Final NCC Pension Fund Annual Report and Accounts 2019-20

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Final NCC Pension Fund Annual Report and Accounts 2019-20 Introduction Page 1 Management and Financial Performance and Policy Statements Management Page 4 Investment Strategy Statement Page 7 Funding Strategy Statement Page 21 Communication Strategy Statement Page 36 Governance Policy and Compliance Statement Page 42 Pension Fund Panel Training Page 49 Assessment of the Effectiveness of the Pension Fund Panel Decisions made in 2019-20 Page 49 Attendance at Pension Fund Panel meetings in 2019-20 Page 52 Annual Report of Northumberland County Council’s LGPS Local Pension Board for 2019-20 Page 53 Administration Page 59 Scheme Members Page 59 Value for Money Page 62 Administration Performance Page 62 Fund Performance Page 63 Market Commentary Page 67 Independent Auditor’s Opinion Page 69 Pension Fund Accounts Page 71 Notes Supporting the Pension Fund Accounts Page 73 Appendix 1 – Fund membership with employer summary Page 92 Appendix 2 – Statement of the Actuary for the year ended 31 March 2020 Page 93 Introduction Introduction The purpose of this report is to account for the experienced by funds generally over that period A fully integrated shared pensions administration income, expenditure and net assets of the and follows the positive returns experienced service provided by South Tyneside Council Northumberland County Council Pension Fund during 2018-19. operated throughout 2019-20. (“the Fund”) for the financial year to 31 March The overall annual return on the Fund was -7.5% Northumberland County Council Pension Fund 2020. Northumberland County Council is an for the year (6.9% in 2018-19), which compares merged into Tyne and Wear Pension Fund on 1 administering authority for the Local Government unfavourably with the Fund specific benchmark April 2020. The Local Government Pension Pension Scheme (LGPS), required by the LGPS annual return of -6.7%. Scheme (Northumberland and Tyne and Wear Regulations to maintain a pension fund for the Pension Fund Merger) Regulations 2020 (UK Scheme. The long term growth of the Pension Fund is seen Statutory Instrument 2020 No 502) came into as the most reliable indicator of performance, as Information about the economic resources force on 3 June 2020 giving this merger short term fluctuations are evened out. In this controlled by the Fund is provided by the Net retrospective effect. All assets and liabilities of context, the overall annualised return on the Fund Assets Statement, which summarises the net Northumberland County Council Pension Fund for the ten years to 31 March 2020 was 6.7% per assets of the Fund, on the basis of current market became the assets and liabilities of Tyne and annum, which compares with the benchmark values. Wear Pension Fund on 1 April 2020, and therefore annualised return of 6.6%. Fund returns for the ten Northumberland County Council Pension Fund’s Information about the additions to, withdrawals year period were higher than the growth in final day as a reporting entity was 31 March 2020. from, and changes in value of the Fund during the average earnings and inflation increases. year to 31 March 2020 is shown in the Fund The significant changes made to Fund Account. investments in 2019-20 were the changes to asset In the year to 31 March 2020 the total market allocations within Legal &d General funds, with value of the Fund, net of liabilities, has decreased 50% of index-linked gilts moved into corporate from £1,400.36 million to £1,297.15 million as the bonds and the reduction in target allocation to the payments made from the Fund have exceeded passive UK equities in favour of passive equities the annual return on the Fund (comprising in other geographies. investment income and realised/unrealised Northumberland County Council made a gains/losses on investments) together with other commitment to join Border to Coast Pensions receipts to the Fund. Partnership (BCPP) pooling arrangement in June The Fund Account shows a net surplus from 2017. BCPP Ltd commenced operation in July dealings with members of £0.75 million in 2019-20 2018. (£29.94 million withdrawal in 2018-19) as None of Northumberland County Council’s contributions from members exceed payments to Pension Fund assets are currently managed by pensioners and leavers. The net negative return BCPP Ltd. The Fund currently has a long term on investments experienced during 2019-20 of investment of £0.83 million as one of the twelve £95.50 million reflects the negative returns shareholders in BCPP Ltd. 2019-20 Pension Fund Annual Report Page 2 Management and Financial Performance and Policy Statements Management and Financial Performance and Policy Statement Management At 31 March 2020, the membership of the Pension Fund Panel was as Statutory Authority follows: Under the Local Government Pension