency or employers’ discretion was Mr A Stott 4 99 (64 in the previous year). The number of ill-health (employee observer - early retirements was 32 (last year 33), which equates to Unison) approximately two in 1,000 active members. Mr M Owen 0 (colleges’ representative) Vacancy 0 (larger business employers’ representative)

8 Cornwall Pension Fund Annual Report 2008-09 Governance Regulatory framework The Scheme and benefits available The Regulations relating to the Fund’s Assets The Annual Report The Local Government Pension Scheme is a The regulations relating to the management and statutory scheme, established by an Act of investment of the Fund’s assets are contained in the The Local Government Pension Scheme Parliament and governed by regulations made Local Government Pension Scheme (Management (Administration) Regulations 2008 require under the Superannuation Act 1972. The Local and Investment of Funds) regulations 1998, as administering authorities to prepare a document Government Pension Scheme (Administration) amended. Under these regulations, we have to known as the “the pension fund annual report”. Regulations 2008 came into force on 1st April 2008. consider the different types of investments and From 1st April 2008, this report must contain Membership of the LGPS is open to all employees their suitability, and to report regularly on all information about the fund on the following: of local authorities except teachers, fire-fighters transactions. We must also get proper advice on • The management and financial performance and police, who have their own separate scheme. investment matters. The more significant limits on investments expressed as a percentage of the total during the year; Pensions and entitlements are still fully protected value of the fund are shown below. • The authority’s investment policy and a review in law. The scheme is open to all employees aged of performance of the fund assets; 16 or over, whether they work full-time or part- time. The Council automatically enrol all employees • Administration arrangements; • Up to 35% of the value of the Fund can be: into the Fund, as long as they have a contract of • A statement by the Actuary of the assets, employment of more than three months duration. the limit on what we can invest in open-ended liabilities and funding level; All members of the scheme can choose to leave investment schemes; • The current version of the Governance at any time. Employees contribute according to the amount that we can invest in unit trusts Compliance Statement; a scale ranging from 5.5% to 7.5% based on their managed by one manager (this category now pensionable pay. This will include basic pay and includes a single contract in a managed fund • The Fund Account and Net Asset Statement and any contractual overtime and regular bonuses. with an insurance company or other similar supporting notes and disclosures in accordance Employers contribute at a rate set by the actuary. organisation); and with proper practices; The rates currently applying are set out at the the total value of securities that we can transfer • The current version of the Statement of end of this report. Employees in the Scheme are under a stock-lending arrangement we allow; or Investment Principles; entitled to a pension of one sixtieth of their final pensionable pay. Further information regarding invested in insurance contracts. • The current version of the Communications the various benefits offered can be found in Statement; the ‘Cornwall Pension Fund guide to the Local • The current version of the Funding Strategy Government Pension Scheme’, obtainable from Statement; and the Pensions Section, Room 109, New County Hall, Truro TR1 3AY, Telephone number 01872 322322, • And other material considered appropriate. Email [email protected].

Cornwall Pension Fund Annual Report 2008-09 9 Governance • Up to 15% of the value of the Fund can be: Regulation changes and developments actuarial factors (e.g. longevity, staff turnover, pay in Cornwall rises etc.) to create a theoretical Model Fund that the amount that we can invest in unlisted commences with a 100% funded position. Future securities; and April 2008 saw the introduction of the ‘New Look’ cost changes that arise over valuation cycles could Local Government Pension Scheme (LGPS). The all contributions to partnerships. then lead to the positive and negative changes new LGPS introduced a number of improved being shared between employers and employees. Up to 10% of the value of the Fund can be: benefits for employees. These included increased the size of a single holding (other than in death in service cover of 3 times pay; pensions Following the collection of initial data, the government securities and the local authority payable to a nominated dependent partner; and a Secretary of State will determine the outcome, after mutual investment trust); or new benefit structure for ill health retirement. Also, consultation on the assumptions. The base position pensions will now build up at a rate of 1/60th per is likely to be established in December 2010. Time the amount of money that we can invest annum rather than 1/80th, although there will now will tell whether these Cost-sharing arrangements in or lend to an individual institution or be no automatic lump sum. Instead, employees will will be sufficient to make the Scheme sustainable. local authority, including the administering have the option of exchanging some pension for a authority. cash lump sum at the rate of £12 cash for each £1 of pension. • Up to 5% of the value of the Fund can be: There was a major change to the contribution rate for employees moving from a fixed amount of 6% invested in sub-underwriting contracts. of pay to rates varying between 5.5% and 7.5% The Pension Act 1995 applies to occupational depending upon the employee’s rate of pay. pension schemes, from 6 April 1997. Another consultation which may impact on The local authority scheme, while described as employees for 1st April 2010 would result in some an occupational pension scheme, is required lower paid workers paying slightly less and those to meet further standards. Local authorities are earning over £75,000 paying more - with a top expected to follow examples of good practice, contribution rate of 10% for those earning over in particular to do with releasing information to £100,000. pension scheme members. However, the most significant work is going on in respect of Cost-sharing as the mechanism to ensure that the LGPS remains affordable, viable and fair to all. What this will involve is the creation of a LGPS Model Notional Fund, based upon data for all pension funds in England and Wales and updated every 3 years (starting with the March 2010 Valuation data). The Model Fund valuation projections would use Government-determined assumptions for key

10 Cornwall Pension Fund Annual Report 2008-09 Governance Work programme and future As part of the work to underpin the proposals, during the 2010 valuation period, the data from all During 2009-10, some of the key objectives of 89 LGPS funds will be collected and collated to form the Administering Authority will be to undertake a Model Fund to enable the assessment of future further work to reduce risk and create greater costs of the scheme. Regulations are currently certainty for the Fund going forward. being drafted to detail how the information in An Asset Review will be undertaken in order the Model Fund will be rolled out to impact on to establish whether the current structure is Cornwall’s Fund but it will take some time before appropriately reflecting an optimised position to the changes are felt. hopefully improve the performance. The strategic The revised Myners Principles will soon be asset allocations are key to driving improved impacting on the governance arrangements of returns, which have suffered extensively over the the Fund. Guidance will shortly be produced last year. to interpret the six new principles and work In addition, further work will be undertaken to will therefore be undertaken to ensure that the better understand the Fund’s liabilities. A longevity Cornwall Fund complies with Best Practice in this study is being undertaken with the fund’s Actuary, area. in order to improve the accuracy of the assumptions The year ahead will be full of challenges, focusing to be made within the triennial valuation on predominantly on reducing risk and improving 31st March 2010. Whilst the volatility in financial the funding position, whilst limiting increases in markets since the 2007 valuation is almost certain contribution rates and bracing for the inevitable to have worsened the position, work is being changes (impacting on all Local Government actively undertaken to fine-tune data and improve Pension Schemes) as it strives to ensure robustness of assumptions in order to lessen the Affordability, Viability and Fairness. impact that may have otherwise been felt. Further work will also be undertaken in order to reduce other liability risks, to improve overall stability in the funding position. With increasing debate surrounding the potential long term viability of the Local Government Pension Scheme, only one thing is likely to be certain, and that is that further changes to the Scheme are almost inevitable. Cost-sharing is being actively pursued, which will result in some risks inherent in the Fund to be borne not just by the employer but also by the employee.

Cornwall Pension Fund Annual Report 2008-09 11 Fund Management

Fund allocations Hermes 0.1 % of the % of the ETF 0.1 Fund Fund Manager Activity Mellon 0.8 Internal cash 0.9 Infracapital 1.1 Hermes Manage the shares of UK companies 6.4 Cash Fauchier 1.7 Currency equity UT 4.6 Standard Life 2.6 Hedge fund UT 1.7 ETF Investors in environmental technologies fund Wilshire 4.0 7.2 Other investments Environmental 0.1 Millennium 4.6 technology fund Alliance Bernstein 8.1 Infrastructure 0.8 Mellon Active currency investment 6.6 Private equity funds GMO 8.3 Internal cash Controlled in house 6.8 Property RREEF 8.7 Infracapital Investors in infrastructure-related companies

Fauchier Active shareholder engagement in UK companies 16.3 Unit Trust Bonds

Standard Life Investors in companies not listed on the stock exchange Insight 16.5

Wilshire Investors in companies not listed on the stock exchange

Millennium 1) Active currency investment. 19.6 UK Equities 2) Reducing the risk of the fund’s investments to over- seas currency movements.

Capital 20.4 Alliance Bernstein 1) Manage the shares of worldwide companies 2) Manage the shares of UK companies

GMO Manage the shares of UK companies North America 10.7 Europe 11.4 RREEF Manage a range of UK property unit trusts Japan 5.2 37.1 Overseas equities Pacific (exc Japan) 4.4 Emerging markets 4.9 Insight Manage UK interest-bearing stocks Newton 22.1 Overseas equity 0.5 futures Capital Manage the shares of worldwide companies

Newton Manage the shares of worldwide companies Fund managers at 31 March 2009 Asset Classes at 31 March 2009 100 100

12 Cornwall Pension Fund Annual Report 2008-09 Fund Management Fund managers Custodian services The fund managers usually discuss any matters of concern with company management boards We employ professional fund management The Northern Trust Company is a major before items are placed on agendas for shareholder companies to manage the Fund’s investments international provider of global custody services. meetings. The Council will be consulted on on a day-to-day basis, in accordance with The company provides for the Fund safe-keeping, contentious issues and they report their voting the investment strategy set by the Pensions settlement of trades, income-collection, corporate actions, which are summarised in a report for Committee. They have full discretion in the actions data and stock lending services for all of the the Pensions Committee. The policy is reviewed management of their individual portfolio, subject Fund’s assets. In addition they liaise with the fund annually. to statutory limits and any directions set down managers and report on all activity both online and in the Statement of Investment Principles. They monthly audited hard copy. A detailed review was have delegated powers to vote on behalf of the last carried out in 2006-07 and the service retained Fund and are required to report on such actions to with Northern Trust. Myners principles committee meetings. They are all major financial In March 2001, the Government published the, institutions based in the City of London and ‘Review of Institutional Investment in the United overseas. Corporate governance Kingdom’. The ‘Myners report’, as it is known, recommended a set of 10 Principles that pension Corporate governance is a general term describing scheme trustees should use when looking at their Fund managers’ attendance at Pensions how companies are directed and controlled. Boards investment policy. Committee of directors are responsible to the shareholders for how they run their companies. Shareholders The extent to which the Fund complies with these May 2008 Newton and Capital can play an active part in corporate governance principles is shown in the Statement of Investment International by using their voting rights at annual general Principles. In compiling this document the Council have followed the guidelines issued by CIPFA, in July 2008 Alliance Bernstein meetings. April 2002. November 2008 GMO and Insight Improving standards of corporate governance will lead to increased profitability and so will benefit Updated Myners Principles were published in February 2009 Alliance Bernstein and shareholders with better long-term returns on October 2008, and the private sector are currently Capital International their investments. Following the recommendations operating to those principles. However, these Officer visits to fund managers’ offices of the Cadbury Committee, the members of the updated principles will not apply to the LGPS until Pensions Committee are encouraged to use the new regulations, which the CLG are drafting, come April 2008 GMO, Capital International Fund’s voting rights. The policy on using voting into force. Regulations are expected any time now and Newton rights is explained in the Fund’s Statement of followed by CIPFA guidance. July 2008 Alliance Bernstein, Insight, Investment Principles, section 4.2 - Exercise of RREEF and Millennium Voting Rights. The Council monitors UK company meetings through the Research Recommendations November 2008 Alliance Bernstein, Capital Electronic Voting Service (RREV) and by giving International, Newton and the use of voting rights to the individual fund Insight managers within the agreed policy guidelines. February 2009 RREEF

Cornwall Pension Fund Annual Report 2008-09 13 Fund Management Socially responsible investment (SRI) Annual Global Stockmarket Commentary The Pensions Committee recognises that fund 12 months to 31 March 2009 managers must consider social, environmental and ethical issues when choosing which investments to Market Review and Equities buy, keep or sell. Equity markets fell sharply around the world In considering these issues, the fund managers during the 12-months under review, with concerns must invest in the best interest of the Fund. about the crisis in global credit markets and the The Pensions Committee believe that the best way implications of that crisis for economic activity to deal with any concerns is for fund managers and for corporate earnings unsettling investors to contact the directors of listed companies. The throughout the year. fund managers act in the best interest of the Fund The credit ‘crunch’ brought about rapid changes when voting on the Fund’s behalf at shareholder in the global financial landscape (and in the meetings. banking sector in particular) over the period. Any issues that could cause disagreement at It proved also to be the dominant factor in the shareholder meetings are reported back to the fortunes of financial markets, with ‘deleveraging’ Pensions Committee meetings, which are held by distressed investors being the overriding cause every three months. The reports also include any of share-price falls. Amid the mounting scarcity of SRI issues that the fund managers have considered. credit, corporate bond spreads also widened and inter-bank lending rates remained unusually high (compared with central-bank interest rates). Investors’ fears about the prospect of a credit- crisis-driven slowdown in global economic activity came to fruition, with the world’s major economies slowing in harmony; the International Monetary Fund now believes that the world economy will shrink in 2009 for the first time in 60 years.

Robert A. Rohde, Global Warming Art Meanwhile, corporate earnings deteriorated towards the end of the period and investors were undermined further during the first quarter of 2009 by a spate of dividend cuts by some of the world’s largest companies. Central banks cut interest rates aggressively during the year and, having all but exploited the scope of conventional monetary policy, they moved increasingly to embrace other measures (most

14 Cornwall Pension Fund Annual Report 2008-09 Performance of the Fund notably in the US and the UK in the shape of (the additional yield premium of corporate issues “When it comes to ‘quantitative easing’). Governments, too, sought over government equivalents) widening to levels the future, there to ease economic and financial-market conditions not witnessed since the Great Depression of the with an alphabet soup of measures, including 1930s. are three kinds of fiscal stimulus packages and rescue plans and Apprehension about the prospect of both deflation people: guarantees for the banking sector. The labours of and inflation exercised bond investors’ minds governments and central banks served to stabilise intermittently over the year. The poor performance conditions in credit markets towards the end of of index-linked bonds versus ‘conventional’ the period but not to ‘normalise’ them. Signs of government bonds suggested that, over the period improvement in the global economy remain too as a whole, fears of deflation had the greater impact patchy to conclude that those actions have yet on investors’ asset allocation decisions. been effective in tackling economic woes. those who let it happen, Against this backdrop, the FTSE All World Index fell sharply by 20.4% in sterling terms, but returns Top performing industrial sectors for the year to to the UK-based investor were flattered by the 31 March 2009 were: weakness of sterling. In local-currency terms the major regions tending to fall in a range between Top % -30% and -40%. To the sterling investor, yen Pharmaceuticals & Biotechnology 15.87 strength led Japan to generate the ‘least bad’ return General Retailers 3.65 those who make it of those regions of -10.6% and dollar strength Software & Computer Services 2.55 happen, resulted in the North America return of -14.0% in Beverages 0.77 sterling terms. Elsewhere, returns were worse, with Fixed Line Telecommunications (2.20) the Pacific ex Japan -22.6%, Emerging Markets Tobacco (2.37) -26.4%, the UK -29.3% and Continental Europe Food & Drug Retailers (4.67) -32.1%. Health Care Equipment & Services (6.68) Electricity (7.75) Bonds Food Producers (8.53) and those who Government bond markets generally performed Bottom wonder what strongly over the 12-month period against a happened.” backdrop of dysfunctional global financial markets Forestry & Paper (50.67) and weakening economic activity. Government Life Insurance (49.81) We are grateful to Newton bonds were supported also by the actions of Industrial Metals (46.87) Investment Management central banks, which cut interest rates aggressively Banks (42.94) Ltd for supplying the General Industrials (42.52) background information on and, in the UK and the US, adopted unorthodox Oil Equipment & Services (40.36) world stock markets measures in the form of ‘quantitative easing’ to try Real Estate (39.73) to ease financial-market and economic conditions. Newton Investment General Financial (37.32) Management Ltd Corporate bond markets, by contrast, weakened Industrial Engineering (34.52) authorised and regulated by John M. Richardson, Jr. during the period, with investment-grade spreads Construction & Materials (33.77) Financial Services Authority

Cornwall Pension Fund Annual Report 2008-09 15 Performance of the Fund

Market values 1000 Income on the Fund The market value of the Fund’s investments, cash 950 A meaningful assessment of future income must and other assets, on 31 March 2008, was £788.8 900 take account of how much we can expect income million, compared with a value of £1,004.4 million 850 to increase with inflation and how far the growth in

on 31 March 2009. The chart below shows the 800 capital can increase the money available to pay out

movement of market values (including cash and 750 the Fund’s liabilities. other assets) since 1999. 700 During 2008-09, the income created by the Fund’s 650 investments, after deduction of tax, was £25.5 2004 2009 600 million and represented a return of 2.8% on the

Fixed interest securities £ millions 550 average market value. The return achieved in UK public sector 2.5 0 500 2007-08 was 2.9%. However, when the impact of 450 the passive currency overlay and the loss on foreign Overseas government bonds 3.3 0 400 exchange transactions is included the return on Corporate bonds 3.9 0 average market value falls to a negative return of 350 -2.8%. Unit Trust Bonds 0.0 16.3 300

Index linked securities 3.9 0 250 UK equities 43.0 19.6 200 General statistics 150 Overseas equities 31.5 37.1 100 Annual inflation, measured by the retail price Private equities 0.0 6.6 50 index, decreased over the year from 3.8% to -0.4%.

Property unit trusts 9.9 6.8 0 Average Earnings Index also decreased over the Other investments 0.0 7.2 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 same period and went into a negative figure, from 4.0% to -0.2%. Cash 2.0 6.4 Market values from 31 March 1999 to 31 March 2009 The UK clearing bank base rate started the financial year at 5.25% and fell by 0.25% in April, 0.5% in 2004 2009 October, 1.5% in November, 1.0% in December and 0.5% in each of January, February and March. At the end of March 2009 the rate was 0.5%. The folowing chart compares the changes/ returns in retail prices, average earnings and the Cornwall Pension Fund over 1, 3, 5 and 10 years. The percentage returns shown for the Fund are How the Fund’s assets have been invested in sterling and, as such, include the change in the value of the sterling against the relevant currencies. NB Other investments includes hedge funds and funds for currency, infrastructure and environmental technology.

