Pensions Annual Report
Pensions Annual Report 2018 - Size (3.1mb)
I am pleased to report another successful year in respect of Fund investment performance, despite the wider political backdrop influencing markets. The Fund achieved a return of 6.5% in 2017/18, with exceptional equity returns key to the out-performance. The RCT Fund maintained its ranking within the top quartile of local authority pension funds over the last 5 years, with the Fund value growing to £3.2bn at 31st March 2018.
This high level of growth has contributed to an increase in our estimated funding level to 93% at 31st March 2018. A review of our asset allocation strategy concluded that we should de-risk at this time. In response we are taking the opportunity to transition from riskier assets, and remove some of thevolatility from the portfolio and lock in some of those 2017/18 gains. A phased transition of assets will follow, aligning to the updated Fund Investment Strategy as appropriate investment opportunities arise, achieving an overall reduction in equity exposure, whilst introducing new diversified asset classes.
In addition to complying with its legal obligations and primary aim, ‘to ensure Fund assets are sufficient to meet Fund liabilities in the short,medium and long term’, the Fund is also committed to considering responsible investment factors, including environmental, social and governance issues. The Fund has updated its ‘Investment Strategy Statement’ to reinforce the expectation on its appointed investment managers to integrate financial and non financial factors into their stock selection process.
The Fund recognises the investment implications of climate change and carbon emission management. As a long term investor charged with looking after the interests of beneficiaries over many decades into the future, we are fully aware that climate change is one of the risk factors for our pension fund investments. The Fund engages with companies in the sector through its participation in the Local Authority Pension Fund Forum (LAPFF). LAPFF’s engagement strategy is to push for an orderly carbon transition by requiring companies to identify and tackle carbon risks in their business models.
During the year, there has been focused activity as part of the Wales Pension Partnership (WPP) implementation of the investment pooling arrangements.Work is on-going to establish and launch the initial pool sub-funds (for High Alpha Global Equities). Passive investments (of circa £3.3bn All Wales) are already managed on a pooled basis and delivering significant fee savings. Our own Committee Chair (Councillor Mark Norris) is chair of the WPP Joint Governance Committee for the forthcoming year (2018/19).
The General Data Protection Regulation (GDPR) came into force in May 2018 and, the Fund through its Governance forums and stakeholders undertooka review to ensure its compliance with the new requirements. A number of initiatives were progressed through the Fund’s data improvement plan during the year to enhance the quality and timeliness of membership data, this included the decision to mandate ‘monthly’ employer data interfaces. The Pension Regulator has announced it will be monitoring Public Sector Pension Funds progress in regard to data improvements.
The RCT Pension Fund is the largest LGPS Pension Fund operating within Wales, with overall membership exceeding 71,000, across a diverse range of Employers. As such we continue to look for opportunities to improve services and the rollout of Member Self-Serve functionality will improve the Fund’s accessibility to its membership and support the digital publication of key documents such as Annual Benefit Statements.
Looking ahead, initial planning discussions have been held with the Fund Actuary regarding the 2019 Triennial Valuation, with a number of complementary exercises underway to support the process.
The LGPS Scheme Advisory Board is continuing its work in respect of the “cost cap” analysis, which sits alongside the process introduced by HM Treasury. The key objective is to ensure a fair balance of risks between scheme members and the taxpayer, the results of which are likely to inform future scheme design and member contribution rates.
I hope that the information presented in this report is helpful; if you feel it could be improved we would welcome your suggestions.
Christopher Lee, C.P.F.A.
Group Director Corporate and FrontlineServices (Section ‘151’ Officer)