Pensions Fund Annual Report 2011-12 , item 18. PDF 4 MB

Staffordshire
Pension Fund
Annual report and accounts 2011/2012
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1
Pension scheme registration number: 10011745

Advisers
Carolan Dobson BSc, MSII
David G Thomas BSc, FIA
Hymans Robertson LLP
Actuary
Hymans Robertson LLP
Auditors
PricewaterhouseCoopers LLP
AVC providers
Clerical Medical
Standard Life Assurance Ltd
The Equitable Life Assurance Society
Bankers
The Co-operative Bank plc
Custodian
The Northern Trust Company
Investment managers
Aberdeen Asset Managers Limited
Colliers International UK plc
Financial Risk Management Limited
Goldman Sachs Asset Management
Insight Investment
JP Morgan Asset Management
Legal & General Investment Management
Longview Partners Limited
Morgan Stanley Investment Management Limited
Pictet Asset Management Limited
Record Currency Management
Russell Investments Limited
Sarasin & Partners LLP
Schroder Investment Management Limited
Standard Life Investments Limited
State Street Global Advisors Limited
Legal adviser
John Tradewell, LLB, MBA
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Director of Law and Democracy
Official responsible for the fund
Andrew Burns BSc (Hons), CPFA, MBA
Director of Finance and Resources
Performance measurement
Portfolio Evaluation Ltd
WM Performance Services
If you need more information, you can find contact
names and phone numbers on page 55.

Contents
2
3
9
18
27
53
55
Chairman’s report
Fund management
Governance 3
Pensions Committee 3
Pensions Panel 5
Risk management 8
Investment report
Investment background 9
Pension fund investment returns 14
Corporate governance and socially responsible investment 16
Fund membership
Fund administration 18
Scheme membership 20
New scheme 22
Benchmarking 23
Communications 24
Organisations who are members of the fund 26
Financial statements 2011/2012
Glossary
Contacts
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Pension fund account 28
Net assets statement 29
Actuarial statement 30
Pension fund accounts reporting requirement 32
Notes to the accounts 34
Statement by the appointed auditor 52
Glossary of terms 53
Photo credits 54
1

C h a i r m a n ’s r e p o r t
Welcome
to our pension fund’s annual report for
the financial year ended March 2012.
2011/2012 has been a turbulent year in the financial markets with
the eurozone debt crisis continuing to cause shockwaves globally
and showing no signs of abating as the period ended. In the UK,
where the EU is our biggest export market, we have not escaped
unscathed, with the economy returning two consecutive quarters of
negative growth in the second half of the period to enter a double
dip recession for the first time since the 1970’s.
In the face of the challenges in the financial environment, it has been
pleasing that the fund, through its strategic planning has managed to
grow this year, increasing in value by 4.5% to £2,679m. In doing this
the fund has outperformed both its own benchmark and the average
return of other local authority funds which is good news for all our
stakeholders.
During the year there have been further developments regarding
reform to the Local Government Pension Scheme as an outcome of
the Hutton review of public sector pension schemes. More details
on this can be found in our fund membership pages alongside details
of the current scheme.
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Throughout this document you will find lots of useful information
on the fund including investment performance information, details
on how the fund is run and our fully audited accounts for the
year. Should you have any further queries though, please feel free to
contact us using the details on page 55.
Finally, I would like to take this opportunity to thank the Director of
Finance and Resources and his staff for their work during the year.
Phillip E B Atkins
Chairman (Pensions Panel)
2

F u n d m a n a g e m e n t
Governance
Staffordshire County Council is legally responsible for the fund. Managing the fund’s
affairs effectively is one of our main aims. As a result of the Local Government Act
2000, the county council introduced a new set of rules known as the ‘constitution’.
Under the constitution, the Pensions Committee and Pensions Panel are delegated to
look after the fund as set out below.
Pensions Committee
The main tasks of the Pensions Committee are to;
decide the overall funding strategy
decide how much of the fund should be shared out between different types of assets and which
countries they should be invested in
make sure that the fund invests in different kinds of assets to spread the risk
review investments to make sure they are suitable for the needs of the fund
agree the terms under which bodies (for example, contractors) will be allowed to join the scheme
decide how to use its discretionary powers
approve the annual report and accounts
monitor the overall administration of the scheme.
Pensions Committee council members
Philip E B Atkins
Ray Barron
Brian Beale
Pat Corfield
MaryonDRAFT
Mike
DRAFT
Mike Maryon Michael Lawrence Stephen Sweeney
Christina Jebb
Geoffrey Locke
3

F u n d m a n a g e m e n t
During the course of 2011/2012 the Pensions Committee:
Approved the payments of pensions to third parties without power of attorney agreements.
Reviewed the service performance of the pensions team and cost of the administration and
investment functions of the fund.
Responded to the consultation on central government plans to reform the Local Government
Pension Scheme (LGPS).
Approved the Pensions Business Plan for 2012/2013.
Reviewed and updated the Statement of Investment Principles and Risk Register.
Involving others in Governance
As well as the nine members on page 3, the Pensions Committee also has co-opted members. Co-opted
members represent the Pensions Consultative Forum, which is made up of representatives from all
organisations that are members of the fund.
The co-opted members cannot vote at meetings and are shown below with who they represent.
Two members are from trades unions, who represent employees and three are from other
employers. During the course of the year the structure of co-opted members was reviewed and the
decision taken to include a sixth co-opted member to represent pensioners.
Co-opted members
Alan Knight (Employees)
Will Enes-Borlace (Employers)
David Loades (Employers)
Steve Elsey (Employees)
Alison Elsmore (Employers)
Eric Shaw (Pensioners)
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4

7
F u n d m a n a g e m e n t
Pensions Panel
The Pensions Panel helps the Pensions Committee. The Pensions Panel’s main tasks are to;
decide the appropriate structure of investment management and appoint appropriate investment
managers
co-ordinate the activities of the various investment managers to reflect the overall aims of the
fund
monitor how the investment managers perform against their investment targets.
The Director of Finance and Resources is responsible for managing the fund’s investments from
day to day, in line with the decisions of the Pensions Panel.
Pensions Panel council members
Philip E B Atkins
Christina Jebb
Stephen Sweeney
Mike Maryon
Michael Lawrence
The Pensions Panel during 2011/2012:
Approved 2.5% of the funds assets to be allocated to alternative asset managers to further
holdings.DRAFT
diversify the funds holdings.
Approved four property purchases to bring the funds property holding nearer to its
benchmark of 10% of the fund.
Approved an Annual Investment Strategy for managing the pension funds cash.
Reviewed the pension fund’s corporate governance arrangements.
More details of the responsibilities of the Pensions Committee and Pensions Panel are set out in
our Governance Policy Statement which is available on our website at www.staffspf.org.uk.
The Governance Policy Statement also contains the ‘Statement of Compliance’. This is our
assessment of how the fund’s governance arrangements compare to nine best practice principles
governmentḌRAFT
set by the
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5

