Devon Pension Fund and Investments

2018 Employers Meeting

This year’s meeting for Devon Pension Fund Employers was held at the Iddesleigh Gallery, Exeter Racecourse on Friday 5th October 2018. Thanks to everyone who attended.

Slides from the meeting:

2018 Combined Presentations Investment Update

Q&A Session:

1. Mark was asked about fund performance in the last quarter as shown on his slide, and whether this was a blip or a trend?

The last quarter of the financial year was one in which equity markets fell. The fund performance in that quarter reflected that. However the following quarter, to the end of June 2018, was positive, and took the fund value back above where it had been at the end of December 2017. There is always likely to be a degree of volatility, the value of investments can go down as well as up, but the long term trend should be upwards.

2. Mark was asked about the future of individual fund actuaries as a result of investment pooling?

While the management of the investments will be pooled, the Devon Fund remains a separate fund and will continue to set its own overall investment strategy and asset allocation. It will continue to be responsible for its own funding strategy and actuarial matters, and appoint its own fund actuary.

3. Charlotte was asked for an update on the public sector redundancy cap?

We  have no further news yet on the introduction of the redundancy cap.

4. Mark was asked about the deficit recovery period and whether it would be further reduced at the 2019 Valuation?

At the 2013 Actuarial Valuation the deficit recovery period was set at 25 years. In theory this provided for a recovery plan to bring the Devon Fund up to being fully (100%) funded over those 25 years. At the 2016 Valuation, as three years had elapsed since the last valuation, it was logical to assume we had had the first three years of the previous 25 year recovery period, and therefore set the recovery period at 22 years at that point. In theory, therefore, it should be reduced by a further three years at the 2019 Valuation, resulting in a recovery period of 19 years. However this can be flexible and the Fund Actuary will re-assess what is appropriate. It should also be emphasised that the overall Devon Fund deficit recovery period is an average for the fund and each employer has its own deficit recovery period depending on its own particular circumstances.

5. Mark was asked if we were doing anything with our investment spread to mitigate for a Brexit downturn?

The impact of Brexit is difficult to assess, but we are looking at the potential outcomes and how it can mitigate the risks. The fund has significant global investments in parts of the world that are less likely to be impacted by Brexit than the UK market, and this provides a degree of mitigation. The Fund has been reducing its exposure to the UK market on a phased basis over the last 18 months, which will help reduce the impact if UK shares fall in value as a reaction to a no-deal Brexit. The value of the UK currency is likely to be impacted by the outcome of Brexit negotiations. In the aftermath of the referendum result in June 2016, the value of Sterling fell against other world currencies and this had the impact of boosting the Pension Fund’s returns as assets held overseas in other currencies increased in value when translated into Sterling. The Fund has a currency hedging strategy that looks to manage the currency risks, the value of Sterling could go significantly up or down depending on the deal that is agreed or not agreed, so the Fund needs to take a relatively neutral stance.

6. Charlotte was asked whether there was any thinking to change the Age 55 Retirement Policy?

Government intention is to link the minimum retirement age (currently 55) to 10 years less than State Pension Age. Initial timeframe for this was April 2028 though whether this time frame still exists we don’t know. No legislation has been passed yet that will implement this change. The work done around the general redundancy packages of the public sector workers could change the minimum retirement age also in the LGPS though no timescales are known at this time.