16 Cornwall Pension Fund Annual Report 2008-09 Performance of the Fund Percentage returns for the year to Summary of Fund Manager Performance as at 31 March 2009 31 March 2009 One year Three years Five Years 10 Years Key Gross Net Benchmark % 1 Year 3 Years 5 Years 10 Years 4 Alliance Bernstein (UK) -43.6 -43.8 -29.3 -17.6 -17.9 -10.1 -6.0 -6.3 0.4 N/A N/A N/A 3 Alliance Bernstein (Global) -38.9 -39.1 -20.1 -16.7 -17.4 -7.7 N/A N/A N/A N/A N/A N/A 2 GMO -24.5 -24.9 -29.3 -9.2 -9.6 -10.2 0.7 0.3 -1.0 N/A N/A N/A 1 Capital -22.0 -22.4 -21.1 -7.4 -7.9 -6.1 2.4 1.9 4.1 N/A N/A N/A 0 Newton -20.4 -20.6 -22.9 -3.6 -3.8 -7.1 6.5 6.2 3.6 4.3 4.0 1.8 -1 Insight -6.6 -6.7 -3.0 0.3 0.1 1.6 3.1 2.9 3.9 N/A N/A N/A -5 RREEF -30.6 N/A -27.1 -10.2 N/A -8.9 1.3 N/A 1.5 6.3 N/A 6.1 -10 Average earnings Total Fund -22.4 N/A -21.7 -6.8 N/A -6.5 2.8 N/A 3.1 2.3 N/A 1.9 Retail prices -15 CCC Fund Note that the table above excludes those fund managers for whom there is insufficient meaningful performance data -20 Newton’s net performance is overstated as the performance element of their fee is not included Overall performance includes the contribution from alternatives and cash held by the Council -25

The following table sets out the fund manager’s Mellon’s own summary report for 2008-09 individual returns. The Pensions Committee examines the performance of 330 UK pension examine the data with officers and advisers and funds, representing 1,773 separate ‘portfolios’ consider taking action, if necessary, should any and having a combined total market value of developing under-performance trends occur. £139 billion (on 31 March 2009). As noted by Mellon, over 97% of all funds now compare their The Fund subscribes to a portfolio analysis service “Everything that performance to a specific benchmark. provided by BNY Mellon Asset Servicing (formerly can be invented has known as CAPS) – which is a group made up of The Cornwall Fund has performed 0.7% below its been invented.” different actuaries. They provide further analysis specific benchmark for 2008-09. that can disclose the contribution made from Investment return 2008-09 Charles H. Duell, an official at fund managers being over or under exposed to the US patent office, 1899 particular stocks, or the effect of making the right Our return -22.4% or wrong stock selection. Our specific benchmark -21.7%

Cornwall Pension Fund Annual Report 2008-09 17 Performance of the Fund Commentary extreme volatility suffered in 2008-09 has not been financially advantageous. It has not been an easy year for assets to perform well and some of Cornwall’s fund managers Some further charts below show more detail of struggled significantly. Overall, the Fund the equity and property unit trust holdings at 31st underperformed the benchmark by 0.7% - the March 2009. worst relative performance in the last 10 years. This poor performance has resulted in the relative returns for the whole Fund, for both the rolling 3 year and 5 year periods, slipping into negative territory. The absolute return of -22.4% is also lower than the local authority average return of -19.9%. The following table shows the huge diversity in performance of each asset class in the financial markets over the last year (most of which were negative). This showed the best performing asset class over 2008-09 was Overseas Bonds – resulting in a positive return of 36.7%. European Equities (excluding UK) performed the worst over the year with a 12 month return of -31.4%. Despite these challenging times, 2 equity managers “The (Newton and GMO) were able to produce positive relative returns over the year, 3 years and 5 years. ordinary Alliance Bernstein and Capital International have ‘horseless had a tough year with stock selection being carriage’ is particularly problematic. The long term focus appeared to not fully appreciate some of the short at present a luxury for the term volatility, particularly in financial stocks. wealthy; and although its price will Overall Fund performance has been hindered probably fall in the future, it will never, by the passive currency overlay which, whilst of course, come into as common use as reducing currency volatility on the equities, has the bicycle.” prevented the Fund from benefiting fully from the significant fall in sterling over the year. The 50% Literary Digest, 1899. passive hedge is still felt to be appropriate as a long term risk management strategy, although the

18 Cornwall Pension Fund Annual Report 2008-09 Performance of the Fund Movements in investment market indices during 2008-2009 (2007-2008 movements shown)

% Return for the year per Mellon Sector Mellon benchmark index -30 -25 -20 -15 -10 -5 0 5 10 15 20 25 30 35 40 UK equities FTSE all share -29.3 -7.7

Overseas equities -19.8 -1.0

North America FTSE All world North America -14.0 -4.8 Europe (not UK) FTSE All world Europe not including UK -31.4 2.4 Japan FTSE All world Japan -10.8 -15.5 Pacific (not Japan) FTSE All world Asia Pacific not including Japan -22.4 8.6 Emerging markets MSCI emerging markets free -26.6 19.7 UK gilts FTSE UK gilts all stocks 10.3 7.6 UK corporate bonds Merrill Lynch sterling non-gilts over 15 years -5.9 -0.8 Overseas bonds JP Morgan world not including UK government bonds 36.7 19.1 UK index-linked gilts FTSE UK index-linked gilts over 5 years -1.3 13.1 Property HSBC AREF all balanced fund -27.4 -11.3 Cash LIBID 7 day rate 3.6 5.6

Data supplied by BNY Mellon Asset Servicing

Currency exchange rates -27.1% Pound sterling to US dollar +2.4% -29.6% Pound sterling to yen -13.3% -13.7% Pound sterling to euro -13.6%

Cornwall Pension Fund Annual Report 2008-09 19 Performance of the Fund Investments in UK equities, held on Largest 20 UK equity holdings on 31 March 2009 31st March 2009

Analysis by industry sectors (above value of £3 million) £ millions 31.065 Oil & Gas

19.259 Pharmaceuticals & Biotechnology £

millions % Oil and gas and Pharmaceuticals biotechnology Telecommunications Mining and beverages Food Utilities Tobacco Banks Insurance Retailers and leisure House, personal goods and defence Aerospace Vodafone Group 17.607 Telecommunications 12.757 8.3% 8.3% GlaxoSmithKline 12.550 8.2% 8.2% 10.689 Mining Royal Dutch Shell 12.261 8.0% 8.0% BP 11.943 7.8% 7.8% 9.975 Banks AstraZeneca 6.485 4.2% 4.2% 8.955 Utilities BG Group 5.618 3.6% 3.6% BHP Billiton 5.604 3.6% 3.6% 8.035 Food & Beverages British American Tobacco 4.997 3.2% 3.2% HSBC Holdings 4.538 2.9% 2.9% 7.570 Insurance Tesco 3.704 2.4% 2.4% 7.169 Retailers Unilever 3.164 2.1% 2.1% Centrica 2.945 1.9% 1.9% 5.536 Tobacco Cable and Wireless 2.910 1.9% 1.9% Prudential 2.472 1.6% 1.6% 4.203 Support Services Diageo 2.459 1.6% 1.6% 3.858 Aerospace & Defence Reckitt Benkiser Group 2.368 1.5% 1.5% Scottish and Southern Energy 2.266 1.5% 1.5% 3.667 Travel & Leisure BAE Systems 2.096 1.4% 1.4% Rio Tinto 3.634 Media 1.950 1.3% 1.3% Standard Chartered 1.872 1.2% 1.2% 3.092 House, Leisure & Personal Goods Largest 20 UK equities 104.959 68.2% 19.4% 12.4% 10.2% 4.9% 3.7% 3.4% 3.2% 2.9% 2.8% 2.4% 1.5% 1.4% Other UK equities 48.891 31.8% 0 5 10 15 20 25 30 35 Total UK equities 153.850 100.0% £ millions

20 Cornwall Pension Fund Annual Report 2008-09 Performance of the Fund Largest 20 overseas equity holdings on 31 March 2009 Property unit trusts on 31 March 2009 North Australia RREEF Other America Europe Japan Far East and others UK funds funds £ £ £ £ £ £ £ £ £ millions % millions millions millions millions millions millions % millions millions Capital International emerging 18.815 6.5% 18.815 BlackRock UK property fund 7.936 14.85 7.936 markets fund Newton South East Asia ex- Henderson Central London office fund 6.337 11.85 6.337 10.565 3.6% 10.565 empt fund Hercules PUT 1.509 2.82 1.509 Roche holdings 7.434 2.6% 7.434 RREEF UK industrial property fund 5.715 10.69 5.715 Total 4.552 1.6% 4.552 Nestle 4.399 1.5% 4.399 RREEF UK office property fund 7.628 14.27 7.628 Sprint nextel 4.097 1.4% 4.097 RREEF UK property ventures fund no. 2 1.439 2.69 1.439

Newcrest mining 3.741 1.3% 3.741 RREEF UK core property fund 1.493 2.79 1.493 Novartis 3.356 1.2% 3.356 Schroder exempt PUT 6.988 13.07 6.988 Ericcson 2.975 1.0% 2.975 UBS Triton PUT 11.164 20.88 11.164 Telstra 2.795 1.0% 2.795 RREEF UK property ventures fund no. 3 3.250 6.08 3.250 NTT Docomo 2.573 0.9% 2.573 Royal Dutch Shell 2.354 0.8% 2.354 Total property unit trusts 53.459 100.00 19.524 33.935 Cisco Systems 2.242 0.8% 2.242 Allianz SE 2.191 0.8% 2.191 Pfizer 2.185 0.8% 2.185 Muenchener Rueckve 2.182 0.7% 2.182 AT & T 2.171 0.7% 2.171 Mitsubishi 2.171 0.7% 2.171 QBE Insurance 2.130 0.7% 2.130 “Who the hell wants Zurich financial services 2.130 0.7% 2.130 to hear actors talk?” Largest 20 overseas equities 85.058 29.26% 13.490 31.573 4.744 10.565 24.686 H M Warner, co-founder of Warner Brothers, 1927 Other overseas equities 205.525 70.7% Total overseas equities 290.583 100.0%

Cornwall Pension Fund Annual Report 2008-09 21 Financial statements Foreword to the accounts Fund Account The accounts summarise the transactions of the Fund Note 2009 2008 £m £m £m £m during the year, both for benefits and investments, Contributions and benefits and show the position of the Fund on 31 March 2009. Contributions received from: 3 The financial statements provide information about employers - normal contributions 49.225 47.509 the financial position, performance and financial - additional contributions 6.898 1.143 adaptability of the Fund. They show the assets that employees 15.929 13.986 were in the Fund at the period end but do not include Receipts on account of joiners 3 the liabilities to pay pensions and other benefits in the Transfers in 4.374 7.802 Other income 0.014 0.001 future, which are reported in the actuary’s statement. Augmentation receipts 1.495 0.182 These accounts are prepared in line with the Code of Total contributions 77.935 70.623 Practice on Local Authority Accounting in Great Britain Less: Benefits paid 4 and the Statement of Recommended Practice, as Pensions 32.182 30.36 1 revised. The Fund account gives details of the financial Lump Sums 14.674 7.787 transactions and changes in the value of the Fund Death benefits 1.112 0.511 during the period. These transactions are shown as Augmentation costs - - being either ‘contributions and benefits’ or ‘returns on Payments to and for leavers 5 investments’ (including investment income and profits Refunds of contributions 0.011 0.018 and losses on investment). Transfers out 2.906 2.100 Administration and other expenses 8 0.490 0.461 The other financial statement is the Net Assets Total payments and deductions 51.375 41.238 Statement, which gives details of the size and Net gains from dealing with members 26.560 29.385 distribution of the net assets of the Fund at the end of Returns on investments 6 the year. Investment income 25.037 30.482 Irrecoverable tax paid on investment income (1.444) (1.233) The Fund does not pay UK income tax on interest Other income 0.446 0.374 received or capital gains tax on investments sold. The Change in market value of investments 7b (214.875) (49.282) Fund is also exempt from Australian and United States’ Gains on currency transactions - - Less: withholding tax on payments made from investments Investment management expenses 8 (3.916) (4.614) and recovers some withholding tax taken in some Loss on currency transactions (47.455) (11.783) European countries. The Chancellor of the Exchequer, Net returns on investments (242.207) (36.056) in his July 1997 budget, removed the ability of Net increase/(decrease) in the Fund during the year (215.647) (6.671) pension funds, and others who enjoyed tax-exempt Opening net assets of the scheme 1,004.434 1,011.105 status, to recover tax on UK equity dividends. Closing net assets of the scheme at 31 March 788.787 1,004.434 Fund net movement statement Opening net assets 1,004.434 1,011.105 Net income available for investment Net additions and gains from dealing with members 26.560 29.385 Investment income less expenses (27.332) 13.226 Change in market value of investments 7b (214.875) (49.282) Closing net assets 788.787 1,004.434 22 Cornwall Pension Fund Annual Report 2008-09 Financial statements Net assets statement Notes to the Financial statements Note 2009 2008 £m £m £m £m 1 How they were prepared Investment assets 7 The accounts have been prepared as a going Fixed interest securities UK public sector - 64.735 concern to meet the requirements of the Local Overseas government bonds - 2.003 Government Pension Scheme Regulations 2008 Corporate bonds 0.128 - and the Local Government Pension Scheme Index linked securities (Management and Investment of Funds) UK public sector - 50.094 Overseas government bonds - 4.503 Regulations 1998 (as amended). They are also Corporate bonds - 0.357 required to meet the requirements of the current Equities Statement of Recommended Practice (SORP) of UK equities 153.850 242.779 the Accounting Standards Board of professional Overseas equities 290.583 366.898 Futures accounting bodies of the United Kingdom. The Bond futures - 10.819 accounts have also been prepared in accordance Equity futures 7.125 10.718 with the current CIPFA Code of Practice on Local Forward currency 3.882 (6.461) Authority Accounting. Unit trusts Property unit trusts 53.459 91.580 Currency equity unit trusts 35.540 38.172 2 Accounting policies Hedge fund unit trusts 13.486 15.853 Unit trust bonds 127.676 37.415 2a Contributions, investment income and Other assets expenses (where material), such as management Private equities 51.616 33.993 expenses and benefits, are shown on an accruals Infrastructure fund 6.280 7.975 basis, where these amounts have been determined Environmental technology fund 1.224 - Total investment assets 744.849 971.433 on the closure of accounts. Current assets 2b These accruals do not include the Fund’s Short term investments 1.380 1.990 Cash 48.674 39.730 liabilities to pay pensions and other benefits, in the Cash backing open futures position (7.125) (21.536) future, to all the present contributors to the Fund. Forward currency positions - 6.461 These liabilities are taken account of in the periodic Investment income we should receive 10a 2.579 5.525 actuarial valuations of the Fund and are reflected in Contributions we should receive 2.141 2.033 Income tax we should receive 10d 0.756 0.464 the levels of employers’ contributions determined Exceptional item - Pension strain, Income Receivable 4.384 - at these valuations. 52.789 34.667 Less: 2c Transfer Values to/from other funds, for Current liabilities individuals, are included in the accounts on the Forward currency positions 3.882 - basis of the actual amounts received and paid in Investment expenses not yet paid 1.149 1.267 Income tax not yet paid - - the year. Block transfers would be accrued, where Contribution contingency - 0.399 relevant, although there were none affecting this Exceptional item- Reorganisation lump sums payable 3.820 - financial year. 8.851 1.666 Current assets less current liabilities 43.938 33.001 Net assets as at 31 March 788.787 1,004.434 Cornwall Pension Fund Annual Report 2008-09 23 Financial statements 2d Market valuations of listed securities are based 2e Under the Pension Fund Regulations, The Fund has two AVC providers, Equitable Life and on bid values, representing the price a third party employers’ contribution rates are set to enable Standard Life. Equitable Life’s funds are closed to would pay the fund in an arm’s length transaction the Fund to meet eventually 100% of its overall new entrants but the value of the fund investments, for the investment, at the reporting date. A fair liabilities to pay benefits for both local authorities at the year end, was £0.699m. The Standard Life value may be employed where that value cannot and other bodies. The latest revaluation was fund movement for the year was as follows:- be ascertained or where it would be considered carried out at 31 March 2007 and showed that the more appropriate. Fair value is the amount for Fund had assets equal to 88% of its liabilities. The Value Contributions Investment Paid Value 1 April Return Out 31 March which an asset can be exchanged, or a liability previous valuation at 31 March 2004 the assets 2008 2009 settled, between unrelated, willing, knowledgeable equalled 78% of the Fund’s liabilities. We have £m £m £m £m £m parties in an arm’s length transaction. Prices in set employers’ contribution rates payable from 1 foreign currencies are converted at the closing April 2008 to bring the Fund up to a funding level 1.534 0.400 (0.221) 0.022 1.691 rates of exchange, as at the financial year-end date. of 100%. You can find more details in the actuarial To keep to the practices adopted by the Fund’s report set out later in this document. The change to the Pension Regulations, in April custodian, we show market values for fixed interest 2006, allows employees to pay more into their AVC 2f The amount of cash stated in the Net Assets stock as ‘clean’ - i.e. without any interest that has account and to receive the proceeds as cash at Statement as at 31 March includes all monies held built up. We take account of this interest at the year retirement, providing tax limits are not exceeded. externally by fund managers on behalf of the end. For this reason, contributions from employees Council and reflects all commitments in respect of continue to increase. The AVC contributions for the The Pensions Research Accountants Group (PRAG) transactions realised and unrealised as at that date. financial year ending 31 March 2009 were £0.400m produced a SORP, “Financial Reports of Pension compared to £0.261m for the previous financial Schemes”. The May 2007 revision to this SORP took year. These contributions are excluded from the effect from 6 April 2007 (effective for accounting 3 Contributions received Pension Fund accounts as they do not feature in the periods commencing on or after that date) and The total contributions received during the year financial reporting requirements. requires the valuation of pensions investments to ending 31 March were: move from a mid price to a bid price basis. Last year’s accounts, closing on 31 March 2008, were not Cornwall Scheduled Designatory Admitted 2009 2008 County Bodies Bodies Bodies prepared on that basis and therefore the opening Council positions for the valuations of the investments were £m £m £m £m £m £m rebased from mid to bid price. This lowered that From employers 32.506 19.157 0.776 3.684 56.123 48.652 position by £1.5 million which, when compared From employees 9.240 5.399 0.256 1.034 15.929 13.986 to the overall value of the fund being in excess Augmentation receipts - 0.919 0.576 - 1.495 0.182 of a billion pounds sterling, is not significant. The (net) valuation for the opening and closing positions Transfers in 2.560 1.634 0.008 0.172 4.374 7.802 allows a comparison on the same basis complying Other income 0.014 - - - 0.014 0.001 with the new International Financial Reporting Total income 45.239 26.766 1.040 4.890 77.935 70.623 Standards (IFRS).

24 Cornwall Pension Fund Annual Report 2008-09 Financial statements 4 Benefits paid 6 Investment Income

Cornwall Scheduled Designatory Admitted 2009 2008 The Fund received investment income for the year ended 31 County Bodies Bodies Bodies March from the following sectors. Council 2009 2008 £m £m £m £m £m £m £m £m Pensions 17.011 13.409 0.381 1.381 32.182 30.361 Fixed interest securities 3.766 3.689 Lump sums 8.015 5.708 0.109 0.842 14.674 7.787 Index linked securities 0.522 0.963 Death benefits 0.754 0.313 - 0.045 1.112 0.511 UK equities 9.033 10.312 Augmentation ------Overseas equities 10.202 9.327 costs Forex (currency transactions) (1.496) (2.901) 25.780 19.430 0.490 2.268 47.968 38.659 Property unit trusts 3.387 5.050 Commission recapture 0.012 0.004 (see note 1) 5 Payments on account of leavers Stock lending (see note 1) 0.434 0.370 Temporary loans and other (0.377) 1.141 Cornwall Scheduled Designatory Admitted 2009 2008 Gross investment income County Bodies Bodies Bodies 25.483 27.955 Council Less: irrecoverable taxation (1.444) (1.233) £m £m £m £m £m £m Currency Gain/(Loss) (47.455) (8.882) Refunds of - 0.009 0.001 0.001 0.011 0.018 Net investment income (23.416) 17.840 contributions Transfers out 1.598 1.206 0.005 0.097 2.906 2.100 Note 1: Treated as `Other Income` as it is not interest or dividend, but a gain from employing those assets. 1.607 1.207 0.005 0.098 2.917 2.118

“Very Cambridge Aeronautics interesting Whittle, my boy, but it will never work.” Professor, when shown Frank Whittle’s plan for the jet engine.