F u n d m a n a g e m e n t
Attendance
The table below sets out the attendance at quarterly Pensions Committee and Pensions Panel
meetings in 2011/2012.
Pensions Committee
Committee
24/06/2011 28/10/2011 16/12/2011 23/03/2012
member
Phillip Atkins
Ray Barron
Brian Beale
Pat Corfield DRAFT
Mike Maryon
Michael Lawrence
Stephen Sweeney
Christina Jebb
Geoffrey Locke
Alan Knight
Will Enes-Borlace
n/a
n/a
Dawn Critchley
n/a
n/a
n/a
David Loades
n/a
n/a
Eric Shaw
n/a
n/a
n/a
Steve Elsey
n/a
n/a
n/a
Alison Elsmore
n/a
n/a
n/a
n/a = not a member of the committee at the time of meeting.
Pensions Panel
memberDRAFT
Panel member 24/05/2011 12/09/2011 29/11/2011 21/02/2012
AtkinsDRAFT
JebbDRAFT
Phillip Atkins
Christina Jebb
Mike Maryon
Michael Lawrence
Stephen Sweeney
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PanelDRAFT
Pensions
6

F u n d m a n a g e m e n t
Administration
The Director of Finance and Resources and
his staff are responsible for the administration
and accounting functions that relate to the
investments of the fund. All transactions carried
out by the funds investment managers are
recorded and examined.
The Director of Finance and Resources and his
staff are also responsible for all administration
related to recording each member’s years of
service, working out benefits and paying pensions.
The Director of Law and Democracy is
responsible for providing legal advice.
Advice
The Pensions Committee and Pensions Panel
take advice from the Director of Finance and
Resources and external consultants appointed by
the Pensions Panel, including a main investment
consultant and two independent consultants. We
review their performance annually.
Training
Recently the Pensions Committee approved an
updated training plan for members and officers
adopting the Chartered Institute of Public
Finance and Accountancy (CIPFA) Knowledge
and Skills Framework. The training will look to
address six areas of knowledge.
Legislative and governance.
Accounting and auditing.
Financial services, procurement, and
relationship management.
Investment performance and risk
management.
Financial markets and products knowledge.
Actuarial methods, standards and practices.
During the year Pensions Committee members
received training on the impact of academies on
the pension fund and updates on the reform of
the LGPS. The Pensions Panel received training
on hedge funds and on investing in alternative
assets.
Communication
During 2011/2012 a review of the funds
communication strategy took place and an
updated document was approved by the
Pensions Committee. The document is kept
under review annually but has specifically
been updated during 2011/2012 to meet the
increased communications required by the
reform of the LGPS. A copy of the updated
communications strategy is available at
www.staffspf.org.uk.
Full details on the how the fund communicates
with its members are available on page 24.
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7

F u n d m a n a g e m e n t
Risk management
The primary objective of the fund is to ensure
that sufficient funds are available to meet all
pension liabilities as they fall due for payment.
Therefore managing risk is very important to
the fund to ensure this objective is always met.
Below are some of the largest risks that have
been identified and how they are managed.
The largest risk the fund faces is having a
large proportion of the fund invested in
equities. The fund invests in equities as they
are expected to provide better returns than
government bonds over the long term. The
risk with this strategy is that equities are not
guaranteed to provide better returns than
government bonds and stock market crashes
like those seen over the last ten years have
become more common.
This investment risk is managed through the
funding strategy which relies on the long term
agreement of the main employing bodies in
the fund, allowing a long term investment
perspective to be taken. The market
environment is also constantly monitored and
changes made to the asset allocation to take
account of market conditions.
Another risk the fund faces is that of an
ageing population, meaning that people are
receiving their pensions for longer. This is an
area which is difficult to forecast accurately,
but as people are living longer the cost to
the fund increases.
To reduce this risk we have made
assumptions on future life expectancy with
allowances for future increases. The fund
actuary also has access to information on
the experiences of other local authority
pension funds, which allow changes that
would affect our fund to be identified early.
The fund also faces a high risk from
inflation rates. For example, an increase in
the rate of inflation increases the value of
future payments the fund has to make to
pensioners as they are linked to the level of
inflation.
In 2010, the Government announced it
is linking future pension increases to the
Consumer Prices Index (CPI) rather than
the Retail Prices Index (RPI). CPI is generally
lower than RPI, so will reduce the future
liabilities for the fund. Investing some of the
fund in assets linked to inflation rates can
also reduce this risk.
To see more of the risks that we face and how
we manage them, visit
www.staffspf.org.uk to see
our Funding Strategy Statement and Statement
of Investment Principles.
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8

I n v e s t m e n t r e p o r t
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Investment background
Global equities
Most global stock markets, apart from Japan in the region. As the year came to a close action
– which was recovering from a devastating by major central banks to increase liquidity to
earthquake and tsunami, began the period the financial sector helped equities rally to end
on a positive note but it did not take long what had been a volatile year on a positive note.
for this sentiment to turn. Fears over the The positive momentum in global stock markets
eurozone debt crisis spreading to the major continued into 2012 helped by continued
economies of Italy and Spain and the inability improving US data and the agreement of a
of US politicians to agree on debt reduction second bailout package for Greece. In the UK
plans and subsequent loss of their ‘AAA’ credit specifically, markets were buoyed further in
rating all helped to send markets lower over February as the Bank of England added another
the summer. Optimism returned briefly in £50 billion to its programme of quantitative
October as improving US data and renewed easing. As the period came to an end though,
hopes for a resolution to the issues in the the early year momentum could not be
eurozone saw markets rally but this was halted maintained as worries about the eurozone debt
in November as both Greek and Italian Prime crisis came back to send global stock markets
Ministers resigned adding to the turbulence lower again.
Major asset class returns for year ended 31 March 2012
Staffordshire
Staffordshire Pension
Pension Fund
Fund benchmark
25.0%
22.1% 21.9%
20.0%
15.0%
10.0%
7.2%
6.6%
5.0%
1.6% 1.4%
1.0%
0.2% -0.7%
0.6%
0.0%
-5.0%
UK equities
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Global
equities
UK Bonds Property Cash
9

