Reportand Accounts
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West Yorkshire Pension Fund Report and Accounts for the Year Ended 31 March 2017 West Yorkshire Pension Fund is administered by City of Bradford Metropolitan District Council • Pension Schemes Registry Number 10041078 Contents Section 1 Appendix A Foreword 4 Resolving Complaints 117 Section 2 Appendix B Management Structure 6 Further Information and Contacts 119 Section 3 Appendix C Local Pension Board Annual Report 11 Glossary of Terms 121 Section 4 Appendix D Pensions Administration Review 16 Pension Administrative Strategy 127 Section 5 Appendix E Financial Management and Performance 21 Funding Strategy Statement 141 Section 6 Appendix F Investment Report 51 Governance Compliance Statement 167 Section 7 Appendix G Investment Management and Strategy 59 Communications Policy 170 Section 8 Appendix H Investment Markets 61 Statement of Investment Principles 177 Section 9 Appendix I Actuary’s Report 78 Risk Management Report 183 Section 10 Appendix J Auditor’s Report 81 Pension Board Knowledge and Section 11 Understanding Framework 205 Statement of Accounts 83 Appendix K Pension Board Terms of Reference 209 West Yorkshire Pension Fund 2 West Yorkshire Pension Fund 3 Section 1 FOREWORD Section 1 Foreword West Yorkshire Pension Fund 4 Section 1 FOREWORD Foreword West Yorkshire Pension Fund (WYPF) is a local government its members, Councillors Graham Stokes and Les Shaw from pension scheme, founded in 1974. As at 31 March 2017 we had Wakefield. Les had a relatively short period on the fund having 284,820 members and 422 employers across the UK. Our largest been appointed in 2011, but Graham was appointed in 2003, employers are the five West Yorkshire councils – Bradford, and gained significant knowledge and experience over those Calderdale, Kirklees, Leeds and Wakefield. years, contributing to the investment strategy debates and playing a full part in the success of the fund. 2016/17 proved to be a volatile year for investment, with the Brexit vote and US elections confounding the polls once again. I trust you will find the Report and Accounts interesting and However, the fund ended the year with a value of £13.6 billion, informative, as it demonstrates that the fund remains financially an increase of over 22%. While markets were generally higher sound, and will provide financial security in retirement for its at the end of the year, a major contributor to this was weaker 250,000 members. sterling following the Brexit vote. As a significant owner of overseas assets (much of the UK stock market consists of companies with substantial overseas assets) the fund has benefitted from this weakness, and will continue to do so, offsetting the weaker environment in the UK. The fund received the result of the actuarial valuation at 31 March 2016, which, after setting even more conservative assumptions for future expected returns, shows a funding level of 94%, a reduction of just 2%. This will demonstrate the consistent success of the long-term investment strategy adopted by the fund, which will have one of the highest funding levels within the LGPS. The government requires LGPS funds to pool their assets in Councillor Andrew Thornton order to achieve cost efficiencies on investments. Having the lowest cost of investments of all the LGPS funds, we concur Chair with the objectives, although we will benefit less than the average fund from the process. We are working with our Joint Advisory Group and pooling partners, two other large, efficient metropolitan funds, Investment Advisory Panel Greater Manchester and Merseyside, to develop the Northern Pool. The Northern Pool has met all the deadlines set by the government, and in respect of investing in infrastructure, one of the pooling criteria, we are well ahead of the pack, having an operational programme with £1.4 billion to invest. On pensions administration we continue to improve our systems, and our dedicated staff deliver a high-quality service at a very low cost. As part of our desire to share this low cost with others we have a joint service arrangement which includes Lincolnshire Pension Fund and seven fire and rescue authorities across the country. We have also been appointed to the National Framework for the provision of administration services to the LGPS, which enables other schemes to share in our low-cost, high-quality service provision. The quality of both the investment and administration teams is clearly demonstrated in what I have covered above, so it gives me great pleasure to thank them on behalf of the Joint Advisory Group and Investment Advisory Panel for all they do for scheme members and employers. During the year the Investment Advisory Panel lost two of West Yorkshire Pension Fund 5 Section 2 MANAGEMENT STRUCTURE Section 