Annual Report 2018/2019 yourpensionservice.org.uk Contents Page A Foreword by the Chair of the Pension Fund Committee 4 B Management and financial performance 8 C Governance of the Fund 10 D Administration of the Fund 12 E Knowledge and skills framework 16 F Investment policy and performance 18 G Asset pools 34 H Accounts of the Fund for the year ended 31 March 2019 36 I Lancashire Local Pension Board annual report 82 J Actuarial valuation 86 K Contacts 102 L Glossary 103 Appendices 1 Scheme employers with active members as at 31 March 2019 2 Governance policy statement 3 Annual Administration report 4 Communication policy statement 5 Pensions administration strategy statement 6 Funding strategy statement 7 Investment strategy statement 2 Lancashire County Pension Fund Annual Report 2018/19 3 A Foreword by County Councillor Eddie Pope, Chair of the Pension Fund Committee I am pleased to report that the • Along with the Head of Fund I have Guild Investments - Forth Ports Group - Endeavour Vision - administration service is now meeting most become a member of the Local Infrastructure Infrastructure Private equity of the key performance indicators as can Authority Pension Fund Forum (LAPFF) Guild Investments Limited is a private Forth Ports is the third largest Ports Group Endeavour Vision has invested in medical be seen on page 11 of this annual report. a collaborative shareholder group limited company established as a vehicle in the UK, with a diverse operational and technology for over 10 years as they This successful turnaround is due to the which aims to promote good corporate to hold infrastructure investments and in port-centric logistic business model across recognised an opportunity to invest in collaborative working between LPP and governance and responsibility by which LPPI Infrastructure Investments LP Tilbury in the south east of England and devices that can improve the overall members of the Pension Fund committee companies. This has enabled direct has a controlling interest. several Scottish ports. Its strategy is focused standard of care, reduce healthcare costs and Local Pension Board. It is also due engagement with companies in which on the delivery of efficient and low carbon and have a life-changing impact on patients to the hard work and commitment of LAPFF members have investments. Guild Investments owns six wind farm sites supply chain solutions. This investment was around the world. Welcome to the 2018/19 the staff who work within the Pension across Portugal, a growing global source of Investment made via the GLIL Infrastructure platform. Annual Report of the Administration service. renewable energy which reduces carbon To date, their Endeavour Medtech Growth The value of the Fund’s net assets at emission intensity. Currently undergoing a project to transform Fund has invested in 12 medtech companies Lancashire County Pension Some of the highlights of the year are as 31 March 2019 was £8,410m, up from an old power station in Tilbury to extend with a total investment value of over EUR Fund. The year has seen the follows: Portugal is an attractive location for wind £7,621m at 31 March 2018. farm installations, having a windy terrain, the port. Not only is this initiative creating 115 million. Every company they invest in number of scheme members • Delivering an 11.7% return on assets which The Fund uses Local Pensions Partnership a stable feed-in-tariff regime and the jobs within the area but the promotion and must meet their strict criteria, meaning that continuing to increase with outperformed the Lancashire benchmark Investment Ltd (LPP I) to manage all of its support of local communities. This protection of wildlife is paramount within the device must be considered ‘best-in- total members now being of 8.0% and resulted in the value of investment assets. LPP I initially undertook investment enables us to partner with a the scope of the project, including the class’ in terms of patient safety and efficacy the fund, at 31 March 2019, increasing 176,476 an increase of 4,402 investments on behalf of Lancashire County top tier renewable energy operator who building of a 12,000 strong water vole park. and offer superior clinical benefits, both to to £8.4bn, bringing the Scheme closer in the year. We are now in our Pension Fund and the LPFA to create is a market leader in renewable energy Further regeneration projects are underway doctors and patients. to being fully funded and placing third year of our partnership a larger pool which is jointly invested to electricity, enjoying technical and local in Scotland. Lancashire at the top of the 2018/19 arrangement with the ensure greater reductions in management expertise support. local authority fund league table for total costs. In 2018/19 Royal County of Local Pension Partnership fund performance. This league table is Guild Investments also actively contribute Berkshire Pension Fund also invested in (LPP) who are providing published by Pensions and Investments to protecting the endangered species LPP