I n v e s t m e n t r e p o r t
Bonds
A steady deterioration in global economic data
and renewed problems in the eurozone meant
that government bonds in major markets (such
as the UK, Germany and US) performed very
strongly in the first few months of the period,
benefiting from a flight to quality as investors
purchased heavily. Corporate bonds in contrast
performed poorly with sectors such as banking,
telecoms and utilities, which had the most
exposure to troubled European economies,
doing the worst. This trend continued
throughout the summer as investors continued
to switch from riskier assets such as corporate
bonds and peripheral European government
debt to the continued benefit of perceived
safe havens such as UK government bonds.
Corporate bonds did outperform government
bonds in October on measures taken to
combat the eurozone debt crisis.
Percentage breakdown of investment
type at 31 March 2012
Cash
(2.7%)
UK equities
(25.3%)
UK bonds
(12.5%)
Property
(8.8%)
Other
(6.8%)
However, it did not take long for the previous
trend to be re-established, with corporate
bonds in particular remaining volatile until the
end of the year.
The start of 2012 signalled a turnaround
in bond markets. The major government
bond markets that had performed so well in
2011 began to find it tougher and corporate
bonds, helped by improving economic data
and the action of the European Central
Bank to provide extra liquidity to the
financial sector, performed much better. This
positive movement in corporate bonds over
government bonds was maintained through
the start of 2012, but began to slow as we
got nearer the end of the period as the now
familiar worries over the eurozone began to
creep back into investors minds.
Global
equities
(43.9%)
Europe –
not including
the UK
(8.3%)
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North
America
(21.9%)
Japan
(1.7%)
Asia pacific –
not including
Japan
(4.5%)
Emerging
markets
(7.5%)
10

I n v e s t m e n t r e p o r t
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Property
The UK commercial property market weakened slightly over the period as it was not immune to
the effects of the eurozone debt crisis and general market turbulence. The market was supported
though by the still relatively attractive returns it offers, in terms of rental income, compared to
other assets.
During the period offices, and particularly prime office locations such as central London continued
to perform well with retail property performing the worst. As the period came to a close,
occupier demand for all property types slowed as in the current economic climate companies
remained unwilling to take on extra commitments.
Alternative investments
The market for private equity investments during the period was quite volatile but sections of the
private equity market did have a successful year leading to overall positive returns from this asset
class. The hedge fund market struggled to generate returns during the period, although the market
is a very diverse one and depending on manager selection some investors will have been rewarded
with positive returns.
The 10 largest equity holdings
Name of company Market value on 31 March 2012
Royal Dutch Shell £24,279,211
Vodafone £22,148,533
HSBC
£19,528,366
British American Tobacco
£15,097,385
Glaxosmithkline
£13,080,164
BP
£12,819,564
Standared Chartered
£12,766,135
Rio Tinto
£11,247,262
Oracle
£9,771,405
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Rio TintoDRAFT
Pfizer £9,197,215
11

I n v e s t m e n t r e p o r t
Investment report
Largest direct property holdings
Market value on
Location
Use
31 March 2012
Bridge Street, Dover Foodstore £17,700,000
Killingbeck Retail Park, Leeds Retail £17,650,000
16 Upper Woburn Place, London WC1 Office £17,400,000
Burwood House, London SW1 Office £16,150,000
Hayes Road, Hayes Retail £12,750,000
How much of the investments
each manager looks after
(by market value on 31 March 2012)
1.2%
3.5%
1.0%
Schroder
Various private
Director of Finance
1.2%
Investment
equity managers
and Resources 9.9%
Morgan Stanley Investment Management
Management
(private equity)
(centrally held) Standard Life
(alternatives)
(alternatives)
Investments
(UK equity)
0.9%
Financial Risk Management (hedge funds)
1.1%
Goldman Sachs Asset Management
(hedge funds)
30.4%
State Street
1.9%
Global Advisors
Pictet Asset Management
(global index
(emerging markets equity)
tracking)
2.3%
Russell Investments
equity)DRAFT
(emerging markets equity)
8.8%
(property)DRAFT
Colliers International UK (property)
6.9%
equity)DRAFT
Sarasin & Partners (global equity)
DRAFT
6.9%DRAFT
8.8%DRAFT
2.3%DRAFT
3.8%
Longview Partners
10.0%
(global equity)
DRAFT£17,400,000
DRAFT17,400,000
Insight Investment
7.0%
(UK Government
JP Morgan Asset
conventional and
2.6%
7.5%
Management
index-linked bonds)
Legal & General
Aberdeen Asset
Investment Management (global equity)
Managers
(UK Government indexlinked
(global equity)
bonds)
12

I n v e s t m e n t r e p o r t
Investment performance
The graph below compares the fund return over the past 10 years against inflation, via the Retail
Prices Index and Average Weekly Earnings. It can be clearly seen that the fund has performed well
over the past decade versus inflation and earnings.
The value of all three measures, 10 years prior to the end of 2011/2012, have been rebased to 100
and the graph shows the performance of each measure on 31 March of each year since.
180.0
170.0
160.0
150.0
140.0
130.0
120.0
110.0
100.0
90.0
80.0
70.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Average Weekly Earnings
Retail Prices Index
Fund return
DRAFT174.8
DRAFT138.1
DRAFT138.0
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13

I n v e s t m e n t r e p o r t
Pension fund investment returns
Investment report
For the year ending 31 March 2012 the fund’s total investments earned a return of 4.5% to
increase the fund value to £2,679m. The average return for all local authorities was 2.6% as
measured by WM Performance Services. Full details on the funds performance for the periods up
to 31 March 2012 are shown below.
Despite the continued challenging economic environment the fund performance has continued to
please; outperforming its own investment benchmark and the performance of other local authority
pension funds for the past I and 3 years. The under-performance in the 5 and 10 year periods were
primarily driven by poorly performing investment managers who have since had their contracts
terminated.
The bar chart on page 15 shows the performance of the funds investment managers for 2011/2012
against their individual benchmark.
18.0%
16.0%
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
4.5%
3.5%
Staffordshire
Pension Fund
2.6%
16.7% 16.2%
Staffordshire Pension
Fund benchmark
14.5%
2.8%
3.7%
3.2%
WM Local Authority
Universe Average
4.5%DRAFT
3.5%DRAFT
2.6%DRAFT
4.0%
DRAFT
5.7%
6.1%
1 year 3 year 5 year 10 year
5.7%
16.7%
16.2%
14
14