Cornwall Pension Fund Annual Report 2008-09 25 Financial statements 7 Investments 7b Change to investment assets in the year: Value Purchases at Sales Change in Value 1 April cost proceeds market value 31 March 2009 7a On 31 March 2009, the fund managers’ 2008 portfolios were valued as follows: £m £m £m £m £m Fixed interest securities Fund Manager £m UK public sector 64.735 155.597 (222.241) 1.909 - Alliance Bernstein UK portfolio 28.235 3.6% Overseas government bonds 2.003 9.325 (11.475) 0.147 - Alliance Bernstein global 34.935 4.4% Corporate bonds - 1.406 (1.059) (0.219) 0.128 portfolio Index linked securities Alliance Bernstein Deep Value 0.608 0.1% Fund UK public sector 50.094 51.867 (98.533) (3.428) - Capital International 159.701 20.4% Overseas government bonds 4.503 3.127 (7.742) 0.112 - ETF 1.224 0.1% Corporate bonds 0.357 0.297 (0.522) (0.132) - Fauchier Partners 13.486 1.7% Equities GMO UK 64.956 8.3% UK equities 242.779 77.513 (85.612) (80.830) 153.850 Hermes Focus Asset Management 0.491 0.1% Overseas equities 366.898 195.406 (176.530) (95.191) 290.583 Infracapital Partners 9.057 1.1% Derivatives Insight Investment Management 129.080 16.5% Bond futures 10.819 153.064 (166.545) 2.662 - Mellon Global Investments 6.270 0.8% Equity futures 10.718 35.007 (35.260) (3.340) 7.125 Millennium Global Investments 35.794 4.6% Forward currency (6.461) 10.343 - - 3.882 Newton Investment Management 173.396 22.1% Unit Trusts RREEF (UK) 67.975 8.7% Property unit trusts 91.580 4.429 (12.886) (29.664) 53.459 Standard Life Investments 20.155 2.6% Currency funds 38.172 - - (2.632) 35.540 Wilshire Associates 31.541 4.0% Hedge funds 15.853 - - (2.367) 13.486 Unit trust bonds 37.415 208.373 (104.554) (13.558) 127.676 Other Assets Internally Controlled Investments 6.992 0.9% Private equities 33.993 10.578 (2.263) 9.308 51.616 Total Investments (including cash 783.896 100.0% Infrastructure fund 7.975 0.884 (2,769) 0.190 6.280 and short term investments) Environmental Technology fund - 1.225 - (0.001) 1.224 (Note 1) All Asset Deep Value - 5.071 (5.474) 0.403 - Note 1. The net position of £788.787m shown in the Net Assets Temporary Bonds 1.990 22.291 (22.901) - 1.380 Statement includes the value of debtors less creditors as at 31 March 2009. 973.423 945.803 (956.366) (216.631) 746.229

Cash (see note 1) 24.655 37.667 Adjustment for net assets movement and unitised fund expenses 1.756 Total Investments (including cash and short term investments) 998.078 (214.875) 783.896 Note 1. Net of derivative offsets and forward currency positions

26 Cornwall Pension Fund Annual Report 2008-09 Financial statements 7c Analysis of listed and unlisted holdings on 31 March 7d Analysis of managed fund-type investments

Unlisted Listed 2009 Unlisted Listed 2008 For the purpose of these accounts, Managed Fund Investment assets £m £m £’000 £m £m £m holdings are those pooled products issued by an Fixed interest securities investment house in order to gain an exposure UK public sector - - 64.735 64.735 to a particular investment area, such as overseas Overseas government bonds - - 2.003 2.003 fixed interest or to a geographical area such as Corporate bonds - 0.128 0.128 - - - Pacific Basin or Far East emerging markets. They - 0.128 0.128 - 66.738 66.738 usually take the form of an investment or unit trust Index linked securities and could have a restricted membership for the UK public sector - - - - 50.094 50.094 purpose of tax exemption. Overseas government bonds - - - - 4.503 4.503 Corporate bonds - - - - 0.357 0.357 - - - - 54.954 54.954 7e The market values of managed funds Equities (unitised and other) held at 31 March were: UK equities 2.189 151.661 153.850 14.337 228.442 242.779 Overseas equities 29.792 260.791 290.583 25.610 341.288 366.898 2009 2008 31.981 412.452 444.433 39.947 569.730 609.677 £m £m Derivatives UK equities 2.189 14.337 Bond futures - - - - 10.819 10.819 Overseas equities 29.792 25.610 Equity futures - 7.125 7.125 - 10.718 10.718 Private equities 51.616 33.993 Forward currency 3.882 - 3.882 (6.461) - (6461) Property unit trusts 53.459 91.580 3.882 7.125 11.007 (6.461) 21.537 15.076 Currency funds 35.540 38.172 Unit Trusts Hedge funds 13.486 15.853 Property unit trusts - 53.459 53.459 - 91.580 91.580 Unit trust bonds 127.676 37.415 Currency funds 35.540 - 35.540 38.172 - 38.172 Infrastructure fund 6.280 7.975 Hedge funds 13.486 - 13.486 15.853 - 15.853 Environmental Technology fund 1.224 - Unit trust bonds 127.676 - 127.676 37.415 - 37.415 176.702 53.459 230.161 91.440 91.580 183.020 321.262 264.935 Other Assets Private equities 51.616 - 51.616 33.993 - 33.993 Infrastructure fund 6.280 - 6.280 7.975 - 7.975 Environmental Technology fund 1.224 - 1.224 - - - 59.120 - 59.120 41.968 - 41.968

Total investment assets (not including 271.685 473.164 744.849 166.894 804.539 971.433 cash and short term investments)

Cornwall Pension Fund Annual Report 2008-09 27 Financial statements 8 Investment and administration expenses dividends due to the fund, as at 31 March 2009, at the financial year end and these were futures and have been accrued in these accounts. This accrual forward currency. Futures are traded on exchange For the years ended 31 March, the analysis of amounts to £2.579m compared with £5.525m as at using the exchange price at the closing date. administration expenditure was as follows: 31 March 2008. Forward currency or forward foreign exchange currency are over the counter contracts and are 10b The Pension Fund includes, as admitted valued by the gain or loss that would arise if the 2009 2008 bodies, several limited companies. In the event contract was closed at the reporting date. That £m £m that any of these companies cease to trade and position is shown by entering into an equal and External investment management staff are made redundant, there is a potentially expenses opposite contract at that date. Fund managers’ fees 2.162 2.860 unfunded liability to pay immediate benefits to Performance fees 0.439 0.451 all redundant staff aged 50 and above. In certain Future Contracts open positions at Unit trusts administration costs 0.558 0.643 cases, guarantees have been obtained from other 31 March 2009 Stock lending administration costs 0.154 0.126 organisations that they would accept responsibility FTSE Futures Jun 09 – 180 contracts Bank charges and custody 0.162 0.164 for any such liability. Advisors’ costs 0.077 0.076 Value £6,958,800 less cost £6,840,000 = £118,000 Other services and fees 0.181 0.081 10c The accounts for the year ended 31 March (market position) 2009 use the valuations for the Fund’s assets based Actuarial fee 0.005 0.045 on the figures provided by our custodian, The EURX E-STXX Futures Jun 09 – 9 contracts 3,738 4.446 Northern Trust Company. This reflects the position Value £166,148.92 less cost £160,521.61 = £625.33 Cost of processing contributions and 0.490 0.461 pensions of the custodian who is ultimately responsible for (market position) the Fund’s cash. Fund managers must make sure Internal investment monitoring and 0.178 0.168 Total Value of Future contracts open - £7,124,948.92 accounting expenses (including strategic that their records agree with those kept by the planning) custodian. It also means the various portfolios Forward Currency open positions at Total investment and administration 4.406 5.075 are consistent so that the same stocks, in different 31 March 2009 expenses portfolios, are valued on the same basis. Purchase value less cost 10d The tax debtor for amounts receivable as at £152,965,131.21 - £152,689,904.52 = £275,226.69 9 Turnover the end of March 2009 stood at £0.756m, of which Sale value less cost 2009 2008 £0.104m was in respect of monies due on property -£149,083,215.05 - £152,689,904.52 = £3,606,689.47 Turnover £m £m unit trusts. Cost of purchases during 945.803 1,004.104 Total gain on currency = £3,881,916.16 year 11 Derivatives Net proceeds of sales 956.366 960.619 12 Events after the balance sheet date The Fund holds investments in derivative 1,902.169 1,964.723 instruments with limitations on their use in 12a The cash balance held at 31 March 2009 Total number of 5,800 6,180 that they are employed solely for the reduction amounted to £48.674m, of which £5.550m was transactions of risk and to facilitate the efficient portfolio held internally. The internal balance was held in management. A derivative is a financial contract temporary loans pending investment in private 10 Specific items held between two parties with a value represented equity and infrastructure holdings and rebalancing, programmed for early in the next financial year. 10a Under standard accounting practices, equity by the underlying assets. For the Cornwall Fund there were two types of derivative contracts open 28 Cornwall Pension Fund Annual Report 2008-09 Financial statements 12b On 1 April 2009, the unitary authority, have added to the strength of the argument. Whilst over the long term, whilst maintaining as stable Cornwall Council was formed. The new Council it is prudent for the Cornwall Fund not to make any employers’ contribution rates as possible. The replaces the former County Council, five District assumptions, these developments are reassuring as Council approved the current FSS that takes effect Councils and a Borough Council. At the year to the success of recovering additional income for from 31 March 2008 and it can be viewed, along end there were known items of income and the Fund. with the actuarial valuation report, on the Council’s expenditure that were required to be settled early website at www.cornwall.gov.uk. 12d A further development in the year was to in the following year, in respect of staff leaving launch claims for potential tax recovery from The 2007 valuation used the same projected the new authority. These comprised income HMRC in respect of manufactured dividends on unit method as employed in the 2004 valuation, from employers in respect of pensions strain equity stock lent out through the stock lending plus a degree of ‘Attained Age’ method for those costs and augmentation income resulting from programme. If successful this will give rise to annual employers who no longer admit new members. compensation amounts being elected to be used claims. The claim to date has a value of £0.442m, for future pension provision. In addition, there The Actuary took into account a number of although no accrual was put in the accounts, as the were a number of employees who were permitted changes since the last valuation to the LGPS benefit outcome is uncertain. to retire, either normally or early, under the structure, some of which are set out here: 12e The Department for Work & Pensions have regulations and were notified before the financial • Removal of the Rule of 85 for some or all service year end. Those costs for lump sums payable in the been asked to supply any missing Guaranteed new financial year were accrued in the accounts. Minimum Pension (GMP) information for our • Introduction of commutation scheme members. Once received, this information 12c The Cornwall Fund has a potential claim • A reduction to the minimum membership will be analysed and calculations made to correct against both the HM Revenue and Customs and required for entitlement to deferred benefit future payments and to help determine if any other countries for reclaiming tax withheld on material overpayments have occurred. Therefore no • Restrictions on aggregation of former foreign income dividends. KPMG, acting on behalf information is currently available on whether any membership of the Cornwall Fund, submitted claims during the material overpayments occurred during 2008-09. • Introduction of survivor benefits for civil year to the relevant authorities for their response. partners In March this year they were notified that the Netherlands tax authorities had agreed to these Actuarial Report The overall effect of these changes is to reduce the findings and would be processing claims. They 2007 Valuation cost of benefits. The new scheme introduced from were not certain of the timing of these refunds New employer contribution rates came into effect 1 April 2008 introduced a seven tiered structure and the amount payable. No accrual was therefore on 1 April 2008 based on the actuarial valuation of giving rise to a range of employee contribution placed in the accounts at the year end. the Pension Fund carried out as at 31 March 2007. rates. Another fundamental change was the calculation of pension from a 80th to 60th times final Overall the Fund could benefit by recovering up to The actuarial valuation provides a profile of the salary for the period of scheme membership. Under a total of £1.4m in lost revenue of which £0.240m funding level of current and future liabilities the new scheme the payment of a lump sum is is in respect of that due from the Netherlands. for the employers in providing pensions for foregone with the higher level of pension payable. These claims are made on the basis that within the their employees in the Scheme. The Council, as The death grant was increased from two to three European Union all member states should enjoy Administering Authority, is required to establish a years. the same status. In respect of tax, resident investors Funding Strategy Statement (FSS) that sets out how should not be classed differently to non-residents. the Fund will meet employers’ pensions liability For the 2004 valuation the actuary used the Recent court cases, notably Manninen and Fokus, following financial assumptions :

Cornwall Pension Fund Annual Report 2008-09 29 Financial statements • The yield available on gilts (described as March 2007 March 2004 minimum risk rate of return) at 4.7% %pa %pa %pa %pa real • Adding the anticipated out-performance from nominal real nominal the Fund’s assets that are higher risk (which Minimum Risk Rate of Return 4.50 1.30 4.70 1.80 were derived by looking at the broad asset Anticipated Extra Long-term Return from split of 75% in equities and 25% in gilts , then Equities 1.75 applying this to the anticipated return on both Corporate Bonds 0.40 of these, namely 6.5% and 4.9% respectively) Overall anticipated Long-term return from: see note • This gave the anticipated future long-term above return on assets to be 6.1% ( derived from 75% Equities CORNWALL COUNTY COUNCIL PENSION FUND6.50 3.60 044 of 6.5% and 25% of 4.9%) Bonds (50% Gilts, 50% Corporate Bonds) 4.90 2.00 HYMANS ROBERTSON LLP For the 2007 valuation this view changed as Overall anticipated out-performance above gilts 1.40 follows: Discount rate 5.90 2.70 6.10 3.20 It was no longer considered appropriate to Pay increases 5.20 2.00 4.90 2.00 derive the anticipated future return by just Price Inflation/Pension Increases Appendix H – Rates3.20 0.00 and adjustments2.90 0.00 certificate considering equities and bonds, since the investment strategy of the Fund had moved so In accordance with Regulation 77 of the Local Government Pension Scheme Regulations 1997, as much away from this. The actuary preferred amended, I have made an assessment of the contributions that should be paid to the Fund by the In accordance with Regulation 77 of the Local to use an out-performance assumption that Valuation Results 31 March 31 Marchemploying authorities as from 1 April 2008 in order to maintain the solvency of the Fund. 2007 2004 Government Pension Scheme Regulations 1997, the Cornwall Fund’s entire asset portfolio of £m £m 1.4% above the yield available on gilts was The requiredasamended, contribution I have rates made are an se assessmentt out in the attached of the statement. Total liabilities 1,144 795 still appropriate. The actuary derived the contributions that should be paid to the Fund by discount rate by simply adding 1.4% to the yield Market value of Assets 1,012 617 the employing authorities as from 1 April 2008 in available on gilts (4.5%) to give the discount Deficit 132 178 order to maintain the solvency of the Fund. rate of 5.9%. See the table above right showing Funding level 88.0% 78.0% The required contribution rates are set out in the the comparison between the 2004 and 2007 Employers’ contribution rate attached statement. valuation financial assumptions: Future service rate 16.0% 14.0% Past service adjustment 3.1% 6.0%Signature:Signature: Date: 28 March 2008 The current actuarial revaluation was carried Total Common Contribution 19.1% 20.0% Date: Name: 28Lorna March Tonner 2008 FFA out using the Fund value and staffing data as at Rate Qualification: Fellow of the Faculty of Actuaries 31 March 2007 and the corresponding revisions Deficit Recovery Period 20 years 20 yearsName: Lorna Tonner FFA to the employers’ contribution rates took effect Firm: Hymans Robertson LLP from 1 April 2008 and are reflected in this year’s Qualification: Fellow20 Waterloo of the StreetFaculty of Actuaries accounts. A comparison of the results of the Glasgow Firm: Hymans Robertson LLP 2004 and 2007 Valuations is shown to the right: G2 6DB 20 Waterloo Street 30 Cornwall Pension Fund Annual Report 2008-09 Glasgow

G2 6DB

March 2008 HTTP://CONNECT.HYMANS.CO.UK/CLIENTS/LGPS/CNWL/2007VAL/SHARED DOCUMENTS/2007 DOCUMENTS/080104 CNWL GN9 VALUATION

REPORT FOR LGPS.DOC Financial statements Statement to the rates and adjustments The Common Rate of Contribution payable by each Individual Adjustments are required under certificate employing authority under Regulation 77 for the Regulation 77 for the period 1 April 2008 to period 1 April 2008 to 31 March 2011 is 19.1% of 31 March 2011 resulting in Minimum Total pensionable pay. Contribution Rates expressed as a percentage of pensionable pay are as set out below:

Employer Employer code Employer Minimum contributions for the year ending code Employer Minimum contributions for the year ending 31 Mar 2009 31 Mar 2010 31 Mar 2011 31 Mar 2009 31 Mar 2010 31 Mar 2011 MAJOR SCHEDULED AND RESOLUTION BODIES LARGE ADMISSION BODIES 1 CORNWALL COUNTY COUNCIL 19.0% N/A N/A 19.4% plus 19.4% plus 19.4% plus CORNWALL COUNCIL N/A 19.4% 19.4% 215 PENWITH HOUSING ASSOCIATION £41.4k £42.5k £43.5k 50 PENWITH DC 24.0% N/A N/A 216 CONNEXIONS CORNWALL & DEVON 19.9% 19.3% 18.8% 51 KERRIER DC 26.9% N/A N/A 19.3% plus 19.3% plus 19.3% plus 52 CARRICK DC 25.1% N/A N/A 218 CORNWALL COUNTY CARE £167.9k £153.4k £137k 53 RESTORMEL BC 23.0% N/A N/A 18.8% plus 18.8% plus 18.8% plus 54 CARADON DC 21.1% N/A N/A 223 COASTLINE HOUSING LTD £57.9k £69.4k £81.9k 55 NORTH CORNWALL DC 21.8% N/A N/A 233 CARRICK LEISURE 15.3% 16.2% 17.1% 56 ISLES OF SCILLY 21.5% 21.2% 20.9% 236 TREMOUGH CAMPUS SERVICES 14.4% 14.1% 13.8% 2 CORNWALL SEA FISHERIES 19.0% 19.4% 19.4% 228 OCEAN HOUSING 26.6% 29.8% 33.1% 150 TAMAR BRIDGE & TORPOINT FERRY 21.4% 21.0% 20.7% 239 OCEAN SERVICES 26.6% 29.8% 33.1% 225 CORNWALL ENTERPRISE 19.4% 19.2% 18.9% 240 OCEAN GROUP 26.6% 29.8% 33.1% 235 CARRICK HOUSING LTD 19.2% 18.7% 18.2% ADMISSION BODIES POOL MINOR EMPLOYERS POOL 203 FALMOUTH HARBOUR COMMISSIONERS 19.0% 19.0% 18.9% 100 BODMIN TC 19.7% 19.6% 19.6% 204 NEWLYN PIER & HARBOUR 19.0% 19.0% 18.9% 101 BUDE STRATTON TC 19.7% 19.6% 19.6% 206 ROYAL INSTITUTION OF CORNWALL 19.0% 19.0% 18.9% 102 LAUNCESTON TC 19.7% 19.6% 19.6% 103 LISKEARD TC 19.7% 19.6% 19.6% BEST VALUE ADMISSION BODIES 106 PENZANCE TC 19.7% 19.6% 19.6% 231 LANDSCAPES SW LTD 14.0% 14.0% 14.0% 107 SALTASH TC 19.7% 19.6% 19.6% 242 SERCO LTD 17.5% 17.5% 17.5% 108 ST IVES TC 19.7% 19.6% 19.6% 245 STONHAM 19.7% 19.7% 19.7% 109 TORPOINT TC 19.7% 19.6% 19.6% 110 TRURO CITY 19.7% 19.6% 19.6% EMPLOYERS WITH NO ACTIVE MEMBERS 112 FALMOUTH TC 19.7% 19.6% 19.6% 3 CORNWALL PROBATION COMMITTEE 113 CALLINGTON PC 19.7% 19.6% 19.6% 4 MAGISTRATES COURTS 115 CAMBORNE TC 19.7% 19.6% 19.6% 105 PERRANZABULOE PC 116 HELSTON TC 19.7% 19.6% 19.6% 111 PENRYN TC 151 CORNWALL JOINT CREMATORIUM COMMITTEE 19.7% 19.6% 19.6% 114 ST MEWAN PC 152 FALMOUTH & TRURO PORT HEALTH 19.7% 19.6% 19.6% 201 CAMBORNE SCHOOL OF MINES 153 FOWEY PORT HEALTH 19.7% 19.6% 19.6% 202 CORNWALL DISABLED CTTEE 217 ST AGNES PC 19.7% 19.6% 19.6% 205 TRURO SCHOOL 221 WADEBRIDGE TC 19.7% 19.6% 19.6% 207 AGE CONCERN 227 HAYLE TC 19.7% 19.6% 19.6% 209 CAMBORNE SCHOOL OF METALLIFEROUS MINING 232 CALSTOCK PC 19.7% 19.6% 19.6% 210 KERRIER GROUNDWORK TRUST 237 ST BLAISE TOWN COUNCIL 19.7% 19.6% 19.6% 219 ST. BURYAN PRIMARY SCHOOL 243 DEVIOCK PARISH COUNCIL 19.7% 19.6% 19.6% 220 TREVITHICK TRUST 244 CORNWALL AIRPORT LTD 19.7% 19.6% 19.6% 222 PENWITH RESPITE CARE 224 NEWQUAY TOWN COUNCIL COLLEGES 229 CPR SUCCESS ZONE 208 UNIVERSITY COLLEGE FALMOUTH 15.0% 15.2% 15.5% 230 MHS LTD 211 PENWITH COLLEGE 14.1% 14.1% 14.1% 234 RESTORMEL REGENERATION PARTNERSHIP 214 TRURO COLLEGE 14.1% 14.1% 14.1% 241 SOUTHERN ELECTRIC CONTRACTING 212/213 CORNWALL COLLEGE 16.7% 17.2% 17.6% 300 CORNWALL RIVER AUTHORITY Cornwall Pension Fund Annual Report 2008-09 31 Financial statements Notes Employers with no active members have had their residual liabilities in respect of deferred Contributions expressed as a percentage should be or pensioner members allocated to a successor paid into Cornwall County Council Pension Fund body where applicable. In some cases, cessation (‘the Fund’) at a frequency in accordance with the valuations under Regulation 78 are to be carried requirements of the Regulations. out. Further sums should be paid to the Fund to meet the costs of any early retirements and/or augmentation using methods and factors issued by me from time to time. Michel de Nostredame (14 December or 21 Further sums may be required to be paid to the December 1503[1] – 2 July 1566), usually Fund by employers to meet the capital costs of any Latinised to Nostradamus, was a French ill-health retirements that exceed those included apothecary and reputed seer within my assumptions. who published collections of The certified contribution rates represent the prophecies that have since minimum level of contributions to be paid. become famous worldwide. Employing authorities may pay further amounts at He is best known for his any time and future periodic contributions may be book Les Propheties adjusted on a basis approved by the Fund actuary. (“The Prophecies”), the The FSS of the Cornwall County Council Pension first edition of which Fund sets out the strategy of the Fund in relation appeared in 1555. to the phasing of any contribution rate increases. Where appropriate, employers’ rates have therefore Some Nostradamus been phased in over the period detailed in the “predictions” FSS. However, as noted in the FSS, in certain 9/11 circumstances, the Administering Authority and the Actuary may agree other phasing-in periods where Hitler an employer, or group of employers, is undergoing Louis Pasteur significant structural changes. In particular, the 2007 valuation allows for the One Cornwall made Henry II of France up of the existing County Council and the six Conquering of the Balkan Peninsula District and Borough Councils, to move to the rate World War II / Atomic Bomb calculated for the new Council from its outset in April 2009. The Great Fire of London Oliver Cromwell The French Revolution