I, therefore the value of the pool has both administration and Research Consultants Ltd (PIRC) and the Iberian Wolf, through formation and increased to approximately £17bn at 31 investment services to the comprises 64 local government pension membership of the Iberian Wolf Habitat March 2019. Fund. The investment side of funds with a combined value of £193bn. Conservation Association. This organisation One of the aims of the pooling was founded in 2006 through constituent their business has performed • The continued development of the arrangements is value for money. As part of members of Guild Investments. well as noted below, however, pooling of investments via Local Pensions this LPP reported to Government that the Partnership saw a new diversifying it has been a challenging arrangement is on track to make investment strategies vehicle launch in September. year for our administration cost savings. Other benefits from the pool It is anticipated that the final vehicle service as LPP went live with include the access to investments and covering property will be launched later a new operating model for portfolio diversification. in 2019. the business in April 2018. Further details on investment performance is • Responsible investment has continued to Unfortunately this change on page 18 of this report and some examples be an important issue for the committee. wasn’t implemented as of Fund investments are set out below. The Responsible Investment Working successfully as anticipated Group reviewed the Climate Change and there were failures in policy, and is working closely with the services to both employers London Pension Fund Authority (LPFA) and members. and LPP to ensure we support the most appropriate investments within this area. Wind Farm, Portugal Investment in Forth Ports Group 4 Lancashire County Pension Fund Annual Report 2018/19 5 A Friargate Court, Preston – Park Hotel East Cliff, Preston Administration Real estate - Real estate During the year the Fund’s administration Friargate Court is newly built exemplary The Fund acquired this landmark property, service, provided by LPP processed around student accommodation providing future originally built in 1883 as a luxury hotel 32,637 items of work (ranging from changes generations of those electing to study and most recently serving as offices to of address to the calculation of pension at the University of Central Lancashire Lancashire County Council. This investment benefits). As noted above this has been a with modern, stylish and safe lodgings to sits within the real estate portfolio of the challenging year for this area of the business enhance their experience of university life. Fund and will be brought back into use as and we have been working hard to improve En-suite bathrooms, Wi-Fi, 24 hour security a 4 star hotel following a programme of the service received by both members and and a range of utilities make this property a construction and refurbishment. employers in the Fund. popular choice. County Councillor Eddie Pope Chair of the Pension Fund Committee Artist’s impression of restored Friargateand converted Court, Park Preston Hotel An artist’s impression of the development at Park Hotel, East Cliff 6 Lancashire County Pension Fund Annual Report 2018/19 7 B Management and Financial performance financial performance of the Fund Administering authority Scheme administrators Custodian to the Fund The Fund asset value increased by investment performance, contribution funding level was a significant improvement Lancashire County Council Local Pensions Partnership Limited Northern Trust £788.9m from £7,621.2m at 31 March income and Fund expenditure against the when compared to 78% in 2013. 2019/20 2018 to £8,410.1m as at 31 March budget, with committee reporting on a is a valuation year and the Fund is expected Pension Fund Committee Head of Fund Independent investment 2019 and delivered an 11.7% return on quarterly basis. The most significant budget to again be closer to fully funded. The new Lancashire County Council A Leech advisors investment assets over the twelve months, variance for the year to 31 March 2019 arose valuation will set the contribution rates for outperforming the Lancashire benchmark due to the accounting treatment adopted employers within the Fund for at least the committee members A Devitt Chief Executive and of 8.0% and placing the Fund at the top of in the prior financial year for up-front three years commencing 1 April 2020. County Councillor J Burrows E Lambert Director of Resources the 2018/19 Local Authority Fund league deficit and future service rate contributions Employer contribution rates in 2018/19 County Councillor S Clarke table for total fund performance, from a received from some employers. The budget A Ridgwell AVC providers range from 0.0% to 28.0% of pension pay County Councillor L Collinge* population of 64 local government pension assumed this early receipt of income would and are dependent on the assumptions Equitable Life funds with a combined value of £193bn.