I n v e s t m e n t r e p o r t
Investment manager return for year ended 31 March 2012
6.3%
-0.4%
Aberdeen Asset Managers
(global equity)
7.2%
6.6%
Colliers International UK
(property)
-1.2%
1.0%
Financial Risk Management
(hedge funds)
Goldman Sachs Asset Management
0.0%
(hedge funds)
1.0%
Insight Investment (UK Government
conventional and index-linked bonds)
22.2%
22.1%
JP Morgan Asset Management
-2.3%
(global equity)
-0.4%
Legal & General Investment Management
(UK Government index-linked bonds)
21.1%
21.2%
Longview Partners
7.9%
(global equity)
-0.4%
Pictet Asset Management
-13.7%
(emerging markets equity)
-8.5%
Russell Investments
-6.7%
(emerging markets equity)
-8.5%
Sarasin & Partners
(global equity)
-3.2%
-0.4%
Standard Life Investments
1.9%
ManagementDRAFT
(UK equity)
State Street Global Advisors
(global index tracking)
1.4%
1.2%
1.1%
-15.0% -10.0% -5.0% 0.0% 5.0% 10.0% 15.0% 20.0%
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returnDRAFT
Investment manager return
Investment manager benchmark
15

I n v e s t m e n t r e p o r t
Corporate governance and socially responsible investment
Introduction
The Pensions Committee recognises its role as one of promoting best practice in corporate
governance which is considered to be consistent with seeking long term returns. As a result, the
fund requires its UK equity managers to comply with the Financial Reporting Council’s (FRC) UK
Stewardship Code and asks that other investment managers should be required to follow it as far
as possible.
Previously UK equity managers were required by the funds Statement of Investment Principles
to comply with the Institutional Shareholders Committee (ISC) Combined Code on Corporate
Governance. The ISC Code has now been replaced by the FRC’s UK Stewardship Code.
The Pensions Committee policy on socially responsible investment is to endorse the United
Nations (UN) Principles of Responsible Investing and encourage all its equity managers to sign
up. All the pension funds current equity managers are signed up to the UN principals therefore
promising to incorporate environmental, social and governance issues into their investment
process.
The Principles were developed by an international group of investors, reflecting the increasing
relevance of environmental, social and governance issues to investment practices. Governance
issues refers to the way an organisation is directed and controlled by management.
Details of the funds individual investment manager corporate governance and socially responsible
investment policies, as well as details on the UK Stewardship Code and the UN principles are
available on the Staffordshire Pension Fund website www.staffspf.org.uk
Annual voting summary
The Pensions Panel receives quarterly updates from managers on details of votes cast on
corporate resolutions for holdings in their relevant portfolios. Below is a summary of their activity
in 2011/2012. To see the managers quarterly voting summaries in full please contact the Treasury
and Pension Fund team at: treasury.pensionfund@staffordshire.gov.uk or 01785 276330.
Total
Vote with Votes against
Not
Abstain
resolutions
management management
voted
MorganDRAFT
JP Morgan 42,707 37,620 4,562 525 0
AberdeenDRAFT
Standard Life 1,700 1,654 13 33 0
Aberdeen 623
556 27 10 30
Sarasin 1,109 573 170 36 330*
Longview 526 472 53 1 0
State Street 9,052 8,722 255 75 0
* Due to restrictions on trading
DRAFT
Standard LifeDRAFT
16

I n v e s t m e n t r e p o r t
Current issues
Below is a small selection of issues that are were topical in the pensions industry during the year
and created media headlines:
The issue of high executive pay was a dominant one in the pensions industry during the year,
with several recent high profile backlashes by shareholder groups against what have been
perceived as over-generous settlements to management with no link to company performance.
Hydraulic fracturing, a controversial method of gas extraction where water, sand and chemicals
are injected into wells at high pressure to break open shale rock, has been attracting attention
recently and pension funds, as long term investors in energy companies have been asked to
apply pressure to make the process less environmentally damaging.
Issues at News Corporation (owner of The News of The World) have been high profile
throughout the year with many institutional investors voting against the re-election of the
board at their AGM due to the failures associated with the phone hacking scandal.
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17

F u n d m e m b e r s h i p
Fund administration
Staffordshire County Council is the administering authority for the Staffordshire
Pension Fund.
Employees (apart from teachers, police officers and fire-fighters) of all the local
and joint authorities in the Staffordshire area and of many other public bodies have
automatic access to the scheme. Employees of a wide range of other bodies providing
public services can join the scheme if covered by a relevant resolution or by an
admission agreement made between the body concerned and Staffordshire County
Council. Local authority councillors may also be eligible to join the scheme. A list of
employers contributing to the fund at 31 March 2012 can be found on page 26.
The scheme is a traditional defined benefit final salary scheme where we normally
use years of membership and pay, near to retirement to work out benefits. Statutory
regulations define the benefits and they do not depend on investment performance or
market conditions. A summary of the main benefits offered by the scheme as it stood at
31 March 2012 can be found below:
Eligibility for membership
Membership is generally available to employees
of participating employers who have contracts
of at least three months, are under age 75,
and are not eligible for membership of other
statutory pension schemes. Employees of
designating bodies or admitted bodies can only
join if covered by the relevant agreement.
Benefits on retirement
For membership from April 2008 onwards,
pension benefits are calculated as 1/60th of
final pay for each year of membership. Benefits
for earlier membership consist of a pension
calculated as 1/80th of final pay for each year of
membership plus a lump sum of three times the
pension. Actual membership may be enhanced
automatically in cases of ill health retirement.
Employers may choose to increase membership
or pension. Members can normally exchange
some pension to provide a bigger lump sum.
Age of retirement
Normal retirement age is age 65, but;
pension benefits are payable at any age if
awarded due to ill health
members may retire with full accrued
benefits from age 55 onwards if their
retirement is on grounds of redundancy or
business efficiency
members who have left employment may
request payment of benefits from age 55
onwards, but requests made before age 60
need employer consent. Actuarial reductions
may apply where benefits come into payment
before age 65
members who remain in employment may
also ask to retire flexibly from age 55
onwards if they reduce their hours of work
or grade. Employer consent is required and
actuarial reductions may apply
payment of benefits may be delayed beyond
age 65 but only up to age 75.
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18