32 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Funding Strategy Statement Funding Strategy Statement • actuarial factors for valuing early retirement going forward; costs and the cost of buying extra service; and • to support the regulatory framework to as approved February 2008 • the Statement of Investment Principles. maintain as nearly constant employer contribution rates as possible; and 1. Introduction Operating within this framework, the Fund’s actuary carries out triennial valuations to • to take a prudent longer-term view of funding This is the Funding Strategy Statement (FSS) of set employers’ contributions and provides those liabilities.” the Cornwall County Council Pension Fund (“the recommendations to the Administering Authority These objectives are desirable individually, but may Fund”), which is administered by Cornwall County when other funding decisions are required, such be mutually conflicting. Council (“the Administering Authority”). as when employers join or leave the Fund. The FSS It has been reviewed by the Administering applies to all employers participating in the Fund. This statement sets out how the Administering Authority in collaboration with the Fund’s actuary, Authority has balanced the conflicting aims of Hymans Robertson, and after consultation with affordability of contributions, transparency of the Fund’s employers and investment adviser. This 1.2 Reviews of FSS processes, stability of employers’ contributions, and prudence in the funding basis. revised version replaces the previous FSS and is The FSS is reviewed in detail at least every three effective from 31 March 2008. years ahead of triennial valuations being carried out, with the next full review due to be completed 2.2 Purpose of the Fund by 31 March 2011. More frequently, Annex A is The Fund is a vehicle by which scheme benefits are 1.1 Regulatory Framework updated to reflect any changes to employers. delivered. The Fund: Scheme members’ accrued benefits are guaranteed The FSS is a summary of the Fund’s approach to • receives contributions, transfer payments and by statute. Members’ contributions are fixed in the funding liabilities. It is not an exhaustive statement investment income; Regulations at a level which covers only part of the of policy on all issues. If you have any queries cost of accruing benefits. Employers currently pay • pays scheme benefits, transfer values and Some Nostradamus please contact Joe Jacques, Senior Assistant County the balance of the cost of delivering the benefits Treasurer in the first instance at jjacques@cornwall. administration costs. “predictions” to members. The FSS focuses on the pace at gov.uk or on 01872 322215. One of the objectives of a funded scheme is to which these liabilities are funded and, insofar as is 9/11 reduce the variability of pension costs over time for practical, the measures to ensure that employers or employers compared with an unfunded (pay-as- Hitler pools of employers pay for their own liabilities. 2. Purpose you-go) alternative. Louis Pasteur 2.1 Purpose of FSS Henry II of France The roles and responsibilities of the key parties The FSS forms part of a framework which includes: The Office of the Deputy Prime Minister involved in the management of the pension Conquering of the Balkan Peninsula (ODPM) (now known as Communities and Local • The Local Government Pension Scheme scheme are summarised in Annex B, on page 45. Government) has stated that the purpose of the World War II / Atomic Bomb (Administration)Regulations 2008 (regulation FSS is: The Great Fire of London 35 is particularly relevant); • “to establish a clear and transparent fund- Oliver Cromwell • the Rates and Adjustments Certificate, which specific strategy which will identify how can be found appended to the Fund actuary’s The French Revolution employers’ pension liabilities are best met triennial valuation report;

Cornwall Pension Fund Annual Report 2008-09 33 Regulatory statements Funding Strategy Statement 2.3 Aims of the Funding Policy 3. Solvency Issues and Target employer or pool-specific spreading and phasing periods. The objectives of the Fund’s funding policy include Funding Levels the following: For some employers it may be agreed to pool 3.1 Derivation of Employer Contributions contributions, see Section 3.7.7. • to ensure the long-term solvency of the Fund Employer contributions are normally made up of as a whole and the solvency of each of the two elements: Annex A contains a breakdown of each employer’s notional sub-funds allocated to the individual contributions following the 2007 valuation for the a) the estimated cost of future benefits being employers. financial years 2008/09, 2009/10 and 20010/11. It accrued, referred to as the “future service rate”; also identifies which employers’ contributions have • to ensure that sufficient funds are available to plus been pooled with others. meet all benefits as they fall due for payment; b) an adjustment for the funding position (or Any costs of non ill-health early retirements must • not to restrain unnecessarily the investment “solvency”) of accrued benefits relative to be paid for either as: strategy of the Fund so that the Administering the Fund’s solvency target, “past service Authority can seek to maximise investment adjustment”. If there is a surplus there may • lump sum payments at the time of the returns for an appropriate level of risk; be a contribution reduction; if a deficit, a employer’s decision in addition to the contributions described above (or by • to minimise the long-term cost to employers of contribution addition, with the surplus or instalments shortly after the decision); or providing pension benefits; deficit spread over an appropriate period. • an agreed increase in the employer’s • to help employers recognise and manage The Fund’s actuary is required by the regulations contribution rate at the time of the valuation. pension liabilities as they accrue; to report the Common Contribution Rate , for all employers collectively at each triennial valuation Employers’ contributions are expressed as minima, • to minimise the degree of short-term change (see regulation 77[4]). It combines items (a) and (b) with employers able to pay regular contributions in the level of each employer’s contributions and is expressed as a percentage of pay. For the at a higher rate. Employers should discuss with where the Administering Authority considers it purpose of calculating the Common Contribution the Administering Authority before making one-off reasonable to do so; Rate, the surplus or deficit under (b) is currently capital payments. • to use reasonable measures to reduce the spread over a period of 20 years. risk to other employers and ultimately to the The Fund’s actuary is also required to adjust the 3.2 Solvency and Target Funding Levels Council Tax payer from an employer defaulting Common Contribution Rate for circumstances on its pension obligations; which are deemed “peculiar” to an individual The Fund’s actuary is required to report on the “solvency” of the whole fund at least every three • to address the different characteristics of the employer(see regulation 77[6]). It is the adjusted years. disparate employers or groups of employers contribution rate which employers are actually to the extent that this is practical and cost- required to pay. The sorts of peculiar factors which “Solvency” for ongoing employers is defined to be effective; and are considered are discussed in Section 3.5. the ratio of the market value of assets to the value placed on accrued benefits on the Fund actuary’s • to maintain the affordability of the Fund to In effect, the Common Contribution Rate is a ongoing funding basis. This quantity is known as a employers as far as is reasonable over the notional quantity. Separate future service rates are funding level. longer term. calculated for each employer or pool together with individual past service adjustments according to

34 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Funding Strategy Statement The ongoing funding basis is that used for each will out-perform gilts, or even match the return on should note that it is only Admission and triennial valuation and the Fund actuary agrees the gilts. The risk is greater when measured over short Resolution Bodies that may have the power not financial and demographic assumptions to be used periods such as the three years between formal to admit automatically all eligible new staff to the for each such valuation with the Administering actuarial valuations, when the actual returns and Fund, depending on the terms of their Admission Authority. assumed returns can deviate sharply. Agreements and employment contracts. The fund operates the same target funding level In light of the statutory requirement for the Actuary for all ongoing employers of 100% of its accrued to consider the stability of employer contributions, 3.4.1 Admission Body Employers that admit new liabilities valued on the ongoing basis. Please refer it is normally appropriate to restrict the degree entrants to paragraph 3.8 for the treatment of departing of change to employers’ contributions at triennial employers. valuation dates. The employer’s future service rate will be based upon the cost (in excess of members’ contributions) Given the very long-term nature of the liabilities, a of the benefits which employee members earn 3.3 Ongoing Funding Basis long term view is taken. For the 2007 valuation, it from their service each year. Technically these rates is assumed that the Fund’s investments will deliver The demographic assumptions are intended to be will be derived using the Projected Unit Method of an average additional return of 1.35% each year best estimates of future experience in the Fund valuation with a one year control period. in excess of the return available from investing based on past experience of LGPS funds advised by in index-linked government bonds at the time of If future experience is in line with assumptions, and the Fund Actuary. It is acknowledged that future the valuation. Based on the asset allocation of the employer’s membership profile remains stable, life expectancy and in particular, the allowance the Fund as at 31 March 2007, this is equivalent to this rate should be broadly stable over time. If the for future improvements in mortality, is uncertain. taking credit for excess returns on equities of 1.6% membership of employees matures (e.g. because of Allowance has been made for improvements in p.a. over and above the gross redemption yield lower recruitment) the rate would rise. line with the PMA/PFA92 services of projections on index-linked gilts on the valuation date and for up to calendar year 2017 for pensioners and 2033 excess returns of 0.4% p.a. on the non-equity assets. for non-pensioners, with age ratings applied to fit 3.4.2 Admission Body Employers that do not past LGPS experience. Employers are aware that The same financial assumptions are adopted for all admit new entrants their contributions are likely to increase in future if ongoing employers. All employers have the same longevity exceeds the funding assumptions. The asset allocation. Certain Admission Bodies have closed the scheme approach taken is considered reasonable in light of to new entrants. This will lead to the average the long term nature of the Fund and the assumed age of employee members increasing over time 3.4 Future Service Contribution Rates statutory guarantee underpinning members’ and hence, all other things being equal, the benefits. The demographic assumptions vary by The future service element of the employer future service rate is expected to increase as the type of member and so reflect the different profiles contribution rate is calculated on the ongoing membership ages. of employers. valuation basis, with the aim of ensuring that To give more long term stability to such employers’ there are sufficient assets built up to meet future The key financial assumption is the anticipated contributions, the Attained Age funding method benefit payments in respect of future service. The return on the Fund’s investments. The investment is normally adopted. This will limit the degree of approach used to calculate each employer’s future return assumption makes allowance for anticipated future contribution rises by paying higher rates at service contribution rate depends on whether or returns from the Fund’s assets in excess of gilts. the outset. not new entrants are being admitted. Employers There is, however, no guarantee that the assets

Cornwall Pension Fund Annual Report 2008-09 35 Regulatory statements Funding Strategy Statement Both funding methods are described in the • the difference between actual and assumed expenditure figures provided for certain cash Actuary’s report on the valuation. amounts of pension ceasing on death; flows for each employer. This process adjusts for transfers of liabilities between employers Both future service rates will include an allowance • the additional costs of any non ill-health participating in the Fund, but does make a number for expenses of administration to the extent retirements relative to any extra payments of simplifying assumptions. The split is calculated that they are borne by the Fund and include an made; using an actuarial technique known as “analysis of allowance for benefits payable on death in service over the period between each triennial valuation. surplus”. The methodology adopted means that and ill health retirement. Actual investment returns achieved on the there will inevitably be some difference between Fund between each valuation are applied the asset shares calculated for individual employers 3.5 Adjustments for Individual Employers proportionately across all employers. When staff and those that would have resulted had they Adjustments to individual employer contribution transfer between employers within the Fund a participated in their own ring-fenced section of rates are applied both through the calculation of transfer of liabilities occur automatically within the Fund. The asset apportionment is capable of employer-specific future service contribution rates this process, with a sum broadly equivalent to verification but not to audit standard. and the calculation of the employer’s asset share. the reserve required on the ongoing basis being The Administering Authority recognises the The combined effect of these adjustments for exchanged between the two employers, unless the limitations in the process, but having regard to individual employers applied by the Fund actuary circumstances dictate otherwise. the extra administration cost of building in new relate to: The Fund actuary does not allow for certain protections, it considers that the Fund actuary’s • past contributions relative to the cost of relatively minor events occurring in the period approach addresses the risks of employer cross- accruals of benefits; since the last formal valuation, including, but not subsidisation to an acceptable degree. limited to: • different liability profiles of employers (e.g. mix of members by age, gender, manual/non • the actual timing of employer contributions 3.7 Stability of Employer Contributions manual, part-time/full-time); within any financial year; 3.7.1 Deficit Recovery Periods • the effect of any differences in the valuation • the effect of the premature payment of any The Administering Authority instructs the actuary basis on the value placed on the employer’s deferred pensions on grounds of incapacity. to adopt specific deficit recovery periods for all liabilities; These effects are swept up within a miscellaneous employers when calculating their contributions. • any different deficit/surplus spreading periods item in the analysis of surplus, which is split The Administering Authority normally targets the or phasing of contribution changes; between employers in proportion to their liabilities. recovery of any deficit over a period not exceeding • the difference between actual and assumed 20 years. However, these are subject to the rises in pensionable pay; 3.6 Asset Share Calculations for Individual maximum lengths set out in the table below. Employers • the difference between actual and assumed increases to pensions in payment and deferred The Administering Authority does not account pensions; for each employer’s assets separately. The Fund’s actuary is required to apportion the assets • the difference between actual and assumed of the whole fund between the employers at retirements on grounds of ill-health from active each triennial valuation using the income and status;

36 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Funding Strategy Statement Type of Employer Maximum Length of 3.7.2 Surplus Spreading Periods 3.7.6 Special phasing periods Deficit Recovery Period Any employers deemed to be in surplus may be The Administering Authority and the Fund Actuary Scheduled and Resolution a period to be agreed permitted to reduce their contributions below may agree other phasing-in periods where an bodies with each employer not exceeding 20 years the cost of accruing benefits, by spreading the employer, or groups of employers, is undergoing surplus element over the maximum periods shown significant structural changes. The 2007 valuation Community Admission Bodies a period to be agreed above for deficits in calculating their minimum allows for the new Council for Cornwall, made up of with funding guarantees who with each employer not contributions. the existing County Council and the six District and admit new entrants into the exceeding 20 years Borough Councils, to move to the rate calculated scheme However, to help meet the stability requirement, for the new Council from its outset in April 2009. Community Admission Bodies a period equivalent to the employers may prefer not to take such reductions. with funding guarantees who expected future working do not admit new entrants lifetime of the remaining into the scheme scheme members 3.7.7 Pooled Contributions 3.7.3 Phasing in of Contribution Rises 3.7.7.1 Smaller Employers Best Value Admission Bodies the period from the start of Best Value Admission Bodies are not eligible for the revised contributions phasing in of contribution rises. Other employers The Administering Authority allows smaller to the end of the employer’s contract may opt to phase in contribution rises over a period employers [of similar types] to pool their of three years. contributions as a way of sharing experience and smoothing out the effects of costly but All other types of employer a period to be agreed 3.7.4 Phasing in of Contribution Reductions with each employer not relatively rare events such as ill-health retirements exceeding 15 years; or Any contribution reductions will be phased in or deaths in service. The maximum number of a period equivalent to the expected future working over six years for all employers except Best Value active members to participate in a pool is set lifetime of the remaining Admission Bodies who can take the reduction with at 50 employees. Whist there are considerable scheme members, immediate effect. advantages for the smaller employers in whichever is the shorter 3.7.5 The Effect of Opting for Longer Spreading participating in pooling arrangements there is a or Phasing-In risk of their contribution rates being adversely affected by the actions of other employers in the This maximum period is used in calculating each Employers which are permitted and elect to use pool, outside of their control. employer’s minimum contributions. Employers a longer deficit spreading period than was used may opt to pay higher regular contributions than at the 2004 valuation or to phase-in contribution Community Admission Bodies that are deemed by these minimum rates. changes will be assumed to incur a greater loss of the Administering Authority to have closed to new entrants are not permitted to participate in a pool. The deficit recovery period starts at the investment returns on the deficit by opting to defer repayment. Thus, deferring paying contributions Best Value Admission Bodies are also ineligible for commencement of the revised contribution rate. pooling. The Administering Authority would normally will lead to higher contributions in the long-term. expect the same period to be used at successive However any adjustment is expressed for different As at the 2007 valuation separate pools were triennial valuations, but would reserve the right to employers the overriding principle is that the operated for Town and Parish Councils and for propose alternative spreading periods, for example discounted value of the contribution adjustment smaller Admission Bodies. to improve the stability of contributions. adopted for each employer will be equivalent to the employer’s deficit.

Cornwall Pension Fund Annual Report 2008-09 37 Regulatory statements Funding Strategy Statement 3.7.7.2 Other Contribution Pools require the actuary to adopt valuation assumptions Employers are required to pay either: which, to the extent reasonably practicable, protect Some Admission Bodies with guarantors are pooled • additional contributions wherever an employee the other employers from the likelihood of any with their Council. retires before attaining the age at which the material loss emerging in future. This could give valuation assumes that benefits are payable. Those employers that have been pooled are rise to significant payments being required. The current costs of these are specified in tables identified in Annex A. (c) For Admission Bodies with guarantors, it is provided by the Fund’s actuary; or possible that any deficit could be transferred to the • an addition to the normal employer’s 3.8 Admission Bodies ceasing guarantor in which case it may be possible simply contribution rate agreed at the time of the Admission Agreements for Best Value contractors to transfer the former Admission Bodies members valuation. If the actual cost of early retirements are assumed to expire at the end of the contract. and assets to the guarantor, without needing to is higher than the amount recovered through crystallise any deficit. the higher contribution rate, the Administering Admission Agreements for other employers Authority reserves the right to charge the are generally assumed to be open-ended Under (a) and (b), any shortfall would be levied employer with additional contributions to make and to continue until the last pensioner dies. on the departing Admission Body as a capital up the difference. Contributions, expressed as capital payments, payment. can continue to be levied after all the employees It is assumed that members’ benefits on age have retired. These Admission Agreements retirement are payable from the earliest age that 3.9 Orphan Liabilities can, however, be terminated at any point. If the employee could retire without incurring a an Admission Body’s admission agreement is In some circumstances, employers in the fund may reduction to their benefit and without requiring terminated, the Administering Authority instructs no longer have any active members but a deficit their employer’s consent to retire. the Fund actuary under Regulation 78 to carry out a may exist in respect of pensioners or deferred The additional costs of premature retirement are special valuation to determine whether there is any pensioners who were previously employed by this calculated by reference to these ages. deficit. employer. If deficit repayments cannot be obtained from such an employer or any related guarantor, 3.10.2 Ill - health monitoring The assumptions adopted to value the departing then the deficit will normally be spread over all of employer’s liabilities for this valuation will depend The Fund monitors each employer’s, or pool the remaining employers in the Fund. upon the circumstances. For example: of employers, ill-health experience on an ongoing basis. If the cumulative number of ill- (a) For Best Value Admission Bodies, the health retirements in any financial year exceeds assumptions would usually be those used for an 3.10 Early Retirement Costs the allowance at the previous valuation, the ongoing valuation to be consistent with those 3.10.1 Non Ill - Health retirements Administering Authority reserves the right to used to calculate the initial transfer of assets charge the employer with additional contributions to accompany the active member liabilities The actuary’s funding basis makes no allowance on the same basis as apply for non ill-health cases. transferred. for premature retirement except on grounds of ill- health. (b) For non Best Value Admission Bodies that elect voluntarily to terminate their participation, the Administering Authority must look to protect the interests of other ongoing employers and will