Scheme Regulations the statutory Voting members administering authority responsible for the Fund is: Representing Northumberland County Council Northumberland County Council County Hall Councillor J. G. Watson (Chair) Morpeth Councillor D. Kennedy (Vice-Chair) Northumberland NE61 2EF Councillor D. L. Bawn Pension Fund Panel Councillor M. Robinson The above authority has delegated its responsibility for determining Councillor E. Dunn investment policy and monitoring investment performance to the Pension Councillor I. C. F. Swithenbank Fund Panel which meets at least quarterly. The Panel sets guidelines for and assesses the investment decisions of the Fund’s investment managers. Non-voting members Representing employers Mrs Helene Adams (Northumberland National Park Authority) Representing employees and pensioners Ms Sue Dick (Scheme member representative of Northumberland County Council) Representing employees Mr Alan Culling (UNISON) Mr Ian Storey (UNISON) The Panel is advised by Ms S Greenwood of Mercer Limited, who is an independent adviser, rather than a member of the Panel. 2019-20 Pension Fund Annual Report Page 4 Management and Financial Performance and Policy Statement Investment Management Infrastructure The day to day management of the Fund’s investments at 31 March 2020 was carried out by the The Panel selected Global Infrastructure Partners of following four external managers: 1345 Avenue of the Americas 30th Floor, New York, New York 10105, USA, as an infrastructure fund Passive balanced Legal and General Investment Management Ltd investment provider to the Fund in July 2011. At 31 One Coleman Street March 2020 the Fund had a commitment to Global London Infrastructure Partners Fund II. The Panel selected EC2R 5AA Antin of 2-8 Avenue Charles de Gaulle, L-1653 Corporate bonds Wellington Management International Ltd Luxembourg, Grand Duchy of Luxembourg, as a Cardinal Place second infrastructure fund in September 2013 and at 80 Victoria Street 31 March 2020 had a commitment to Antin London Infrastructure Partners II LP. The Panel subsequently SW1E 5JL selected Pantheon Ventures (UK) LLP of 10 Finsbury Square, 4th Floor, London EC2A 1AF, as a third Property Schroder Investment Management Ltd infrastructure investment provider in April 2018 and 31 Gresham Street at 31 March 2020 had a commitment to one of London Pantheon’s global infrastructure funds. EC2V 7QA BCPP Ltd Property BlackRock Investment Management (UK) Ltd In June 2017, Northumberland County Council, 12 Throgmorton Avenue together with eleven other LGPS administering London authorities, entered into the Inter Authority EC2N 2DL Agreement and Shareholders Agreement to become Private equity the sole shareholders in Border to Coast Pensions The Panel selected Morgan Stanley of 25 Cabot Square, Canary Wharf, London E14 4QA, as private Partnership Limited (BCPP Ltd), Floor 5, Toronto equity fund of funds investment provider to the Fund in November 2005. At 31 March 2020, the Fund Square, Leeds, LS1 2HJ. As at 31 March 2020, the had commitments to three of Morgan Stanley’s private equity funds of funds. The Panel selected NB Fund had no investments managed by BCPP Ltd. Alternatives, an affiliate of Neuberger Berman Europe Ltd, Lansdowne House, 57 Berkeley Square, London W1J 6ER, as a further private equity fund of funds investment provider in January 2007 and at 31 March 2020 had a commitment to two NB Crossroads private equity funds of funds. The Panel subsequently selected Pantheon Ventures (UK) LLP of 10 Finsbury Square, 4th Floor, London EC2A 1AF, as a third private equity fund of funds investment provider in April 2017 and at 31 March 2020 had a commitment to one of Pantheon’s private equity fund of funds. 2019-20 Pension Fund Annual Report Page 5 Management and Financial Performance and Policy Statement Fund assets at 31 March 2020 can be analysed as follows: Solicitors Legal services are provided by Northumberland County Council’s in-house Uk Non-Uk Global Total Legal Team. When specialist legal advice is required and the expertise is not £m £m £m £m available in-house legal services are provided by South Tyneside Council’s Equities 169.17 545.45 103.52 818.14 Pension Fund Team through the shared pension administration service. Bonds 216.96 - 102.12 319.08 Alternatives 52.29 - 113.30 165.59 Pension Fund Team Cash and cash equivalents (5.66) - - (5.66) Legal Services Total 432.76 545.45 318.94 1,297.94 South Tyneside Council Town Hall and Civic Offices Custody Westoe Road, South Shields, Custody services for the funds managed by the external managers are Tyne and Wear provided by: NE33 2RL The Northern Trust Company 50 Bank Street AVC Fund provider Canary Wharf Scheme members can make additional voluntary contributions (AVCs) to the London E14 5NT Fund’s nominated AVC provider. These contributions
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