F u n d m e m b e r s h i p
Benefits on death in service
A lump sum is payable, normally equivalent to
three year’s pay. The administering authority
has absolute discretion over the distribution
of this lump sum among the deceased’s
relatives, dependants, personal representatives
or nominees. Pensions may also be payable to
the member’s widow, widower, civil partner,
nominated cohabiting partner and dependent
children.
Benefits on death after
retirement
A death grant is payable if less than 10 years
pension has been paid and the pensioner is
under age 75 at the date of death, in which case
the balance of 10 years of pension is paid as a
lump sum. Pensions are also generally payable
to the pensioner’s widow, widower, civil partner,
nominated cohabiting partner and dependent
children.
Extra benefits
The scheme offers several ways for members to
improve benefits:
Payment of additional regular contributions
(ARCs) to buy extra pension.
A money purchase additional voluntary
contribution (AVC) scheme which operates
with Clerical Medical and Standard Life
offering pension and life assurance options.
Cost of living increases
Pensions payable to members who retire on
health grounds and to members’ spouses etc
and children are increased annually by law in
line with increases in inflation. Pensions payable
to other members who have reached the age
of 55 also benefit from this annual inflation
proofing. Where a member has an entitlement
to a Guaranteed Minimum Pension (which
relates to membership up to 5 April 1997),
some or all of the statutory inflation proofing
may be provided by the Department for Work
and Pensions through the State Pension.
Contributions
Standard employee contributions vary according
to levels of pay, ranging from 5.5% of pay to
7.5% of pay. Employers meet the balance of the
cost of the scheme through variable employer
contributions. The funds actuary normally sets
employer contributions following actuarial
valuations held every three years. Employer
contributions can rise or fall depending on
the solvency of fund and the estimated cost of
providing benefits for future membership.
DRAFT
19

F u n d m e m b e r s h i p
Fund membership
earlyḊRAFT
Scheme membership
Membership of the Staffordshire Pension Fund continues to grow. The following information shows
the number of active, deferred and retired members over the five years to 31 March 2012.
31 March 2008 31 March 2009 31 March 2010 31 March 2011 31 March 2012
Active pensionable employees 37,751 38,043 37,633 36,218 34,846
Pensioners 20,265 21,599 22,983 24,201 25,821
Deferred pensioners (people who
22,710 25,445 27,565 29,922 31,535
no longer pay into the scheme)
Total membership 80,726 85,087 88,181 90,341 92,202
40,000
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
Active pensionable employees
Pensioners
Deferred pensioners
(people who no longer pay into the scheme)
31 March 2008
31 March 2009
31 March 2010
31 March 2011 31 March 2012
There were 4,305 members who joined the fund during the period, of which 34 had transfers
into the fund from other Local Government Pension Scheme (LGPS) administrators and 80 had
transfers initiated from private schemes or other pension arrangements.
There were 1,282 retirements where members had left the LGPS with immediate entitlement to
benefits. There were a further 536 benefits put into payment following the member reaching an age
at which a deferred benefit could be bought into payment automatically, or where the member had
elected to do so early.
Number of members
DRAFT
During the same period the number of actual ill health retirements that occurred was 50.
There has been a further increase during 2011/2012 in the number of employers contributing to
the fund with the overall number of actively contributing employers rising to 117 as at 31 March
2012. The main sources of new employers are academies, which are designated in the scheme rules
as “scheme employers” and therefore required to participate, as new admitted bodies. In most
cases, admission agreements are made to allow existing scheme members who are outsourced
by a local authority or other scheme employer to a private sector contractor to continue as
members of the scheme. In other cases, agreements have been made to reflect an existing body’s
change of legal status.
DRAFT31,535
DRAFT92,202
A list of all the new organisations to join the fund and those which have left during 2011/2012 are
provided overleaf.
20

F u n d m e m b e r s h i p
aT
New organistations to the fund
Name
Date effective from
Belgrave Academy 1 April 2011
Lovell Partnerships Limited 1 April 2011
Violet Way Academy 1 June 2011
Erasmus Darwin Academy 1 July 2011
Christchurch Academy 1 August 2011
Chadsmead Primary Academy 1 August 2011
2011T
The Cheadle Academy 1 August 2011T2011
Cannock Chase Academy 1 September 2011
Staffordshire University Academy 1 September 2011
The Creative Education Academy Trust 1 September 2011
The Landau Forte Academy 1 September 2011T
2011
The Biddulph Academy 1 September 2011
The Ormiston Horizon Academy 1 September 2011
The Discovery Academy 1 September 2011
Lichfield Diocese Woodard
DRAF1 Academy 1 September 2011
Weston Road Academy 1 October 2011
Bridgtown Parish Council 6 December 2011
Organisations which have left the fund
Name
Date effective from
Connexions Staffordshire
1 April 2011
Bretby Crematorium Joint Committee
31 August 2011
KGB Cleaning Services Limited (ex SCC)
30 November 2011
Morrisons Facilities Services Limited
31 March 2012
New Administration Software
During the last twelve months Pension Services have been involved in the introduction of
Heywood Altair, this replaced the former AXISe administration system. The project involved large
scale data conversion, testing, audit compliance and staff training. Altair allows improved database
reporting and interfacing and in conjunction with Staffordshire ICT we have now introduced full
arrangements.DRAF
disaster recover arrangements.
The introduction of Altair now means the section has an up to date pensions administration
system in place with guaranteed future compatibility for the proposed new 2014 LGPS based on a
career average rather than current final salary basis.
New Regulations
This year saw no significant changes to the existing scheme rules.
DRAF
T
21

F u n d m e m b e r s h i p
DRAFT
New scheme
During the previous year the government announced that there was to be a review of all public
sector pension schemes and a commission was set up chaired by Lord Hutton. The commission
was set up to consider a number of options and issued a final report on 10 March 2011 containing
27 recommendations. Recently the Local Government Association and trade unions announced
the outcome of their negotiations on a new LGPS scheme as a result of the Hutton review and it
is expected that the new scheme will be introduced in 2014. Initial indications lead us to believe
that the new scheme will be career average rather than final salary; a link will be made between
scheme retirement age to the individual member’s State Pension Age and there will be full
protection for service accrued up until the point of change.
Staffordshire Pension Fund will keep its membership updated with all the proposals and the
outcome of the consultation when full details are available.
Retirements over the past 5 years
Type 2007/2008 2008/2009 2009/2010 2010/2011 2011/2012
Ill Health 60 50 76 63 50
Redundancy or efficiency 375 918 557 530 558
Other early retirements 19 62 166 110
74
Normal 934 549 1,108 1,181 1,136
Total 1,388 1,579 1,907 1,884 1,818
Average cases processed per member of staff 2011/2012
640.7 (654 2010/2011)
Total cases 18,324; staff 28.6 (19,358; staff 29.6 2010/2011)
Based on CIPFA numbers for Retirements, Transfers, Refunds, Preserved Benefits, Purchases, Divorces and Deaths
Internal dispute resolution procedure
The LGPS has an appeal system known as the ‘internal dispute resolution procedure’. Scheme
members or their representatives can appeal against decisions relating to the benefits they are
awarded or the membership they are entitled to, or complain about the way their case has been
handled. The appeal process is in two stages. At stage one, the scheme employer who made the
original decision reviews the matter. At stage two, we, the administering authority, review the
member’s appeal. Both we and the scheme employer must appoint a ‘specified’ person to review
the appeal.
DRAFT
During 2011/2012 Staffordshire County Council as administering authority reviewed fifteen stage
two appeals. The results are shown in the table below.
Appeal
Appeal Case referred to Decision due
TOTAL CASES
Dismissed
Successful the ombudsmen to be made
15 9 3 0 3
TOTAL CASESDRAFT
Although there have been successful appeals during 2011/2012, every effort is made by both
employers and the administrating authority to take the relevant steps to prevent similar issues
arising again.
As a number of the appeals related to ill health decisions, steps are currently being taken to
reform this method of referral.
22