38 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Funding Strategy Statement 4. Links to Investment Strategy 4.2 Consistency with Funding Basis Authority will review whether its single strategy The funding basis adopts an asset out performance should be refined. Enabling other investment Funding and investment strategy are inextricably assumption of 1.35% per annum over and above strategies will require investment in new systems linked. Investment strategy is set by the the redemption yield on index–linked gilts. Both and higher ongoing costs which would have to be Administering Authority, after consultation with the Fund’s Actuary and its investments adviser borne by the employers. The potential benefits of the employers and after taking investment advice. consider that the funding basis does conform to multiple investment strategies need to be assessed the requirement to take a “prudent longer-term” against the costs. 4.1 Investment Strategy approach to funding. The investment strategy currently being pursued 4.4 Intervaluation Monitoring of Funding is described in the Fund’s Statement of Investment The Administering Authority is aware that in the Position Principles. short term – such as the three yearly assessments The Administering Authority monitors investment The investment strategy is set for the long-term, at formal valuations – the proportion of the performance relative to the growth in the liabilities but is reviewed from time to time, normally every Fund invested in equities brings the possibility by means of an annual comparison of key financial three years, to ensure that it remains appropriate of considerable volatility and there is a material and liability statistics against the assumptions to the Fund’s liability profile. The Administering chance that in the short-term and even allowed in the previous valuation. If necessary Authority has adopted a benchmark, which sets medium term, asset returns will fall short of the the Administering Authority will ask the Fund the proportion of assets to be invested in key asset outperformance target. The stability measures actuary to carry out an interim valuation. It reports classes such as equities, bonds and property. As at described in Section 3 will damp down, but not back to employers by having representatives of 31 March 2007, the proportion held in equities and remove, the effect on employers’ contributions. the District Councils, the Colleges and the larger property was 82% of the total Fund assets. The Fund does not hold a contingency reserve employers on the Pensions Committee. Copies of The investment strategy of lowest risk would be to protect it against the volatility of equity the annual inter-valuation monitoring report and one which provides cashflows that replicate the investments. any interim valuations are sent to all employers. The excepted benefit cashflows (i.e. the liabilities). Administering Authority produces and circulates to Equity investment would not be consistent with 4.3 Balance between risk and reward all employers a comprehensive annual report. this. Prior to implementing its current investment It also holds an Annual General Meeting for The Fund’s benchmark includes a significant strategy, the Administering Authority considered all employers which includes presentations on holding in equities in the pursuit of long-term the balance between risk and reward by altering the Fund’s investment performance and key higher returns than from a liability matching the level of investment in potentially higher membership data. strategy. The Administering Authority’s strategy yielding, but more volatile, asset classes like recognises the relatively immature liabilities of the equities. This process was informed by the use of Fund, the security of members’ benefits and the Asset-Liability techniques to model the range of secure nature of most employers’ covenants. potential future solvency levels and contribution The same investment strategy is currently followed rates. for all employers. The Administering Authority In the light of the recent admission of Best Value does not currently have the facility to operate contactors on different terms to other employers different investment strategies for different and the 2004 valuation results which showed the employers. sensitivity of individual employers’ contributions to changes in investment returns, the Administering

Cornwall Pension Fund Annual Report 2008-09 39 Regulatory statements Funding Strategy Statement 5. Key Risks & 5.2 Financial Risks Controls Risk Summary of Control Mechanisms 5.1 Types of Risk Fund assets fail to deliver Only anticipate long-term return on a relatively prudent basis to reduce risk of under- The Administering returns in line with the performing. Commission a quarterly funding update for the Fund as a whole, on an Authority has an active anticipated returns approximate basis. risk management underpinning valuation of Analyse progress at three yearly valuations for all employers. programme in place to liabilities over the long-term Annual comparison of key financial and liability statistics against the assumptions allowed in control key risks, which the last valuation. If necessary carry out an interim valuation. are summarised below Inappropriate long-term Set Fund-specific benchmark, informed by Asset-Liability modelling of liabilities. under the following investment strategy Consideration will be given to measuring performance and setting managers’ targets relative headings: to bond based target, absolute returns or a Liability Benchmark Portfolio and not relative to indices. • financial; • demographic; Fall in risk-free returns on Inter-valuation monitoring, as above. • regulatory; and Government bonds, leading Some investment in bonds helps to mitigate this risk. • governance. to rise in value placed on liabilities Active investment manager Short term (quarterly) investment monitoring analyses market performance and active under-performance relative to managers relative to their index benchmark. benchmark Formal annual review of fund manager performance by specialist investment consultants.

Pay and price inflation The focus of the actuarial valuation process is on real returns on assets, net of price and pay significantly more than increases. anticipated Inter-valuation monitoring, as above, gives early warning. Some investment in index-linked bonds also helps to mitigate this risk. Employers pay for their own salary awards and are reminded of the geared effect on pension liabilities of any bias in pensionable pay rises towards longer-serving employees. Effect of possible increase Seek feedback from employers on scope to absorb short-term contribution rises. in employer’s contribution Mitigate impact through deficit spreading and phasing in of contribution rises. rate on service delivery and admission/scheduled bodies

40 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Funding Strategy Statement 5.3 Demographic Risks

Risk Summary of Control Mechanisms Pensioners living longer. Set mortality assumptions with some allowance for future increases in life expectancy. Fund actuary monitors combined experience of around 50 funds to look for early warnings of lower pension amounts ceasing than assumed in funding. Administering Authority encourage any employers concerned at costs to promote later retirement culture. Each 1 year rise in the average age at retirement would save roughly 5% of pension costs. Deteriorating patterns of early Employers are charged either : retirements • the extra capital cost of non ill-health retirements following each individual decision; or • by paying an increased contribution rate (some larger employers). “Remote shopping, while entirely In all cases early retirement experience is monitored. The Administering Authority reserves the feasible, will fl op right to charge employers with the extra capital cost if the additional cost exceeds the allowance - because women made at the last actuarial valuation. like to get out Local Government All employers aff ected by the reorganisation will be charged with the capital cost of any non ill - Reorganisation in 2009 may health retirements. of the house, lead to signifi cant numbers of The Administering Authority will monitor the cost of early retirements resulting from the like to handle early retirements reorganisation. merchandise,

5.4 Regulatory like to be able to change their Risk Summary of Control Mechanisms minds.”

Changes to regulations, e.g. The Administering Authority is alert to the potential creation of additional liabilities and TIME, 1966, writing off more favourable benefi ts administrative diffi culties for employers and itself. e-commerce long before package, potential new It considers all consultation papers issued by the CLG and comments where appropriate. anyone had ever heard of it. entrants to scheme, e.g. part- The Administering Authority will consult employers where it considers that it is appropriate. time employees Changes to national pension requirements and/or HM Revenue and Customs rules e.g. eff ect of abolition of earnings cap for post 1989 entrants from April 2006

Cornwall Pension Fund Annual Report 2008-09 41 Regulatory statements Funding Strategy Statement 5.5 Governance Risk Summary of Control Mechanisms Administering Authority The Administering Authority monitors membership movements on an annual basis, via a report unaware of structural changes from the administrator. in an employer’s membership The Actuary may be instructed to consider revising the rates and Adjustments certificate to (e.g. large fall in employee increase an employer’s contributions (under Regulation 78) between triennial valuations members, large number of Deficit contributions may be expressed as monetary amounts (see Annex A). retirements). Administering Authority not advised of an employer closing to new entrants. Administering Authority In addition to the Administering Authority monitoring membership movements on an annual failing to commission the basis, it requires employers with Best Value contractors to inform it of forthcoming changes. Fund Actuary to carry out a It also operates a diary system to alert it to the forthcoming termination of Best Value Admission termination valuation for a Agreements. departing Admission Body and losing the opportunity to call in a debt. An employer ceasing to exist The Administering Authority believes that it would normally be too late to address the position if it with insufficient funding or was left to the time of departure. adequacy of a bond. The risk is mitigated by: • Seeking a funding guarantee from another scheme employer, or external body, wherever possible. • Alerting the prospective employer to its obligations and encouraging it to take independent actuarial advice. • Vetting prospective employers before admission. • Where permitted under the regulations, requiring a bond to protect the scheme from the extra cost of early retirements on redundancy, if the employer failed.

42 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Funding Strategy Statement Statement to the rates and adjustments Employer Minimum contribution for the year ending 31 Mar 2009 31 Mar 2010 31 Mar 2011 certificate MAJOR SCHEDULED AND RESOLUTION BODIES The Common Rate of Contribution payable by each employing CORNWALL COUNTY COUNCIL 19.0% N/A N/A authority under Regulation 77 for the period 1 April 2008 to 31 CORNWALL COUNCIL N/A 19.4% 19.4% March 2011 is 19.1% of pensionable pay. PENWITH DC 24.0% N/A N/A KERRIER DC Individual Adjustments are required under Regulation 77 26.9% N/A N/A CARRICK DC 25.1% N/A N/A for the period 1 April 2008 to 31 March 2011 resulting in RESTORMEL BC 23.0% N/A N/A Minimum Total Contribution Rates expressed as a percentage CARADON DC 21.1% N/A N/A of pensionable pay are as set out in the adjacent table: NORTH CORNWALL DC 21.8% N/A N/A ISLES OF SCILLY 21.5% 21.2% 20.9% CORNWALL SEA FISHERIES 19.0% 19.4% 19.4% TAMAR BRIDGE & TORPOINT FERRY 21.4% 21.0% 20.7% CORNWALL ENTERPRISE 19.4% 19.2% 18.9% CARRICK HOUSING 19.2% 18.7% 18.2%

MINOR EMPLOYER POOLS “... BODMIN TC 19.7% 19.6% 19.6% good enough BUDE STRATTON TC 19.7% 19.6% 19.6% LAUNCESTON TC 19.7% 19.6% 19.6% for our transatlantic LISKEARD TC 19.7% 19.6% 19.6% PENZANCE TC 19.7% 19.6% 19.6% friends ... but unworthy SALTASH TC 19.7% 19.6% 19.6% of the attention of ST IVES TC 19.7% 19.6% 19.6% TORPOINT TC 19.7% 19.6% 19.6% practical or scientific TRURO CITY 19.7% 19.6% 19.6% FALMOUTH TC 19.7% 19.6% 19.6% men.” CALLINGTON PC 19.7% 19.6% 19.6% CAMBORNE TC 19.7% 19.6% 19.6% Parliamentary HELSTON TC 19.7% 19.6% 19.6% Committee, CORNWALL JOINT CREMATORIUM COMMITTEE 19.7% 19.6% 19.6% referring to FALMOUTH & TRURO PORT HEALTH 19.7% 19.6% 19.6% Edison’s light FOWEY PORT HEALTH 19.7% 19.6% 19.6% bulb, 1878 ST AGNES PC 19.7% 19.6% 19.6% WADEBRIDGE TC 19.7% 19.6% 19.6% HAYLE TC 19.7% 19.6% 19.6% CALSTOCK PC 19.7% 19.6% 19.6% ST BLAISE TC 19.7% 19.6% 19.6% DEVIOCK PC 19.7% 19.6% 19.6% CORNWALL AIRPORT LTD 19.7% 19.6% 19.6% ST JUST IN PENWITH TC N/A 19.6% 19.6%

Please note that COLLEGES this table has been UNIVERSITY COLLEGE FALMOUTH 15.0% 15.2% 15.5% updated to reflect all TRURO & PENWITH COLLEGE 14.1% 14.1% 14.1% CORNWALL COLLEGE 16.7% 17.2% 17.6% current employers in the Fund

Cornwall Pension Fund Annual Report 2008-09 43 Regulatory statements Funding Strategy Statement Notes Employer Minimum contribution for the year ending 31 Mar 2009 31 Mar 2010 31 Mar 2011 Contributions expressed as a percentage should be paid into Cornwall County Council Pension Fund (‘the Fund’) at LARGE ADMISSION BODIES a frequency in accordance with the requirements of the PENWITH HOUSING ASSOCIATION 19.4% Plus £41.4k 19.4% Plus £42.5k 19.4% Plus £43.5k Regulations. CONNEXIONS CORWALL & DEVON 19.9% 19.3% 18.8% Further sums should be paid to the Fund to meet the costs of CORNWALL COUNTY CARE 19.3% Plus £167.9k 19.3% Plus £153.4k 19.3% Plus £137k any early retirements and/or augmentation using methods and COASTLINE HOUSING LTD 18.8% Plus £57.9k 18.8% Plus £69.4k 18.8% Plus £81.9k factors issued by me from time to time. CARRICK LEISURE 15.3% 16.2% 17.1% TREMOUGH CAMPUS SERVICES 14.4% 14.1% 13.8% Further sums may be required to be paid to the Fund by OCEAN HOUSING 26.6% 29.8% 33.1% employers to meet the capital costs of any illhealth retirements OCEAN SERVICES 26.6% 29.8% 33.1% that exceed those included within my assumptions. OCEAN GROUP 26.6% 29.8% 33.1% The certified contribution rates represent the minimum level RNLI N/A 22.6% 22.6% of contributions to be paid. Employing authorities may pay COMPASS SERVICES N/A 21.4% 21.4% further amounts at any time and future periodic contributions CHURCHILL N/A 23.6% 23.6% may be adjusted on a basis approved by the Fund actuary. ADMISSION BODIES POOL The FSS of the Cornwall County Council Pension Fund sets FALMOUTH HARBOUR COMMISSIONERS 19.0% 19.0% 18.9% out the strategy of the Fund in relation to the phasing of any NEWLYN PIER & HARBOUR 19.0% 19.0% 18.9% contribution rate increases. Where appropriate, employers’ ROYAL INSTITUTION OF CORNWALL 19.0% 19.0% 18.9% rates have therefore been phased in over the period detailed in the FSS. However, as noted in the FSS, in certain circumstances, BEST VALUE ADMISSION BODIES the Administering Authority and the Actuary may agree other LANDSCAPES SW LTD 14.0% 14.0% 14.0% phasing-in periods where an employer, or group of employers, SERCO LTD 17.5% 17.5% 17.5% is undergoing significant structural changes. In particular, STONHAM 19.7% 19.7% 19.7% the 2007 valuation allows for the One Cornwall made up of the existing County Council and the six District and Borough EMPLOYERS WITH NO ACTIVE MEMBERS Councils, to move to the rate calculated for the new Council CORNWALL PROBATION COMMITTEE from its outset in April 2009. MAGISTRATES COURTS PERRANZABULOE PC Employers with no active members have had their residual PENRYN TC liabilities in respect of deferred or pensioner members ST MEWAN PC allocated to a successor body where applicable. In some cases, CAMBORNE SCHOOL OF MINES cessation valuations under Regulation 78 are to be carried out. CORNWALL DISABLED CTTEE TRURO SCHOOL AGE CONCERN CAMBORNE SCHOOL OF METALLIFEROUS MINING KERRIER GROUNDWORK TRUST ST.BURYAN PRIMARY SCHOOL TREVITHICK TRUST “With over fifteen types of foreign cars PENWITH RESPITE CARE NEWQUAY TC already on sale here, the Japanese CPR SCCESS ZONE MHS LTD auto industry isn’t likely to carve out a Please note that this table has RESTORMEL REGENERATION PARTNERSHIP big share of the market for itself.” been updated to reflect all current SOUTHERN ELECTRIC CONTRACTING CORNWALL RIVER AUTHORITY employers in the Fund Business Week, August 2, 1968.

44 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Funding Strategy Statement Annex B – Responsibilities of Key Parties • notify the administering authorities promptly of all changes to membership or, as may be proposed, which affect future funding. The Administering Authority should:- • collect and properly account for employer and employee contributions; The Fund actuary should:- • invest surplus monies in accordance with the • prepare valuations including the setting of regulations; employers’ contribution rates after agreeing assumptions with the Administering Authority • ensure that cash is available to meet liabilities and having regard to the FSS; and as and when they fall due; • prepare advice and calculations in connection • manage the valuation process in consultation with bulk transfers and individual benefit- with the fund’s actuary; related matters. • prepare and maintain a FSS and a SIP, both after proper consultation with interested parties; • monitor all aspects of the fund’s performance and funding and amend FSS/SIP; and • provide advice and guidelines to employers with regard to pensions decisions.

The Individual Employer should:- • deduct contributions from employees’ pay correctly; • pay all contributions, including their own as determined by the actuary, promptly by the due date; • exercise discretions within the regulatory framework; • make additional contributions in accordance with agreed arrangements in respect of, for example, augmentation of scheme benefits, early retirement strain, excess ill-health retirements if appropriate; and

Cornwall Pension Fund Annual Report 2008-09 45 Regulatory statements Governance Compliance Statement Governance Compliance Statutory Guidance Compliance Evidence of compliance and Governance Standards and status justification for non-compliance Statement Principles A – Structure As approved August 2009 a) The management of the Compliant The terms of reference for the administration of benefits and Pension Committee clearly define strategic management of fund its responsibilities in these areas The Local Government Pension Scheme assets clearly rests with the Regulations require administering authorities to main committee established by the appointing council. prepare a written statement setting out compliance with best practice governance principles. b) That representatives of Compliant The Pensions Committee membership participating LGPS employers, is: The following statement sets out admitted bodies and scheme - with full voting rights: members (including pensioner 10 elected Members and deferred members) are 1 representative of the Higher and members of either the main Further Education Colleges • the principles against which compliance is to or secondary committee 1 representative of the larger business be measured established to underpin the employers work of the main committee. 2 member-nominated representatives • the level of compliance by the Cornwall appointed by the trade unions Pension Fund representing employees, deferred members and pensioners • evidence of compliance and, if appropriate, c) That where a secondary reasons for non-compliance? committee or panel has been established, the Not The Pensions Committee has no structure ensures effective Applicable secondary committee communication across both levels. d) That where a secondary committee or panel has been established, at least one seat Not The Pensions Committee has no on the main committee is Applicable secondary committee allocated for a member from the secondary committee or panel. B – Representation a) That all key stakeholders are afforded the opportunity to be represented within the main or secondary committee structure. These include:

46 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Governance Compliance Statement

Statutory Guidance Compliance Evidence of compliance and Statutory Guidance Compliance Evidence of compliance and Governance Standards and status justification for non-compliance Governance Standards and status justification for non-compliance Principles Principles i) employing authorities Compliant See A) above. C – Selection and role of lay members (including non-scheme employers, eg, admitted a) That Committee or panel Compliant On appointment all new Pension bodies); members are made fully aware Committee members receive of the status, role and function induction training and member they are required to perform handbook that describes the role ii) scheme members (including Compliant The Pensions Committee includes a on either a main or secondary of the Committee. deferred and pensioner scheme member-nominated representative committee. members); appointed by the trade unions, After each four-yearly Council representing employees, pensioner election a training day is organised and deferred pensioner members. which covers the background to the scheme and the role of members of the Committee, All iii) independent professional Compliant The Committee is advised by an members of the Committee are observers; and independent professional adviser who invited. is invited to attend all meeting of the Pension Committee and other relevant D – Voting meetings.. a) The policy of individual Compliant The constitution of the Pensions iv) expert advisors (on an ad- Compliant The Council has two contracts with administering authorities Committee and the Governance hoc basis). Hymans Robertson covering both on voting rights is clear and Statement sets out the voting actuarial services and investment transparent, including the rights of each organisation. consultancy. They are invited to justification for not extending attend all meetings where expert voting rights to each body or advice is required. group represented on main LGPS committees. b) That where lay members Compliant All members of the Pensions sit on a main or secondary Committee are given equal access committee, they are treated to meetings, training events and equally in terms of access to can fully contribute to the decision papers and meetings, training making process. . and are given full opportunity 03) 19 to contribute to the decision s in wa ght making process, with or l flli sfu without voting rights. ces suc irst eir fi 1 (th 190 ent, erim exp ing g flly ntin ppoi disa fter a ille, a er Orv broth eer, to n pion n aviatio , America “Man will not fly for 50 years.” Wilbur Wright

Cornwall Pension Fund Annual Report 2008-09 47 Regulatory statements Governance Compliance Statement

Statutory Guidance Compliance Evidence of compliance and Statutory Guidance Compliance Evidence of compliance and Governance Standards and status justification for non-compliance Governance Standards and status justification for non-compliance Principles Principles E – Training, facility time and expenses b) That an administering authority’s secondary a) That in relation to the way Compliant The Pension Committee recognises in which statutory and related the importance of training for committee or panel meet Not The Pensions Committee has no decisions are taken by the members of the Committee and fully at least twice a year and is Applicable secondary committee administering authority, there is a supports Myners’ first principle. This synchronised with the dates clear policy on training, facility time states that decisions should only be when the main committee sits. and reimbursement of expenses in taken by persons or organisations with respect of members involved in the the skill, information and resources c) That administering decision-making process. necessary to take them effectively. In authorities who do not include The Pensions Committee includes the Fund Business Plan provision is lay members in their formal lay members. It also holds and made for the cost of Member Training governance arrangements, Not (£20,000 in 2009-10). In recognition Annual General Meeting to which provide a forum outside of Applicable of the need for specialist knowledge all employers and trade unions are those arrangements by which no substitutes are allowed on the invited. Pensions Committee. the interests of key stakeholders can be represented. An annual training event normally takes place jointly with Devon County G – Access Council. Other training is provided as required. a) That subject to any rules Compliant All members of our Pensions in the council’s constitution, Committee receive the same Any expenses incurred by members of all members of main and agenda and all reports and papers, the Pensions Committee in attending secondary committees or including those of treated as training courses are reimbursed panels have equal access to through the County Council confidential. arrangements Members Allowance committee papers, documents Scheme. and advice that falls to be considered at meetings of the b) That where such a policy Compliant All members of the Pensions main committee. exists, it applies equally to all Committee have equal access to members of committees, sub- training. H – Scope committees, advisory panels a) That administering Compliant The remit of the Pensions or any other form of secondary authorities have taken steps Committee includes all matters forum. to bring wider scheme issues relating to the Local Government F – Meetings (frequency/quorum) within the scope of their Pension scheme governance arrangements a) That an administering Compliant There are four scheduled authority’s main committee quarterly meetings of the or committees meet at least Pension Committee. Additional quarterly. Committees are arranged as necessary.