2 Management Structure West Yorkshire Pension Fund 6 Section 2 MANAGEMENT STRUCTURE Members of the WYPF Joint Advisory Group Bradford Council Councillor A Thornton Councillor G Miller Councillor S Lal Chair Deputy Chair Calderdale Council Councillor B Metcalfe Councillor S Baines MBE Councillor J Lynn Kirklees Council Councillor E Firth Councillor F Fadia Councillor H Richards Leeds Council Councillor P Davey Councillor P Harrand Councillor N Dawson Wakefield Council Councillor D Jones Councillor J Speight Councillor R Forster Trade union representatives I Greenwood OBE – UNISON Tristan Chard – GMB Liz Bailey – UNISON Scheme member representatives Kenneth Sutcliffe Wendy Robinson Representative from the councils of West Yorkshire Stuart McKinnon-Evans Strategic Director – Corporate Services – BMDC West Yorkshire Pension Fund 7 Section 2 MANAGEMENT STRUCTURE Members of the WYPF Investment Advisory Panel Bradford Council Councillor A Thornton Councillor G Miller Chair Calderdale Council Councillor B Metcalfe Councillor S Baines MBE Kirklees Council Councillor E Firth Councillor H Richards Leeds Council Councillor P Davey Councillor P Harrand Wakefield Council Councillor Ms J Speight Councillor M Morley Trade union representatives I Greenwood OBE – UNISON Tristan Chard – GMB Liz Bailey – UNISON Deputy Chairman West Yorkshire Pension Fund Rodney Barton – Director External advisers Noel Mills Mark Stevens Representative from the councils of West Yorkshire Doug Meeson Director of Resources and City Development – Leeds City Council Scheme member representatives Stuart Imeson Gerald Hey West Yorkshire Pension Fund 8 Section 2 MANAGEMENT STRUCTURE Members of the WYPF Local Pension Board Employer representatives Councillor M Slater Councillor M Isherwood John Morrison Chairman Councillor G Hyde Member representatives Gary Nesbitt – GMB Colin Sykes – UNISON Mark Morris – Unite Mick Binks – UNISON Appointed service providers and advisers Actuarial services Aon Hewitt 25 Marsh Street Bristol BS1 4AQ AVC providers Equitable Life Assurance Society PO Box 177 Walton Street Aylesbury Buckinghamshire HP21 7YH Prudential Lancing BN15 8GB Scottish Widows PO Box 902 15 Dalkeith Road Edinburgh EH16 5BU West Yorkshire Pension Fund 9 Section 2 MANAGEMENT STRUCTURE Auditors Mazars LLP Gelderd Road Gildersome Leeds LS27 7JN Banking and HSBC custodial services 8 Canada Square Canary Wharf London E14 5HQ Legal adviser Parveen Akhtar City Solicitor City of Bradford Metropolitan District Council City Hall Bradford BD1 1HY Pensions Civica UK Limited computer services Vanguard House Dewsbury Road Leeds LS11 5DD Internal dispute resolution advisers Appointed persons for Rodney Barton – Director, WYPF stage 1 internal dispute resolution procedure (IDRP) City of Bradford Metropolitan District Council WYPF Ground Floor Aldermanbury House 4 Godwin Street Bradford BD1 2ST Appointed persons for Kersten England stage 2 internal dispute resolution procedure (IDRP) Chief Executive City of Bradford Metropolitan District Council City Hall Bradford BD1 1HY West Yorkshire Pension Fund 10 Section 2 MANAGEMENT STRUCTURE IDRP medical adviser Santia Occupational Health Santia House Parc Nantgarw Cardiff CF15 7QX West Yorkshire Pension Fund 11 Section 3 LOCAL PENSION BOARD ANNUAL REPORT Section 3 Local Pension Board Annual Report West Yorkshire Pension Fund 12 Section 3 LOCAL PENSION BOARD ANNUAL REPORT West Yorkshire Pension Fund Pension Board Annual Report Foreword West Yorkshire Pension Fund’s Local Pension Board was established in April 2015 as required by section 5 of the Pension Act 2013. During the 2016 calendar year the board has met in March 2016 and November 2016. Board members have attended numerous training events, seminars, conferences and activities on issues relating to local government pension schemes and overriding legislation in order to broaden their depth of knowledge. The Local Pension Board was set up in such a way to ensure knowledge and understanding of the board is maintained at all times by appointing half of the members for an initial two-year period instead of the usual four years. This approach will ensure board members are replaced on a rolling programme and therefore new members of the board will have access to a wealth of knowledge from the experienced board members. We have had a busy first two years and as there are a number of significant issues affecting the Local Government Pension Scheme on the horizon, I expect the work of the board to be busy going forward. Councillor Malcolm Slater Chair of WYPF Pension Board West Yorkshire Pension Fund 13 Section 3 LOCAL PENSION BOARD ANNUAL REPORT Pension Boards Overview of WYPF Pension Board In accordance with section 5 of the Public Service Pensions Act 2013 (the Act) and under regulation 106 of the Local Government