F u n d m e m b e r s h i p
Benchmarking
National benchmarking: service standards result for 2011/2012
2011/2012 2010/2011
Transfer out - quote
100
(Target 10 days)
99
Refund - payment
89
(Target 5 days)
83
Deferred benefits - send details
86
(Target 10 days)
87
Death - send details
89
(Target 5 days)
86
Death - initial acknowledgement
97
(Target 5 days)
98
Retirements - payment
95
(Target 5 days)
96
Retirements estimate - issue quote
99
(Target 10 days)
99
Transfer in - issue quote
95
(Target 10 days)
95
0 10 20 30 40 50 60 70 80 90 100
% of procedures meeting standard (target 90%)
Further development of procedures to monitor and evaluate the performance of the fund and
scheme employers in meeting the agreed service standards will be a priority over the forthcoming
year in line with the introduction of our Administration Strategy.
CIPFA pensions administration benchmarking costs 2011/2012
The fund continues to participate in the Chartered Institute of Public Finance and Accountancy
(CIPFA) Pensions Administration Benchmarking Club. The results for the administration cost for
each member of the fund for 2011/2012 are below.
Cost for each member
Staffordshire County Council
£22.21 (£20.57 2010/2011)
averageDRAFT
National average
£21.54 (£22.68 2010/2011)
DRAFT
DRAFT99
DRAFT89
DRAFT83
DRAFT87
DRAFT86
DRAFT97 DRAFT98
Although the cost per member increased for 2011/2012, costs are continually monitored to
ensure savings can be made where possible. Actual staffing costs were reduced in 2011/2012 but
actuarial costs increased in the short term due to the high number of employers joining the fund.
23

F u n d m e m b e r s h i p
Communications
The fund publishes its Communications Policy
on its website www.staffspf.org.uk.
The fund believes that clear and meaningful
communication with members and employers
is vital and it uses various media to achieve
effective communication including newsletters
for members and a separate newsletter for
pensioners.
nest egg inContact
A Newsletter for retired members of the Local Government Pension Scheme participating the Staffordshire Pension Fund
December 2011 – Issue 7
A newsletter for members of the Local Government Pension
Scheme participating in the Staffordshire Pension Fund
Latest News on Pension Reform
The story so far…
Since the last edition of Nest Whatever changes do eventually occur, it should
Egg, public sector pensions be remembered that the LGPS will still provide an
have remained headline news. excellent range of benefits to its members. We explain
The Government and various these benefits inside this edition of Nest Egg and
public sector unions have been
the consequences of what you could lose if you are
in discussion regarding the
considering opting out.
future for a number of public
sector schemes. This edition Your Annual Benefit Statement for 2011 provides
of nest egg provides more details of the estimated value of your LGPS benefits as at
detail regarding the Local 31 March 2011 and it is worth remembering that despite
Government Pension Scheme (LGPS) and aims to clarify any future change, the basis upon which these have built
the headlines and present them as more meaningful facts up will not be affected.
for members of the scheme.
In brief, the Government has adopted a 2 step approach
to reform. The first step which forms the basis of the
current consultation can be viewed on our pension
website. The key proposals are:
Janet Caiazzo
• an increase in employee contributions from April 2012
Pensions Manager
• reduced future benefits from April 2013/2014
• linking the scheme retirement age to state
retirement age
The second step would see the introduction of a new
In this issue
scheme by 2015.
Pension Reform – the story so far___________ 1
An alternative solution may be to roll all the changes into
Pension Reform – reason for change_________ 2
one; this is currently being considered at a national level.
Pension Reform – how may it affect me? __ 3 & 4
Spring 2012
The details in this Nest Egg are current as at date of
going to press and could be subject to change. Pension Pension Reform – CARE scheme proposal__ 4 & 5
In this issue
Services are committed to informing its LGPS members Frequently asked questions_____________ 6 & 7
of any further developments relating to Pension Reform
• Pensions Increase for 2012
How to keep up with what’s happening_______ 8
as they happen. We have started issuing a series of
information bulletins on the subject, which can be found
on the ‘What’s New’ page of our website:
www.staffspf.org.uk .
The fund offers to hold pension surgeries
for members of all employers, normally at
their sites. During the calendar year 2011,
approximately 350 members were seen on an
In addition, employers receive regular updates
individual basis. These members were asked to
to keep them informed of all changes that
complete satisfaction questionnaires rating the
affect them. The fund’s objective is to provide
adequacy of the fund’s response, the helpfulness
information electronically where appropriate.
of the fund’s staff, the suitability of the location
The fund is currently developing a strategy to
and the privacy afforded them. The results the
increase its use of electronic delivery of generic
fund received from these questionnaires were
information such as member and employer
very positive.
newsletters. It is accepted that a significant
Annual Benefit Statements are an important
number of the fund’s members do not have
tool in communicating with
email access at their workplace and they can
both active and deferred
opt to continue to receive information in a
members of the scheme. The
printed format. Despite this, significant future
statements provide valuable
savings are expected in reduced printing and
information that assists
costs.DRAFT
postage costs.
members in understanding
The fund has had its own dedicated pension
just how their benefits are
website for over ten years and this is now a calculated and whether
major source of information for members and or not they need
employers. The site has separate sections for to make any further
each category of membership and also one for financial provision for
employers.
themselves in the future.
The website received an increased number
of ‘hits’ this year demonstrating an increased
interest in pensions following media coverage
of the Hutton Review of public sector pensions,
which has significantly highlighted the profile of
pensions.
DRAFT
24
A re-design will be
taking place of the
statements due to be
issued in 2013 which
should make them even
clearer to understand.
Dear
I am pleased to be sending you your latest annual
benefit statement which provides details of the
benefits arising from your membership of the Local
Government Pension Scheme (LGPS).
The Local Government Employers and the Unions
issued a joint Statement on 31st May 2012 outlining
the main design features of the new 2014 LGPS,
You should by now have received our newsletter
explaining the changes and timescales which the
government is working towards for implementing
the new Scheme. More newsletters are planned
together with road shows on the run up to 1st April
2014 to help members with the transition to the new
Scheme.
Pension Services welcome any comments or
suggestions you may have in respect to this statement
or any other aspects of your pension benefits.
The notes included in the statement should provide
you with an explanation of the details quoted but if
you still require assistance please get in touch. Our
contact details are provided on the back page.
Yours sincerely
Janet Caiazzo
Pensions Manager
Contact Details for Pension Services:
Wedgwood Building
Tipping Street
Stafford
ST16 2DH
Email: pensions.enquiries@staffordshire.gov.uk
Telephone: 01785 278222
Web: www.staffspf.org.uk
Dear
I am pleased to provide you with your annual deferred
benefit statement from the Staffordshire Pension Fund,
at April 2012.
The benefits shown overleaf will be paid to you in
addition to your state pension and any other benefits
you hold in this or other pension schemes.
Information on your state pension scheme benefits can
be found at: www.direct.gov.uk
Information on Additional Voluntary Contributions
(AVC) is not included; if you have investments in any
of the fund’s AVC plans you will receive a separate
annual statement from your chosen provider(s).
Pension Services would welcome any comments or
suggestions you may have in respect of this statement
or any other aspect of your pension benefits. For further
information on the LGPS please visit the Staffordshire
Pension Fund Website:
www.staffspf.org.uk
Yours sincerely
Janet Caiazzo
Pensions Manager
Contact Details for Pension Services:
Wedgwood Building
Tipping Street
Stafford
ST16 2DH
Email: pensions.enquiries@staffordshire.gov.uk
Telephone: 01785278222
Web: www.staffspf.org.uk
Annual Benefit
Statement
Deferred Members
2012
Annual Benefit
Statement 2012