48 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Governance Compliance Statement

Statutory Guidance Compliance Evidence of compliance and Governance Standards and status justification for non-compliance Principles I – Publicity a) That administering Compliant The Governance Policy Statement authorities have published was approved by the Pensions details of their governance Committee in February 2006. arrangements in such a way The Statement will be available that stakeholders with an on the Council website and will interest in the way in which be included in the new Pension the scheme is governed, Fund website currently under can express an interest in construction, Reference to the wanting to be part of those Governance Policy Statement was arrangements. included in the 2007-08 Annual Report and Accounts.

Cornwall Pension Fund Annual Report 2008-09 49 Regulatory statements Governance Policy Statement Governance Policy Statement Period of Membership The Committee delegates to the Corporate Director for Corporate Support responsibility The Council suggested that co-opted members are for the following items: As approved July 2009 appointed for an initial period of four years. At the end of the four year period the individuals should be able to present themselves for reselection. • Managing and monitoring the investment Introduction managers, consultants and custodian This is the Governance Policy Statement of the Frequency of meetings • Managing the Fund’s cash assets directly held Cornwall Council Pension Fund, as required under by the Council the Local Government Pension Scheme Regulations The Committee meets quarterly, with additional 1997, Regulation 73A. meetings as and when required. • Transferring assets between the Council, the investment managers and custodian • Accounting for all investment transactions Exercise of Administering Authority Function Delegation to Officers – Corporate Director for Corporate Support • Within limits, authorising expenditure from the The Council, on 24 July 2009, continued to support Fund the agreement that the Pensions Committee will: At its meeting on 24 July 2009, the Committee agreed a Scheme of Delegation to the Corporate • Paying the fees of the investment managers • exercise the functions of the Council as Director for Corporate Support (set out in full at and the custodian administering authority for the Local Appendix 3A). This can be summarised as: Government Pension Scheme in Cornwall; and • When necessary, exercising the Funds’ voting rights after consulting the Chairman and Vice • establish a scheme of delegation to officers. Chairman The Committee retains responsibility for the following items: • Admitting organisations into the Pension Membership of the Pensions Committee Scheme after consulting the Chairman and Vice • The Fund’s investment strategy The membership, with full voting rights, is as Chairman • The Statement of Investment Principles follows: • Approval of all policies • ten County Councillors (politically balanced); Scheme of Delegation from the Pensions • The appointment of investment managers, • one co-opted representative of the Higher and Committee to the Corporate Director for consultants and the custodian Further Education Colleges’ employers in the Corporate Support Scheme • Approval of the Annual Business Plan Pension Fund Investments • one co-opted representative of the larger • Approval of Annual Report and Accounts The Council has set up a Pensions Committee business employers in the Scheme. • Acceptance of the triennial valuation report to exercise its functions as the Administering • Two Member-nominated representatives produced by the Fund Actuary Authority for the Local Government Pension Scheme in Cornwall. This responsibility includes appointed by the trade unions representing • Appointment of AVC providers the views of employees, deferred members and managing the investments of the Fund. pensioners. The Pensions Committee has agreed to delegate

50 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Governance Policy Statement certain of its responsibilities for managing the 3. Approval of all policies – current policies cover: 4. Accounting for all investment transactions in Fund’s investments to the Corporate Director for compliance with standard accountancy and a. Corporate governance and the exercise of Corporate Support. This Scheme of Delegation sets audit practice. voting rights; out the limits of that delegation. 5. Authorising expenditure from the Fund in b. Activism; The Committee has also delegated day-to- accordance with financial projections contained day management of the Fund’s investments to c. Admission of organisations into the Pension in the annual Business Plan or any higher professional investment managers. Legally binding Scheme. amount as approved by the Committee (See 6. agreements govern the relationship between the 4. The appointment and removal of investment below). Council and the investment managers. managers, the Fund actuary, investment 6. The payment of fees to the investment Irrespective of whether or not the Committee consultants and the Fund custodian. managers and the custodian in accordance with decides to delegate a function to an officer, it is 5. Approval of the Annual Business Plan. their contractual agreements. The fees paid to essential that those making a decision receive the investment managers and to the custodian proper advice from suitably qualified people or 6. Approval of the Annual Report and Accounts. are linked to the performance of the market. organisations (usually the Corporate Director or the 7. Acceptance of the triennial valuation report They may also be performance related. For this Fund’s Investment consultants and advisers). produced by the Fund actuary. reason, they are excluded from the limits of expenditure in 5 above. Nothing in this Scheme of Delegation can override 8. Appointment of AVC providers. the responsibility of Members and Officers to 7. When necessary, the exercise of the Funds’ comply with the Council’s Constitution, Financial voting rights by instruction to the investment Regulations, or Standing Orders. Investment responsibilities delegated to the managers and custodian and after consultation Corporate Director for Corporate Support: with the Chairman and Vice Chairman of the The Local Government Pension Scheme Committee. The Committee has delegated (Management and Investment of Funds) 1. The management, monitoring and reporting to the use of the voting rights, attaching to it Regulations provide the legal framework governing the Pensions Committee of the activities and shareholdings, to the investment managers investments by the Pension Fund. Any decisions the performance of the: but retains a right to exercise these rights on its or actions taken by the Committee, Members or a. Investment Managers; own account in exceptional circumstances. officers must comply with these regulations. b. Investment Consultants and Advisers; 8. The admission of organisations into the Pension c. Fund Custodian. Scheme - in accordance with approved policy Responsibilities retained by the Committee and after consulting the Chairman and Vice and not delegated to officers or Investment (Within any limits set by the Pensions Chairman of the Committee. Managers Committee) 9. Under exceptional circumstances, taking urgent 1. Determination of the Fund’s investment 2. The management of the Fund’s cash assets decisions regarding management of funds strategy. directly held by the Council. in the event that existing fund managers are 2. Approval of the Statement of Investment 3. The authorisation of cash or asset movements unable to fulfil their responsibilities. This may, Principles, including the Funds position on between the Council, the Fund custodian and for example, relate to fund managers no longer social, ethical and environmental issues relating the investment managers. carrying out the management function and to investments. selling that on to another organisation. Cornwall Pension Fund Annual Report 2008-09 51 Regulatory statements Governance Policy Statement 10. When decisions are taken under paragraphs 7, 2. B25 Decide on the evidence required 8 and 9 above, those decisions are reported to to determine the financial the Pensions Committee. dependence of a nominated co-habitee on a scheme member or “There is no reason the financial interdependence of Pension Fund administrative discretions and a nominated co-habitee anyone would requirements and scheme member. want a computer 3. B26(4) For the payment of a child’s in their home.” pension, the treatment of Responsibilities retained by the committee and Ken Olson, president, not delegated to officers education as continuous despite a chairman and founder of break. Digital Equipment Corp. Item Regulation Details (DEC), maker of big business 4. B39 Commutation of small pensions. 1. A23(3) Discretion as to mainframe computers, 5. A44 Ability to charge interest on late arguing against the PC in requirement for 1977. a medical examination payment of contributions. before purchasing 6. A28 Ability to charge a member for additional pension. information on AVC transfers if no 2. A70 Discretion regarding election is subsequently made. abatement of pension. 7. A56 Choice of medical practitioner for The regulation number refers to the Local advice on ill-health retirements. Government Pension Scheme (Administration) 8. T83 Ability to extend time limit Regulations 2008. if employee wishes to pay off additional contributions by way of a lump sum. Administrative responsibilities delegated to the Corporate Director for Corporate Support Regulation prefix (A) refers to the Local Government Pension Scheme (Administration) Item Regulation Details Regulations 2008. 1. B23/32/35 Recipient of a Death Regulation prefix (B) refers to the Local Government Grant can be the member’s Pension Scheme (Benefits, Membership and nominee, personal Contribution) Regulations 2007. representatives, relatives or dependants as decided on Regulation prefix (T) refers to the Local the merits of each case. Government Pension Scheme Regulations 1997, as covered by the Local Government Pension Scheme (Transitional Provisions) Regulations 2008.

52 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Statement of Investment Principles Statement of Investment into force. Regulations are expected any time now followed by CIPFA guidance. Principles as approved If you need any more information, you should August 2009 contact Jackie Shute on 01872 322212 or e-mail [email protected] The Local Government Pension Scheme (Management and Investment of Funds) (Amendment) Regulations 1999 include the requirement that administering authorities must maintain and publish a Statement of Investment Principles (SIP). This requirement brings local authority funds into line with the practice adopted by private pension schemes under the Pension Act 1995. The written statement, which sets out the principles governing decisions about investment, also deals with the way voting rights are carried out and how far (if at all) social, environmental or ethical considerations are taken into account when choosing, keeping and selling investments. The Government says that we must state in our SIP how far we keep to CIPFA’s 10 principles resulting from the Myner’s Review. The CIPFA report, Principles for Investment Decision Making in Local Government Pension Schemes, forms the basis of our response and will show whether we are meeting the principles, but it will also highlight any problems we need to tackle. The report was based on the findings of a specially commissioned government review committee, headed by Paul Myners who investigated these issues. Updated Myners Principles were published in October 2008, and the private sector are currently operating to those principles. However, these updated principles will not apply to the LGPS until new regulations, which the CLG are drafting, come

Cornwall Pension Fund Annual Report 2008-09 53 Regulatory statements Statement of Investment Principles Statement of with the level of disclosed surplus or To provide for members’ pension and lump deficit. sum benefits on their retirement or for their dependants’ benefits on death before or Investment Principles 1.4 The current benchmark reflects the Committee’s views on the appropriate after retirement, as required by the Local 1.0 Introduction balance between maximising the long-term Government Pension Scheme Regulations 1997. 1.1 This is the Statement of Investment return on investments and minimising short- Principles (SIP) adopted by Cornwall term volatility and risk. It is intended that the In order that this primary objective can Council (“the Council”) in relation to the strategy will be revised at least every three be achieved, the following funding and investment of assets of the Council’s years following actuarial valuations of the investment objectives have been agreed. Fund. Pension Fund. 2.2 Funding Objectives - Ongoing Plan The Cornwall Council Pension Fund embraces The Statement of Investment Principles 1.5 To fund the Fund in such a manner that, the Cornwall Council, the Isles of Scilly and has to be reviewed on a regular basis to in normal market conditions, all accrued numerous other bodies in Cornwall. These ensure that the contents reflect the current benefits are fully covered by the actuarial are listed in part 5h. below. situation. value of the Fund’s assets and that an 1.2 Investments are monitored on a regular 1.6 In March 2001, the UK Government appropriate level of contributions is agreed basis by the Corporate Director for published a ‘Review of Institutional by the administering authority to meet Corporate Support and the Pensions Investment in the United Kingdom’ the cost of future benefits accruing. For Committee (the Committee). The authority undertaken by Paul Myners. In response employee members, benefits will be based to invest the monies of the Pension Fund to this review the Government later issued on service completed but will take account of is delegated to the Corporate Director ten principles and further required that future salary increases. authorities in England and Wales respond, for Corporate Support who receives The assumptions used for this test, in their published Statements of Investment advice from both the Committee and the corresponding with the assumptions used Principles, with the extent to which they external advisers. Advice is received as in the latest Actuarial Valuation, are shown comply with these principles. The Council’s required from professional advisers. In in part 5a. below. This position will be response, using the initial guidelines as addition, the Committee formally review reviewed at least at each triennial Actuarial recommended by the Chartered Institute of the performance of investments and the Valuation. The Committee will be advised of Public Finance and Accountancy, is set out overall strategy on an annual basis. any material changes to the Fund during the in part 5i. below. The Institute are issuing a inter-valuation period. 1.3 In preparing this statement the Committee revision to their guidelines and the Council has taken professional advice from the will revise their response in due course. 2.3 Employer’s Contribution Rate investment practice of Hymans Robertson The absolute level of the employer’s Actuaries and Consultants. Due account 2.0 Objectives has been taken of the maturity profile contribution rate and its stability over of the Fund (in terms of the relative 2.1 Primary Objective time are important to the employers in the Cornwall Council Pension Scheme. Within proportions of liabilities in respect of The primary objective of the Fund is as pensioners and active members), together follows.

54 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Statement of Investment Principles the investment parameters of diversification appointed Global Custodian, subject to The appointment of more than one fund and risk control the Fund will endeavour satisfactory legal arrangements being put in manager introduces a meaningful level to maintain low and stable employer’s place. This arrangement excludes any assets of diversification of manager risk. Also, as contribution rates. not under the direct management of an outlined above, the appointment of a passive appointed fund manager. The arrangements currency manager helps to protect the Fund 3.0 Investment Objectives are summarised in part 5d. below. from potential currency losses arising from overseas investments. 3.1 To achieve a return on Fund assets which 3.4 Kinds of Investments to be held Although each fund manager may not is sufficient, over the long-term, to meet A management agreement is in place for be represented in each asset class, they the funding objectives set out above on an each fund manager, which sets out the are expected to maintain a diversified ongoing basis. relevant target weightings (benchmarks), portfolio of investments for their individual 3.2 To achieve these objectives the following performance target, asset allocation ranges benchmarks. have been agreed. and any restrictions, as determined by the Committee. 3.6 Expected Return on Investments 3.3 Choosing Investments The Committee have also appointed two The strategic benchmark is expected to The Committee will ensure that one or fund managers to manage currency. This is produce a return, over the long term, in more fund managers are appointed, who partly to provide another source of potential excess of the investment return assumed in are authorised under the Local Government extra return (through active management) the Actuarial Valuation. The Fund’s assets are Pension Scheme (Management and and partly to offset exposure to currency managed on a fully ‘active’ basis. The ‘active’ Investment of Funds) Regulations 1998, to risk due to the Fund’s substantial overseas managers seek to provide out-performance manage the assets of the Fund. investment. of a relevant benchmark through asset The Committee, after seeking appropriate allocation, market timing or stock selection The overall fund benchmark has been sub- investment advice, may give specific (or a combination of these). divided into a series of specific benchmarks directions as to the strategic asset allocation appropriate for management by one fund The investment performance achieved by the and will ensure the suitability of assets manager. The weightings/benchmarks used Fund is expected to exceed the rate of return in relation to the needs of the Fund. The by the Fund are shown in part 5e. below. assumed by the Actuary in funding the Fund fund managers will be given full discretion on an ongoing basis. over the choice of individual stocks and are 3.5 Risk 3.7 Realisation of Investments expected to maintain a diversified portfolio. The adoption of an asset allocation Investment Managers benchmark (as described above) and the The majority of stocks held by the Fund’s explicit monitoring of performance relative managers are quoted on major stock markets Part 5d. below lists the managers appointed to a performance target, constrains the fund and may be realised quickly, if required. to manage the Fund’s assets and summarises managers from deviating significantly from Property investments, which are relatively their respective investment briefs. the intended approach, while permitting illiquid, currently make up approximately 8% Custody flexibility to manage the Fund in such a way of the Fund’s assets. as to enhance returns. The Committee have agreed that the custody of the Fund’s assets be delegated to the

Cornwall Pension Fund Annual Report 2008-09 55 Regulatory statements Statement of Investment Principles 3.8 Additional Voluntary Contributions (AVC’s) 4.2 Exercise of Voting Rights Members have the opportunity to invest in The Committee has delegated the exercise AVC funds, as shown in part 5g. below. The of voting rights to the fund managers on the arrangements now in place follow a review basis that voting power will be exercised with undertaken in September 2001. the objective of preserving and enhancing long term shareholder value. Accordingly, 4.0 Other Issues fund managers have produced written guidelines of their process and practice in 4.1 Socially Responsible Investment this regard. They are encouraged to vote The Committee recognises that social, in line with their guidelines, in respect of environmental and ethical considerations all resolutions, at annual and extraordinary are among the factors which fund managers general meetings of companies. Voting will take into account, where relevant, when actions are reported to the Committee on a selecting investments for purchase, retention regular basis and these actions are reviewed or sale. Having discussed the matter, the and discussed as appropriate. Committee has decided that any policy on 4.3 Activism Socially Responsible Investment should not conflict with the Fund’s investment objective. The Committee support the view that In practice, any detailed policy would be the fund manager should engage and, if “What, difficult to implement and monitor and it necessary, intervene with the companies it sir, would you could unreasonably constrain the ability of invests in. The aim is to derive value from make a ship sail against the fund managers to invest in the best interests these investments through the practice of of the Fund. effective management and good corporate wind and currents by lighting governance standards. a bonfire under her deck? I pray The fund managers have produced statements setting out their policy in this The Committee welcomes the endorsement you, excuse me, I have not the regard. The Committee has delegated by the fund managers of the Institutional time to listen to such nonsense.” investment powers to them to act Shareholders Committee statement, accordingly. Managers are encouraged to ‘Responsibilities of Institutional Shareholders Napoleon Bonaparte, when told of Robert Fulton’s steamboat, 1800s. engage in constructive dialogue on behalf and Agents – Statement of Principles’. The of the Fund and to use their influence to fund managers have amended their policies encourage companies to adopt best practice on corporate governance to embrace this in key areas. They have been asked to report ‘Statement of Principles’. to the Committee on the implementation of this policy, which will be reviewed on a regular basis. Copies of Pensions Committee reports are available on the Council’s website www.cornwall.gov.uk.

56 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Statement of Investment Principles 5.0 Supplementary Information 5b. Liability Mix

5a. Main Actuarial Assumptions as at 31st March Liabilities % of Total % of Fund 2007 Liabilities Employee members 51.6 57.8

Deferred pensioners 11.3 12.6 Financial Assumptions March 2007 Real (Longer term) % per annum % per annum Pensioners 37.1 41.6

Total liabilities 100.0 112.0 Investment Return Surplus/(Deficit) (12.0) (12.0) Equities 5.9% 2.6% Total fund (at actuarial value) 88.0 100.0

Bonds 4.5% 1.3% Pay Increases 5.2% 2.0% Price Inflation / Pension 3.2% - Based on the actuarial valuation as at 31 March 2007 Increases

It should be noted that the absolute returns 5c. Asset Mix as given above are not critical to the results of Liabilities Market Value 31 March 2007 the Valuation - it is the returns relative to one £’000 % another which are more significant (in particular, UK Equities 296,436 29% the return achieved in excess of inflation). Overseas Equities 428,054 42% The 2007 valuation was carried out in line with Total Equities 724,490 72% the Fund’s Strategy Statement (FSS) published in UK Fixed Interest Gilts 54,008 5% February 2008. This sets out how the Fund will meet UK Index-linked Gilts 45,414 4% its long-term liabilities, whilst making as stable a UK Corporate Bonds 17,108 2% contribution rate as possible. The FSS set out the Overseas Bonds 26,762 3% maximum period over which employers can recover Property 100,760 10% any deficit. The maximum period allowed is 20 years Cash 35,333 3% but for some employers this is considerably less. Net Current Assets 7,230 1% While preparing the latest valuation, the Actuary did consider the many developing issues that would Total Fund Value at actuarial date 1,011,105 100% affect the Fund (including any residual impact of the ‘Rule of 85’ and the costs arising as a consequence of people living longer). Cornwall Council continues to monitor the Fund’s ability to meet its liabilities, both current and future.

Cornwall Pension Fund Annual Report 2008-09 57 Regulatory statements Statement of Investment Principles 5d. Assets held by Fund Managers (situation as at 30 June 2009)

Fund Manager Date Appointed Benchmark # Performance Type of Manager Target p.a. Newton Investment Management 1.10.94 * specific benchmarks +1.0% Global equities Capital International 30.03.01 * specific benchmarks +1.5 % Global equities Insight Investment Management 30.03.01 * specific benchmarks +0.5 % Bonds GMO UK 12.10.04 FTSE All Share Index +2.0% UK equities Alliance Bernstein - specialist UK active 24.11.04 FTSE All Share Index +2.5% UK equities - global unconstrained equity 3.04.06 MSCI World ex UK +4.0% Global equities Standard Life Investments 17.12.04 LIBOR 7 Day Index +5.0% Private equity Wilshire Associates 17.12.04 LIBOR 7 Day Index +5.0% Private equity Mellon Capital 24.08.06 LIBOR 7 Day Index +5.0% Active currency Millennium Global Investments 24.08.06 LIBOR 7 Day Index +5.0% Active currency and passive currency overlay Fauchier Partners 05.04.07 LIBOR 7 Day Index +5.0% Hedge fund ING Real Estate Select 30.06.09 IPD UK All Balanced Fund +1.0 % Property Unit Trusts (portfolio transferred from RREEF) Infracapital Partners 04.05.07 LIBOR 7 Day Index +5.0% Infrastructure fund

ETF Manager 29.02.08 FTSE All Share Index +5.0% Environmental technologies fund # Performance is measured over a three year rolling period. * See part 5e.Target Weightings, for details of specific benchmarks

Custody arrangements The Fund’s assets that are under the direct management of the Council’s fund managers are held by the global custodian listed below. Any excluded assets are held under an approved arrangement and the value of such are incorporated in the overall valuation by the global custodian for total assets of the ‘Fund‘. Custodian Name: The Northern Trust Company Registered Address: 50 Bank Street, Service Provided: Global Custody including income collection Canary Wharf, London E14 5NT

58 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Statement of Investment Principles 5e.1.Overall Target Weightings as at 30 June 2009

Asset Class Index Current Planned Total Total Fund % Fund % UK Equities FTSE All Share Index 21.9 26.0 Overseas Equities 39.0 39.0 FTSE All World Developed North America 7.3 North America 11.0 * FTSE All World Developed North America (hedged) 7.3 FTSE All World Developed Europe ex UK 5.3 Europe ex UK 10.8 * FTSE All World Developed Europe ex UK (hedged) 5.3 FTSE All World Developed Japan 3.1 Japan 5.0 * FTSE All World Developed Japan (hedged) 3.1 Pacific ex Japan FTSE All World Developed Asia Pacific ex Japan 5.0 3.8 Emerging markets MSCI Emerging Markets Free NDR 5.1 3.8 Total Equities 60.9 65.0 “It will be years - not Bonds in my time - before a Unit Trust Bonds 16.1 woman will become

Total Bonds iBoxx £ Overall 16.1 15.0 Prime Minister.” Property IPD UK Pooled Property Funds - All Balanced Funds 6.0 10.0 Margaret Thatcher, 1969. Alternative Assets LIBOR 7 day index (all plus 5%) Active Currency 4.3 Environmental 0.1 Technology Fund 10.0 Hedge Fund 1.7 Infrastructure Fund 0.8 Private Equity 4.7 Total Alternative Assets 11.6 10.0 Cash with Fund 5.4 0.0 Managers Portfolio total 100.0 100.0 * The Fund has a currency overlay in place which hedges half the investment in overseas equities. The company, Millennium Global Investments, administer this passive hedging using three currencies - the US dollar, the Euro and the Japanese Yen. Consequently, there is a benchmark index and a hedged benchmark index for each of the relevant equity classes.

Cornwall Pension Fund Annual Report 2008-09 59 Regulatory statements Statement of Investment Principles 5e.2. Target Weightings for Equity, Bond and Property Mandates as at 30 June 2009 Benchmark Percentages

Newton Capital Alliance Bernstein GMO Insight ING

*Global UK only

Asset Class Index % % % % % % %

UK Equities FTSE All Share Index 25.0 10.0 100.0 100.0

Overseas 75.0 90.0 100.0 Equities

North America FTSE All World Developed North America 25.0 30.0

Europe ex UK FTSE All World Developed Europe ex UK 20.0 25.0

Japan FTSE All World Developed Japan 14.0 15.0

Pacific ex FTSE All World Developed Asia Pacific ex Japan 8.0 10.0 Japan

Emerging MSCI Emerging Markets Free NDR 8.0 10.0 markets

Total Equities 100.0 100.0 100.0 100.0 100.0

Bonds

Unit Trust 100.0 Bonds

Total Bonds iBoxx £ Overall 100.0

Property IPD UK Pooled Property Funds - All Balanced Funds 100.0

Current weighting of Total Fund 22.1 20.7 4.7 3.8 8.5 16.3 7.8 * Alliance Bernstein’s global mandate is unconstrained. The index used for comparison is MSCI World ex UK.

60 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Statement of Investment Principles 5e.3. Target Weightings for Alternative Assets as at 30 June 2009 Benchmark Percentages

Standard Wilshire Mellon Millennium Fauchier Infra- ETF Cash Life (Private Capital (Active (Hedge capital (Environ- Held (Private Equity) (Active Currency) Fund) (Infra- ment) Centrally Asset Class Index Equity) Currency) Structure)

% % % % % % % %

Alternative Assets LIBOR 7 day index Active Currency (all plus 5%) 100.0 100.0 Environmental Technology Fund 100.0

Hedge Fund 100.0

Infrastructure Fund 100.0

Passive Currency Overlay

Private Equity 100.0 100.0

Current weighting of Total Fund 11.6 1.4

(Planned weighting of Total Fund) 10.0 0.0 HG British Wells, novelist, in 1901. “I must confess that my imagination refuses to see any sort of submarine doing anything but suffocating its crew and floundering at sea.”

Cornwall Pension Fund Annual Report 2008-09 61 Regulatory statements Statement of Investment Principles 5f. Fee Structure for Fund Managers and Advisers Fund Managers

Alliance Bernstein Fixed percentage per annum (lower percentage in bands ING Real Estate Select Fixed percentage fee per annum based on the value of - UK Equity Mandate above £15m) based on closing market value of assets the portfolio. A performance fee is payable for exceeding - Global Equity Mandate assets and paid quarterly, for both mandates. Ten percent a 3-year benchmark (a percentage of the resultant excess discount applies, due to holding two portfolios with this manager. Standard Life Investments No specific fee. Investment related costs and remuneration covered at the time of investing client’s Capital International Fixed percentage per annum (lower percentage in bands money. above £17.5m) based on closing market value of assets and paid quarterly. ‘House’ unit trusts excluded. Wilshire Associates No specific fee. Investment related costs and remuneration covered at the time of investing client’s ETF Manager Fixed percentage per annum of the total commitment money. made.

Advisers Fauchier Partners Fixed percentage per annum of the net asset value of George Henshilwood, Fixed fee for advice and attendance at up to 4 meetings shares held. Hymans Robertson per year plus expenses incurred attending meetings. Other advice and attendances payable at an agreed hourly/daily rate. GMO UK Fixed percentage per annum (lower percentage in bands above £25m) based on closing market value of assets and paid quarterly. Actuary Hymans Robertson Negotiated fixed fee for triennial actuarial valuation. Infracapital Partners Fixed percentage per annum of the total commitment Other services payable at an agreed hourly/daily rate. made.

Insight Investment Management Fixed percentage per annum (lower percentage in bands above £20m) based on closing market value of assets and paid quarterly.

Mellon Capital Fixed percentage per annum of the net asset value of “Television won’t shares held. last because people will soon Millennium Global Investments Fixed percentage per annum of the net asset value of shares held. A further fixed percentage of calculated net get tired of staring profits will be paid as a performance fee. at a plywood box

Newton Investment Management Fixed percentage per annum (lower percentage in every night.” bands above £10m) based on closing market value of assets and paid quarterly. Performance fee payable for Darryl Zanuck, movie exceeding 4-year benchmark. producer, 20th Century Fox, 1946.

62 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Statement of Investment Principles 5g. AVC Arrangements The ‘with profits’ vehicle is designed to provide smoothed medium to long term growth by The options for members’ AVC’s are set out below, investing in a range of assets including equities and together with details of the principles governing property. The investment returns are distributed by the range of investment vehicles offered. Members way of reversionary and terminal bonuses. can choose to switch AVC’s between options available to them from time to time, subject to the The objective of the ‘with profits’ policy and terms and conditions of each vehicle. At retirement, managed fund is to provide returns on members’ the accumulated value of a member’s AVC can be contributions which at least keep pace with used to purchase an annuity on the open market; inflation. taken as cash; buy an annuity in the LGPS; or, in The provision of AVC’s through Equitable Life was limited circumstances, buy additional service. reviewed in September 2001. It was agreed that existing members with Equitable Life be allowed to continue to pay but Standard Life Assurance will be Provider Vehicle the AVC provider for any new contracts.

Equitable Life Building Society With Profits Managed Fund

Closed to new members

Standard Life Assurance Managed Fund With Profits

Sterling Fund Ethical Life Style Managed Cash

Cornwall Pension Fund Annual Report 2008-09 63 Regulatory statements Statement of Investment Principles 5h. Member Organisations 2009-10

Major Employers Admitted Organisations Other Interested Bodies with no Cornwall Council Careers South West Ltd Pensionable Employees Council of the Isles of Scilly Carrick Leisure Ltd Age Concern Churchill Contract Services Ltd Camborne School of Metalliferous Mining Statutory Organisations Coastline Housing Ltd Camborne School of Mines Bodmin Town Council Compass Services (UK) Ltd Cornwall Water/River Authority Bude-Stratton Town Council Cornwall Care Ltd CPR Success Zone Callington Town Council Cornwall Disabled Association Devon and Cornwall Magistrates Calstock Parish Council Falmouth Harbour Commissioners Devon and Cornwall Probation Camborne Town Council Landscapes Southwest Ltd Kerrier Groundwork Trust Carrick Housing Ltd Newlyn Pier and Harbour Commissioners MHS Ltd Cornwall Airport Ltd Ocean Housing Group Ltd Newquay Town Council Cornwall College Ocean Housing Ltd Penryn Town Council Cornwall Development Company Ocean Services (South West) Ltd Penwith Respite Care Ltd Cornwall Joint Crematorium Committee Penwith Housing Association Perranzabuloe Parish Council Cornwall Sea Fisheries Royal National Lifeboat Institution Restormel Regeneration Partnership Deviock Parish Council Serco Ltd St Buryan Primary School Falmouth and Truro Port Health Committee Stonham St Mewan Parish Council Falmouth Town Council The Royal Institution of Cornwall Southern Electric Contracting Fowey Port Health Authority Tremough Campus Services The Trevithick Trust Hayle Town Council Truro School Helston Town Council Launceston Town Council Liskeard Town Council Penzance Town Council St Agnes Parish Council St Blaise Town Council St Ives Town Council St Just-in-Penwith Town Council Saltash Town Council Tamar Bridge and Torpoint Ferry Joint Committee Torpoint Town Council Truro City Council Truro and Penwith College University College Falmouth Wadebridge Town Council

“Transmission of documents via telephone wires is possible in principle, but the apparatus required is so expensive that it will never become a practical proposition” Dennis Gabor, British physicist and author of Inventing the Future, 1962.

64 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Statement of Investment Principles 5i. Myners Review on Institutional Investment in Responses to Myners Principles the UK Principle 1. - Effective decision making Background Myners proposed that: The Government published in March 2001 the, Decisions should be taken only by persons or ‘Review of Institutional Investment in the United organisations with the skills, information and Kingdom’. The Myners report, as it is known, Compliance with CIPFA’s guidelines resources necessary to take them effectively. Where recommended a set of 10 Principles that pension 1. Effective decision-making comply partially comply do not comply trustees elect to take investment decisions, they scheme trustees should use when looking at their Define who takes investment decisions. must have sufficient expertise and appropriate l investment policy. training to be able to evaluate critically any advice Consider whether members have sufficient l It is the Government’s intention that local they take. skills. government pension schemes should state the Determine whether appropriate training is l Trustees should ensure that they have sufficient being provided. extent to which they comply with these principles. in- house staff to support them in their investment Assess whether in-house staffing support is Regulations came into force, in August 2002, l responsibilities. Trustees should also be paid, unless sufficient. requiring local authorities to publish this detail, there are specific reasons to the contrary. Establish an investment committee with before the 30 September 2002, in their Statements suitable terms of reference. l It is good practice for trustee boards to have of Investment Principles. Draw up a business plan. an investment sub-committee to provide the l The position in respect of the Cornwall Fund is appropriate focus. set out below. In compiling these responses we Overall Assessment Compliant have used the Guidelines issued by CIPFA, in April Trustees should assess whether they have the right 2002. To a large extent, the Fund complies with set of skills, both individually and collectively, and these Principles. Where there are areas that need the right structures and processes to carry out their to be addressed, the appropriate course of action role effectively. They should draw up a forward- is set out in the report. It is intended that the looking business plan. Fund’s position will be carefully monitored and a report taken to the Pensions Committee at regular Issues intervals. Issues have now been resolved. A Pensions Committee was set up in June 2003, to replace the Advisory Panel. Also, the Fund’s first annual Business Plan was presented to Committee in February 2004.

“Transmission of documents via telephone wires is possible in principle, but the apparatus required is so expensive that it will never become a practical proposition” Dennis Gabor, British physicist and author of Inventing the Future, 1962.

Cornwall Pension Fund Annual Report 2008-09 65 Regulatory statements Statement of Investment Principles Principle 2. - Clear objectives Principle 3. - Focus on asset allocation Principle 4. - Expert advice Myners proposed that: Myners proposed that: Myners proposed that: Trustees should set out an overall investment Strategic asset allocation decisions should Contracts for actuarial services and investment objective for the fund that: receive a level of attention (and, where relevant, advice should be opened to separate competition. advisory or management fees) that fully reflect the • represents their best judgement of what is The fund should be prepared to pay sufficient fees contribution they can make towards achieving the necessary to meet the fund’s liabilities given for each service to attract a broad range of kinds of fund’s investment objective. their understanding of the contributions potential providers. likely to be received from employer(s) and Decision-makers should consider a full range of Issues employees; and investment opportunities, not excluding from consideration any major asset class, including Actuarial services were tendered for, separately, in • takes account of their attitude to risk, private equity. September 2006. specifically their willingness to accept under- performance due to market conditions. Asset allocation should reflect the fund’s own characteristics, not the average allocation of other Objectives for the overall fund should not be funds. expressed in terms which have no relationship to the fund’s liabilities, such as performance relative to Issues other pension funds, or to a market index. None Compliance with CIPFA’s guidelines

Issues 4. Expert advice comply partially comply do not comply None Separate contracts in place for actuarial Compliance with CIPFA’s guidelines services and investment advice. l

3. Focus on asset allocation comply partially comply do not comply Terms of reference specified. l Compliance with CIPFA’s guidelines Priority is given to strategic asset allocation l Specify role of S151 officer in relation to decisions. advisers. l 2. Clear objectives comply partially comply do not comply All asset classes permitted within the Tender procedures followed without cost Set overall investment objective specific only regulations have been considered. l l to the fund’s liabilities. l constraint factor. Asset allocation is compatible with liabilities Determine parameters for employer and diversification requirements. l Overall Assessment Compliant contributions. l Specify attitude to risk and limits. l Overall Assessment Compliant Identify performance expectations and timing of evaluation. l Peer group benchmark in use for comparison purposes only. l

Overall Assessment Compliant

66 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Statement of Investment Principles Principle 5. - Explicit mandates Principle 6. - Activism Myners proposed that: Myners proposed that:

Trustees should agree with both internal and Compliance with CIPFA’s guidelines The mandate and trust deed should incorporate

external investment managers an explicit written 5. Explicit mandates comply partially comply do not comply the principle of the US Department of Labor mandate covering agreement between trustees Written mandate included in management Interpretative Bulletin on activism. and managers on: l contract containing elements specified. Trustees should also ensure that managers have • An objective, benchmark(s) and risk parameters Constraints on the types of investment are in an explicit strategy, elucidating the circumstances line with regulations. l that together with all the other mandates are in which they will intervene in a company; the Reasons stated if soft commissions coherent with the fund’s aggregate objective permitted. l approach they will use in doing so; and how they and risk tolerances; measure the effectiveness of this strategy. Overall Assessment Compliant • The manager’s approach in attempting to Issues achieve the objective; and The Institutional Shareholders Committee issued • Clear timescale(s) of measurement and a statement of principles, which provides a evaluation, such that the mandate will not be “If good framework for shareholder activism. Many terminated before the expiry of the evaluation authorities, including Cornwall, have adopted timescale for underperformance alone. excessive this code for activism, as an alternative to the incorporation of US principles and there is a The mandate and trust deed and rules should not smoking general acceptance of this approach. exclude the use of any set of financial instruments, actually without clear justification in the light of the specific plays a circumstances of the fund. role in the Trustees, or those to whom they have delegated production Compliance with CIPFA’s guidelines the task, should have a full understanding of the transaction-related costs they incur, including of lung 6. Activism comply partially comply do not comply commissions. They should understand all the cancer, it Incorporate US Principles on activism into mandates. ? options open to them in respect of these costs, seems to be and should have an active strategy - whether Engage external voting agencies if l a minor appropriate. through direct financial incentives or otherwise -for Review manager strategies. l ensuring that these costs are properly controlled one” Establish means to measure effectiveness. l without jeopardising the fund’s other objectives. W.C. Heuper, Trustees should not without good reason permit National Overall Assessment Compliant Cancer soft commissions to be paid in respect of their Institute, fund’s transactions. 1954. Issues None

Cornwall Pension Fund Annual Report 2008-09 67 Regulatory statements Statement of Investment Principles Principle 7. - Appropriate benchmarks Principle 8. - Performance measurement Myners proposed that: Myners proposed that:

Trustees should: Compliance with CIPFA’s guidelines Trustees should arrange for measurement of the performance of the fund and make formal • explicitly consider, in consultation with their 7. Appropriate benchmarks comply partially comply do not comply assessment of their own procedures and decisions investment manager(s), whether the index Consider whether index benchmarks l as trustees. benchmarks they have selected are appropriate; selected are appropriate. in particular, whether the construction of the Limits on divergence from index are relevant. l They should also arrange for a formal assessment index creates incentives to follow sub-optimal Active or passive management considered. l of performance and decision-making delegated to investment strategies; advisers and managers. Targets and risk controls reflect performance l • if setting limits on divergence from an index, expectations. Issues ensure that they reflect the approximations Overall Assessment Compliant Although the performance of managers is regularly involved in index construction and selection; monitored, the performance of officers, Members • consider explicitly for each asset class invested, and advisers is not formally assessed. whether active or passive management would be more appropriate given the efficiency, liquidity and level of transaction costs in the market concerned; and Compliance with CIPFA’s guidelines • where they believe active management has the

8. Performance measurement comply partially comply do not comply potential to achieve higher returns, set both Formal structure for regular monitoring in targets and risk controls that reflect this, giving operation. l the managers the freedom to pursue genuinely Arrangements in place to assess procedures l active strategies. and decisions of members. Similar arrangements established for advisers and managers. l l Issues Overall Assessment Compliant None

“Rail travel at high speed is not possible, because passengers, unable to breathe, would die of asphyxia.”

68 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Statement of Investment Principles Principle 9. - Transparency Principle 10. - Regular reporting Myners proposed that: Myners proposed that: A strengthened Statement of Investment Principles Trustees should publish their Statement of should set out: Investment Principles and the results of their monitoring of advisers and managers. • who is taking which decisions and why this Compliance with CIPFA’s guidelines structure has been selected; They should send key information from these 9. Transparency comply partially comply do not comply annually to members of these funds, including an • the fund’s investment objective; SIP updated as specified. l explanation of why the fund has chosen to depart • the fund’s planned asset allocation strategy, Consultation undertaken on amendments. l from any of these principles. including projected investment returns on Changes notified to stakeholders. l Issues each asset class, and how the strategy has been arrived at; Overall Assessment Compliant Employers receive an Annual Report and are invited to an Annual General Meeting. The information for • the mandates given to all advisers and individual members needs to be enhanced. managers; and • the nature of the fee structures in place for all advisers and managers, and why this set of structures has been selected. Issues Although the SIP contains most of the required Compliance with CIPFA’s guidelines

information to comply with this Principle, the 10. Regular reporting comply partially comply do not comply format and presentation of the document needs Publish changes to SIP and its availability. l to be improved to make it more meaningful to Identify monitoring information to report. l stakeholders. The SIP is available on the Council’s website. Inform scheme members of key monitoring data and compliance with principles. l

Overall Assessment Compliant

Dr Dionysys Larder (1793-1859), professor of Natural Philosophy and Astronomy, University College London.