F u n d m e m b e r s h i p
Customer Satisfaction
We place customer satisfaction and service excellence at the heart of everything we do. We
achieve this through delivering services through efficient business processes and providing quality
communication which encompasses customer first, best practice and value for money.
Here are some the comments we received from our stakeholders over the last twelve months:
Thank you for all your help in
dealing with my redundancy
Information Active member
I would like to thank you and
your team for how quickly I
received my lump sum and my
first pension payment from you
Retired member
May I thank you
very much for the
way my pension
was dealt with……
excellent service
Retired member
DRAFT
DRAFT
I just wanted to thank everyone for still
making the effort to send out the In Contact
magazine. I found it very informative
and helpful and commend the council for
keeping the pensioners up to date
Retired member
25

F u n d m e m b e r s h i p
Organisations which were members of the fund at 31 March 2012
Staffordshire County Council (as
employing authority)
Abbots Bromley Parish Council
Alrewas Parish Council
Anglesey Parish Council
APCOA Parking UK Limited
Aspire Housing Limited
(Newcastle)
Audley Rural Parish Council
Belgrave Academy
Biddulph Town Council
Branston Parish Council
Brereton and Ravenhill Parish
Council
Brewood and Coven Parish
Council
Bridgtown Parish Council
Burntwood Town Council
Burton-on-Trent College
C W Audit Services
Cannock Chase Academy
Cannock Chase District Council
Central Borders Housing Group
Chadsmead Primary Academy
Cheadle Town Council
Cheddleton Parish Council
Christchurch Academy
Codsall Parish Council
Colwich Parish Council
Community Council of
Staffordshire
De Ferrers Academy
Draycott in the Clay
Parish Council
East Staffordshire Borough Council
Eccleshall Parish Council
Essington Parish Council
Erasmus Darwin Academy
Evolve Young People
Fradley and Streethay Parish
Council
Gnosall Parish Council
Great Wyrley Parish Council
Haywood Engineering College
Stoke
Heath Hayes & Wimblebury
Parish Council
Hednesford Town Council
Homezone Housing Limited
(Lichfield)
Horninglow and Eton Parish Council South Staffordshire College
Inspace Partnerships
South Staffordshire District Council
J & S Seddon (Building) Limited South Staffordshire
Jack in the Box Day Nursery Housing Association
John Taylor Academy
St Joseph’s College Edmund Rice
Academy Trust
JDM Accord Limited
St Margaret Ward School
Keele University
St Thomas More Catholic College
KGB Cleaning Services Limited
(ex Newcastle College)
Stafford and Rural Homes Limited
Kidsgrove Town Council
Stafford Borough Council
Kier Group
Stafford College
Kings Bromley Parish Council Staffordshire and Shropshire
Valuation Tribunal
Kingsland Kindergarten Limited
Staffordshire Moorlands
Kinver Parish Council
District Council
Landau Forte Woodhouse
Staffordshire Police Authority
Academy
Staffordshire University
Lapley, Stretton & Wheaton Aston
Parish Council
Staffordshire University Academy
Leek College of Further Education Stoke-on-Trent and Staffordshire
& School of Art
Fire Authority
Leek Town Council
Stoke-on-Trent City Council
Lichfield City Council
Stoke-on-Trent College
Lichfield Diocese Woodard Stoke-on-Trent Education
Academy
Action Zones
Lichfield District Council Stone Town Council
Liverpool Personal
Swinfen & Packington
Services Society
Parish Council
Lovell Partnerships Limited Tamworth Borough Council
Madeley Parish Council
Taylor Shaw (Alleynes)
Make Some Noise West
Taylor Shaw (Chasetown)
Midlands Limited
The Biddulph Academy
Making Space
The Cheadle Academy
Mencap
The Co-operative Community
Moorlands Housing
Academy
Newcastle-under-Lyme
The Creative Education
Borough Council
Academy Trust
Newcastle-under-Lyme College The Crescent Pre-School
Nursery Limited
North Staffordshire
Combined Healthcare
The Discovery Academy
Northgate Information Systems The JCB Academy
UK Limited (Lichfield)
The Landau Forte Academy
Northgate Information Systems The Ormiston Horizon Academy
UK Limited (Moorlands) The Ormiston Sir Stanley
Penkridge Parish Council Matthews Academy
Perton Parish Council
Thistley Hough High School
Rolleston-on-Dove Parish Council Trent and Dove Housing
Rugeley Town Council
Association
Sixth Form College, Stoke on Trent Uttoxeter Town Council
South Staffordshire and Shropshire Violet Way Academy
NHS Foundation Trust
Weston Road Academy
Wombourne Parish Council
DRAFT
26

Financial statements
Staffordshire Pension Fund
Financial statements
1 April 2011 to
31 March 2012
DRAFT