Cornwall Pension Fund Annual Report 2008-09 69 Regulatory statements Communication Statement and Timeframes Communication Statement Regulatory Framework issued September 2005]. The type of information that pension schemes are required to disclose will and Timeframes as approved This policy statement is required by the provisions remain very much the same as before, although of Regulation 106B of the Local Government the prescriptive timescales are being replaced February 2006 Pension Scheme Regulations 1997. The provision with a more generic requirement to provide requires us to: information within a “reasonable period”. The Introduction “….prepare, maintain and publish a written draft Code of Practice issued by the Pensions This is the Communications Policy Statement statement setting out their policy concerning Regulator in September 2005 sets out suggested of Cornwall County Council Fund, administered communications with: timescales in which the information should be provided. While the Code itself is not a statement by Cornwall County Council (the Administering (a) members. Authority). of the law, and no penalties can be levied for failure (b) representatives of members. to comply with it, the Courts or a tribunal must The Fund liaises with over 40 employers and over (c) prospective members. take account of it when determining if any legal 34,000 scheme members in relation to the Local requirements have not been met. A summary of Government Pension Scheme. The delivery of the (d) employing authorities.” our expected timescales for meeting the various benefits involves communication with a number of In addition it specifies that the statement must disclosure of information requirements are set other interested parties. This statement provides include information relating to: out in the Performance Management section of an overview of how we communicate and how we this document, alongside those proposed by the intend to measure whether our communications “(a) the provision of information and publicity Pension Regulator in the draft Code of Practice. are successful. about the Scheme to members, representatives of members and employing authorities; It is effective from 1 April 2006. Responsibilities and Resources (b) the format, frequency and method of Any enquiries in relation to this Communication Within the Pension Section the responsibility for distributing such information or publicity; and Policy Statement should be sent to: communication material is performed by our (c) the promotion of the Scheme to prospective Cornwall County Council Pension Manager with the assistance of the Deputy members and their employing authorities.” Manager and three Senior Pensions Officers. Pensions Section As a provider of an occupational pension scheme, Although we write all communication within County Hall we are already obliged to satisfy the requirements the section, all design work is carried out by the Council’s publications team. We also carry out Truro of the Occupational Pension Schemes (Disclosure of information) Regulations and other legislation, all the arrangements for forums, workshops and Cornwall for example the Pensions Act 2004. Previously the meetings covered within this statement All printing is carried out by an external supplier, TR1 3AY disclosure requirements have been prescriptive, concentrating on timescales rather than quality. which is usually decided upon by the Council’s Tel: 01872 322322 From 6 April 2006 more generalised disclosure publications team. Fax: 01872 323824 requirements are to be introduced, supported All arrangements for forums, workshops, meetings by a Code of Practice [Reasonable periods for the and presentations covered within this statement Email: [email protected] purposes of the Occupational Pension Schemes are made by the same officers detailed above, in (Disclosure of Information) Regulations 2006 partnership with the employer or department requesting the information. 70 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Communication Statement and Timeframes Communication with key audience complement this by use of electronic means such groups as our website www.cornwall.gov.uk. We will accept communications electronically, for example Our audience by e-mail and, where we do so, we will respond We communicate with a number of stakeholders. electronically where possible. For the purposes of this communication policy Our pension section staff are responsible for statement, we are considering our communications specific tasks and for dealing with a specific with the following audience groups: proportion of our scheme members. Direct line phone numbers and email addresses are shown • active members; on all external communication to assist with easier access to the correct person. Certainty? • deferred members; In this world nothing • pensioner members; Branding is certain but death • prospective members; As the Pension Fund is administered by Cornwall and taxes. • employing authorities (scheme employers and County Council, all literature and communications Benjamin Franklin admission bodies); will conform to the branding of the Council. • senior managers; Policy on communication with active, • union representatives; deferred and pensioner members • elected members Our objectives with regard to communication with • Pension Section staff members are: In addition there are a number of other stakeholders with whom we communicate on a • for the LGPS to be used as a tool in the regular basis, such as Her Majesty’s Revenue and attraction and retention of employees. Customs, the Office of the Deputy Prime Minister, • for better education on the benefits of the solicitors, the Pensions Advisory Service, and other LGPS. pension providers. We also consider as part of this • to provide more opportunities for face to face policy how we communicate with these interested communication. parties. • as a result of improved communication, for How we communicate queries and complaints to be reduced. General communication • for our employers to be employers of choice. We will continue to use paper based communication as our main means of • to increase take up of the LGPS employees. communicating, for example, by sending letters • to reassure stakeholders. to our scheme members. However, we will

Cornwall Pension Fund Annual Report 2008-09 71 Regulatory statements Communication Statement and Timeframes Our objectives will be met by providing the Explanation of Fund during the questions and answers, following communications, which are over and communications financial year, income links to related sites and above individual communications with members and expenditure as well contact information. (for example, the notifications of scheme Scheme booklet - A as other related details. Roadshows – A number benefits or responses to individual queries). The booklet providing Estimated Benefit of staff will attend communications are explained in more detail in the a relatively detailed Statements – For active various locations upon table below: overview of the LGPS, members these include request of the employer. including who can join, Method of Media Frequency Method of Audience Group the current value of These presentations Communication of issue Distribution (Active, Deferred, how much it costs, the benefits as well as the provide the opportunity Pensioner or All) retirement and death projected benefits as at to have a face to face benefits and how to their earliest retirement conversation about Scheme booklet Paper At joining Post to home address/ Active increase the value of based and major via employers date and at age 65. your pension rights benefits. and on scheme The associated death Face to face education website changes Pension Fund Report and benefits are also shown sessions – These are Pension Fund Paper Annually On request All Accounts – Details of as well as details of any education sessions Report and based Accounts and on the value of the Pension individuals the member that are available website Fund during the has nominated to on request for small Pension Fund Paper Required Via employers for All financial year, income receive the lump sum groups of members. Report and based for specific actives. Post to home and expenditure as death grant. In relation For example, where Accounts – occasions address for deferred well as other related to deferred members, Summary only and pensioner an employer is going members details, for example, the benefit statement through a restructuring, the current employing includes the current Estimated Paper Annually Post to home address/ Active and Deferred. it may be beneficial Benefit based/via via employers for authorities and scheme value of the deferred for the employees to Statements website active members. To membership numbers. benefits and the earliest understand the impact home address for This is a somewhat payment date of the deferred members. any pay reduction may detailed and lengthy benefits as well as Roadshows/ Face to On request Advertised in All have on their pension Induction face Administration document and, the associated death rights. therefore, it will not be benefits. sessions manuals Joiner packs – These routinely distributed Website Electronic Continually Advertised on all All Website – The complement the joiner available communications except on request. A website will provide booklet and enclose summary document, as Face to face Face to On request On request All scheme specific information on AVCs education face detailed below, will be sessions information, forms and the paperwork distributed. that can be printed or Joiner packs Paper On joining Post to home Active members needed to join the based addresses Pension Fund Report downloaded, access scheme. and Accounts Summary to documents (such as Pay advice slips Paper Change in Post to home address Pensioners Pay advice slips – These – provides a handy announcements and based pension or are sent only when the tax code summary of the report and accounts), pension or income tax position of the Pension frequently asked 72 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Communication Statement and Timeframes code changes. Pension Policy on promotion of the scheme Posters – These will be designed to help those who • to assist them in increase letters and to prospective members and their are not in the LGPS understand the benefits of making the most P60 information is participating in the scheme and provide guidance of the discretionary communicated using employing authorities on how to join the scheme. areas within the this medium on an Our objectives with regard to communication with LGPS. annual basis. Policy on communication with prospective members are: Our objectives will employing authorities • to improve take up of the LGPS. be met by providing Our objectives with regard to communication with the following • for the LGPS to be used as a tool in the employers are: communications: attraction of employees. • to improve relationships. • for our employers to be employers of choice. • to assist them in understanding costs/funding As we, in the Pension Fund office, do not have issues. direct access to prospective members, we will work • to work together to maintain accurate data. in partnership with the employing authorities in the Fund to meet these objectives. We will do this • to ensure smooth transfers of staff. by providing the following communications: • to ensure they understand the benefits of being an LGPS employer. Method of Media Frequency of Method of Audience Communication Issue Distribution Group

Scheme booklet Paper On Via New Method of Media Frequency Method of Audience Communication of Issue Distribution Group based commencing employers employees employment Employers’ Guide Paper At joining Post or via Main contact Educational As part of On Face to face New based and email for all sessions induction commencing employees and on updated as employers workshops employment employer necessary website Posters Paper Ongoing Via New and Annual Face to Annually Invitations All contacts based employers existing employers face by post for all employees meeting employers

Explanation of communications Employers focus Face to At least Invitations Either main Scheme booklet - A booklet providing a relatively groups face quarterly/ by e-mail contacts detailed overview of the LGPS, including who can half yearly or specific join, how much it costs, the retirement and death groups (e.g. HR or Finance) benefits and how to increase the value of benefits. depending on Educational sessions – A talk providing an overview topics of the benefits of joining the LGPS. Cornwall Pension Fund Annual Report 2008-09 73 Regulatory statements Communication Statement and Timeframes Method of Media Frequency Method of Audience Explanation of communications Communication of Issue Distribution Group Briefing papers – a briefing that highlights key issues or developments relating to the LGPS and Pension Fund Paper Annually Post Main contact the Fund, which can be used by senior managers Report and based and for all Accounts employer employers when attending meetings. website Committee paper – a formal document setting out Meeting with Face to On request Invite sent Senior relevant issues in respect of the LGPS, in many adviser face by post or management cases seeking specific decisions or directions from email involved in elected members. funding and HR issues. Policy on communication with union representatives Explanation of communications Policy on communication with senior Our objectives with regard to communication with Employers’ Guide - A detailed guide that provides managers guidance on the employer responsibilities union representatives are: Our objectives with regard to communication with including the forms and other necessary • to foster close working relationships in senior managers are: communications with the Pension Section and communicating the benefits of the scheme to scheme members. • to ensure they are fully aware of developments their members Annual employers meeting – A formal annual within the LGPS • to ensure they are aware of the Pension Fund’s general meeting event with a number of speakers • to ensure that they understand costs/funding policy in relation to any decisions that need to covering topical LGPS issues. issues be taken concerning the scheme Employers’ focus groups – Generally workgroup style sessions set up to debate current issues within the • to promote the benefits of the scheme as a • to engage in discussions over the future of the LGPS. recruitment/retention tool scheme Pension Fund Report and Accounts – Details of the Our objectives will be met by providing the • to provide opportunities to education union value of the Pension Fund during the financial following communications: representatives on the provisions of the scheme year, income and expenditure as well as other related details, for example, the current employing authorities and scheme membership numbers. Method of Media Frequency Method of Audience Communication of Issue Distribution Group Adviser meeting – Gives employers the opportunity to discuss their involvement in the scheme with Briefing papers Paper As and when Email or All advisers. based and required hard copy electronic Committee Paper In advance of Email or All papers based and committee hard copy electronic meeting

74 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Communication Statement and Timeframes Our objectives will be met by providing the Policy on communication with elected Explanation of following communications: members/the Pensions Committee communications Training Sessions – Method of Media Frequency Method of Audience Our objectives with regard to communication with providing a broad Communication of Issue Distribution Group elected members/the Pensions Committee are: overview of the main Briefing papers Paper As and when Email or All • to ensure they are aware of their responsibilities provisions of the LGPS, based and required hard copy in relation to the scheme and elected member’s responsibilities within it. electronic • to seek their approval to the development or Face to face Face to face On request On request All amendment of discretionary policies, where Briefing papers – a education required briefing that highlights sessions key issues and • to seek their approval to formal responses to developments to the Pension Meeting Quarterly Email or All government consultation in relation to the Committee hard copy LGPS and the Fund. scheme meetings Pension Committee Our objectives will be met by providing the meetings - a formal Employee Meeting Quarterly Email or All following communications: Relations Group hard copy meeting of elected members, attended by senior managers, at Method of Media Frequency Method of Audience which local decisions Explanation of communications Communication of Issue Distribution Group in relation to the Briefing papers – a briefing that highlights key scheme (policies, etc) Training sessions Face to face When new Face to face All members issues and developments relating to the LGPS and Pension or via the of the Pension are taken. A non-voting the Fund. Committee Employers Committee member, representing Face to face education sessions – these are and as Organisation Union views, acts as an education sessions that are available on request for and when for local observer. union representatives and activists, for example to required government improve their understanding of the basic principles Briefing papers Paper As and when Email or All members of the scheme, or to explain possible changes to based and required hard copy of the Pension policies. electronic Committee Pension Committee meeting – a formal meeting of Pensions Meeting Quarterly Members All members elected members, attended by senior managers, Committee elected onto of the at which local decisions in relation to the scheme Meetings Pensions Pensions Committee Committee (policies, etc) are taken. Employee Relations Group – a formal meeting attended by senior managers and union representatives where local decisions in respect of a number of employment issues, including pensions, are discussed. Cornwall Pension Fund Annual Report 2008-09 75 Regulatory statements Communication Statement and Timeframes Policy on communication with pension Explanation of communications section staff Face to face training sessions – which enable new staff to understand the basics of the scheme, or Our objectives with regard to communication with provide more in depth training to existing staff, pension section staff are: either as part of their career development or to • ensure they are aware of changes and explain changes to the provisions of the scheme. proposed changes to the scheme Staff meetings – to discuss any matters concerning • to provide on the job training to new and the local administration of the scheme, including existing staff for example improvements to services or timescales. • to develop improvements to services, and changes to processes as required Administration procedure guide – in-house document detailing procedures to follow regarding Our objectives will be met by providing the benefit calculations, updating administration following communications: database and authorising benefit payments. Attendance at seminars – to provide more tailored Method of Media Frequency Method of Audience training on specific issues. Communication of Issue Distribution Group Software User Group meetings – to discuss any Face to face Face to face As required By All issues concerning the computer software used to training sessions arrangement administer the scheme, including future upgrades Staff meetings Face to face Monthly By All and improvements. arrangement Regional Officer Group meetings – discussion group of senior officers from other South West Administration Internally As and By email, All Administering Authorities. procedure guide provided when paper based required

Attendance at Externally As and By email, All Policy on communication with tax payers seminars provided when paper based advertised Our objectives with regard to communication with tax payers are: Software User Face to face Quarterly By email, Senior • to provide access to key information in relation Group meetings paper based Administrators to the management of the scheme • to outline the management of the scheme Regional Officer Face to face Quarterly By email, Pensions/ group meetings paper based Assistant Manager

76 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Communication Statement and Timeframes Our objectives will be met by providing the Our objectives will be met by providing the following communications: following communications:

Method of Media Frequency Method of Audience Method of Media Frequency Method of Audience Communication of Issue Distribution Group Communication of Issue Distribution Group

Pension Fund Paper Annually Post and All, on Press releases Paper As and Post or email Local press Report and based and email request based or when Accounts on Pension electronic required Fund for other website matters Pension Paper As and Post All, on Committee based and when request Explanation of communications Papers website available Press releases – provide statements setting out the Fund’s opinion of the matters concerned (i.e . Fund Explanation of communications valuation results) Pension Fund Report and Accounts – details of the Policy on communication with other value of the Pension Fund during the financial year, income and expenditure as well as other stakeholders/interested parties related details, for example, the current employing Our objectives with regard to communication with authorities and scheme membership numbers. other stakeholder/interested parties are: Pension Committee Papers - a formal document • to meet our obligations under various setting out relevant issues in respect of the LGPS, in legislative requirements many cases seeking specific decisions or directions • to ensure the proper administration of the from elected members. scheme • to deal with the resolution of pension disputes • to administer the Fund’s Additional Voluntary Policy on communication with the media Contribution (AVC) scheme Our objectives with regard to communication with the media are: • to ensure the accurate reporting of Fund valuation results, the overall performance of the “They couldn’t hit an Fund and the Fund’s policy decisions against elephant at this dist-...” discretionary elements of the scheme Last words of Gen. John Sedgwick, spoken as he looked out over the parapet at enemy lines during the Battle of Spotsylvania in 1864.

Cornwall Pension Fund Annual Report 2008-09 77 Regulatory statements Communication Statement and Timeframes Our objectives will be met by providing the Explanation of communications following communications: Pension Fund Valuation Reports – a report issued every three years setting out the estimated assets Method of Media Frequency Method of Audience and liabilities of the Fund as a whole, as well as “Space travel is bunk.” Communication of Issue Distribution Group setting out individual employer contribution rates Pension Fund Electronic Every three Via email or Office of the for a three year period commencing one year from valuation years post Deputy Prime the valuation date . reports Minister • Rates & (ODPM)/Her Details of new employers – a legal requirement to Adjustment Majesty’s notify both organisations of the name and type of certificates Revenue employer entered into the Fund (i.e. following the • Revised R&A and Customs certificates (HMRC)/ admission of third party service providers into the • Cessation all scheme scheme). valuations employers Resolution of pension disputes – a formal notification of pension dispute resolution, together with any Details of new Hard As new Post ODPM/HMRC employers copy employers additional correspondence relating to the dispute. entered into the are entered Completion of questionnaires – various Fund into the Fund questionnaires that are received, requesting specific information in relation to the structure of Formal Hard As and Via email or Scheme the LGPS or the make up of the Fund. resolution of copy or when a post member pension disputes electronic dispute or their AVC Annual Benefit statements – statements requires representatives, received from insurance companies, information resolution the Pensions Advisory loaded onto administration database and paper Service/the copy forwarded to scheme member. Pensions Ombudsman Completion of Electronic As and Via email or ODPM/HMRC/ Performance measurement questionnaires or hard when post the Pensions copy required Regulator So as to measure the success of our communications with active, deferred and pensioner members, we will use the following AVC Annual Paper Annually Post Scheme methods: Benefit based member Sir statements Harold Spencer Jones, Astronomer Royal of the UK, 1957 (two weeks later Sputnik orbited the Earth)

78 Cornwall Pension Fund Annual Report 2008-09 Regulatory statements Communication Statement and Timeframes Timeliness Quality We will measure against the following target delivery timescales: Audience Method To consider Notes

Communication Audience Statutory Target delivery Active and Feedback from All services delivery period deferred annual benefit period members statements Scheme booklet New joiners to Within two Within four weeks of All member Administration Performance Procedure the LGPS months of joining the LGPS types software targets performance figures joining performance achieved for obtained for various statistics based each specific benefit calculations Estimated Active members On request 31 October each year on completion administration i.e. retirements, Benefit of specific tasks procedure new starts and Statements as at and procedures transfers in, 31 March transfers out, deferred leavers Telephone calls All Not 95% of phone calls to applicable be answered within All member Employee All services Representative group 30 seconds types Relations and identify of all member types. Issue of Active and Within two 95% of retirement Group meeting improvement To include union retirement deferred months of benefits to be issued on quarterly areas/new representatives. benefits members retirement within ten working basis services retiring days of retirement Employers Focus Groups Their issues Regular feedback Issue of deferred Leavers Within two Within one month sessions. benefits months of of notification from withdrawal employer Results Transfers in Joiners/active Within two Within one month of Details of the software performance figures are members months of request request reported to the Head of Personnel Services on a quarterly basis. Feedback is received from the Issue of forms Active/Deferred N/A Within five working i.e. expression of members days of request Head of Personnel Services and Assistant County wish Treasurer, from the various focus/discussion groups.

Changes to Active/deferred Within two Within two months of scheme rules and pensioner months of change coming into Review Process members, as the change effect We will review our communication policy to required coming into ensure it meets audience needs and regulatory effect requirements at least every three years. A current Annual Pension All Within two Within ten working version of the policy statement will always be Fund Report and months of days of request Accounts request available on our website at www.cornwall.gov.uk and paper copies will be available on request.

Cornwall Pension Fund Annual Report 2008-09 79 Glynn Bennallick

80 Cornwall Pension Fund AnnualThe Report unpredictable 2008-09 sundial at St Wenn Church, mid Cornwall