F i n a n c i a l s t a t e m e n t s
Pension fund account
Staffordshire Pension Fund account for the year ended 31 March 2012
Contributions and benefits
Notes
2010/2011 2011/2012
£ 000 £ 000
Contributions receivable 4 159,864 153,491
Transfers in 5 11,237 9,382
171,101 162,873
Benefits payable 6 126,252 137,413
Leavers 7 9,099 52,772
Administrative expenses 8 2,536 2,696
137,887 192,881
Net additions / (withdrawals) from dealings
with fund members
Returns on investments
33,214 (30,008)
Investment income 9 46,272 46,852
Change in the market value of investments 10 150,292 53,764
Investment management expenses 12 (7,932) (8,505)
Net returns on investments 188,632
92,111
DRAFT
Net increase in the fund during the year 221,846 62,103
Opening net assets of the fund 2,395,417 2,617,263
Closing net assets of the fund 2,617,263 2,679,366
28

F i n a n c i a l s t a t e m e n t s
Net assets statement
Net assets statement at 31 March 2012
Investment assets
Notes
2010/2011 2011/2012
£ 000 £ 000
Fixed-interest securities 10 164,012 164,834
Equities 908,065 916,765
Index-linked securities 99,614 100,213
Pooled investment vehicles 1,005,822 993,420
Property 187,427 234,363
Cash deposits 107,724 72,125
Other investment balances 138,871 185,145
Derivatives 11 0 1,771
Investment liabilities
2,611,535 2,668,636
Derivatives 11 (6,984) 0
2,604,551 2,668,636
Current assets 15
22,209 21,186
Current liabilities 16
(9,497) (10,456)
Net assets of the fund at 31 March 2,617,263 2,679,366
DRAFT
The financial statements summarise the transactions of the fund and deal with the net assets available to
us. They do not take account of obligations to pay pensions and benefits which fall due after the end of the
financial year. The actuarial position on the scheme, which does take account of these obligations, is set out
in the actuary’s report.
The notes on pages 34 to 51 also form part of the pension fund financial statements.
29

F i n a n c i a l s t a t e m e n t s
basisDRAFT
Actuarial statement
This statement has been prepared in accordance with Regulation 34(1)(d) of the Local
Government Pension Scheme (Administration) Regulations 2008, and Chapter 6 of the
CIPFA/LASAAC Code of Practice on Local Authority Accounting in the UK 2011/12.
Description of funding policy
The funding policy is set out in the administering authority’s Funding Strategy Statement (FSS),
dated March 2011. In summary, the key funding principles are as follows;
to ensure the long-term solvency of the fund i.e. that sufficient funds are available to meet all
pension liabilities as they fall due for payment;
to ensure that employer contribution rates are stable;
to minimise the long-term cost of the fund by recognising the link between assets and liabilities
and adopting an investment strategy that balances risk and return;
to reflect the different characteristics of employing bodies in determining contribution rates
where the administering authority considers it reasonable to do so;
to use reasonable measures to reduce the risk to other employers and ultimately to the
council tax payer from an employer defaulting on its pension obligations.
The FSS sets out how the administering authority seeks to balance the conflicting aims of securing
the solvency of the fund and keeping employer contributions stable. For employers whose
covenant was considered by the administering authority to be sufficiently strong, contributions
have been stabilised below the theoretical rate required to return their portion of the fund to
full funding over 20 years if the valuation assumptions are borne out. Asset-liability modelling
has been carried out which demonstrate that if these contribution rates are paid and future
contribution changes are constrained as set out in the FSS, there is still a better than 50% chance
that the fund will return to full funding over 20 years.
Funding Position as at the last formal funding valuation
The most recent actuarial valuation carried out under Regulation 36 of the Local Government Pension
Scheme (Administration) Regulations 2008 was as at 31 March 2010. An estimate was also carried out as
at 31 March 2012.
Date
31 March 2010 31 March 2012
Liabilities – ongoing basis
£m £m
Assets
2,435 2,709
Liabilities
3,257 4,346
DRAFT
(Deficit) (822) (1,637)
Funding level 74.8% 62.3%
Individual employers’ contributions for the period 1 April 2011 to 31 March 2014 were set in
accordance with the fund’s funding policy as set out in it’s FSS.
Principal actuarial assumptions and method used to value the liabilities
Full details of the methods and assumptions used are described in the valuation report dated 31
March 2011.
30

F i n a n c i a l s t a t e m e n t s
Method
The liabilities were assessed using an accrued benefits method which takes into account
pensionable membership up to the valuation date, and makes an allowance for expected future
salary growth to retirement or expected earlier date of leaving pensionable membership.
Assumptions
A market-related approach was taken to valuing the liabilities, for consistency with the valuation
of the fund assets at their market value.
The key financial assumptions adopted for the 2010 valuation were as follows:
Financial assumptions
31 March 2010 31 March 2012
% p.a. Nominal % p.a. Real % p.a. Nominal % p.a. Real
Discount rate 6.1% 2.8% 4.9% 2.0%
Pay increases 5.3%* * 2.0% 4.8% 1.9%
Price inflation/pension increases 3.3% - 2.8%
-
* Salary increases are assumed to be 1% p.a. until 31 March 2012 reverting to the long term
assumption shown thereafter.
The key demographic assumption was the allowance made for longevity. As a member of Club Vita,
the baseline longevity assumptions adopted at this valuation were a bespoke set of VitaCurves that
were specifically tailored to fit the membership profile of the fund. Longevity improvements were in
line with standard PXA92 year of birth mortality tables, with medium cohort projections and a 1% p.a.
underpin effective from 2007. Based on these assumptions, the average future life expectancies at age
65 are as follows:
Males
31
Females
Current Pensioners
21.2 years
23.4 years
Future Pensioners*
23.3 years
25.6 years
*Currently aged 45
Copies of the 2010 valuation report and Funding Strategy Statement are available on request from
Staffordshire County Council, administering authority to the fund.
The next actuarial valuation will be carried out as at 31 March 2013. The Funding Strategy
Statement will also be reviewed at that time.
Douglas Green FFA
Fellow of the Institute and Faculty of Actuaries
For and on behalf of Hymans Robertson LLP
31 May 2012
Hymans Robertson LLP
20 Waterloo Street
Glasgow
G2 6DB
DRAFT
DRAFT% p.a.

F i n a n c i a l s t a t e m e n t s
Pension fund accounts reporting requirement
Introduction
CIPFA’s Code of Practice on Local Authority Accounting 2011/12 requires administering
authorities of LGPS funds that prepare pension fund accounts to disclose what IAS26 refers to as
the actuarial present value of promised retirement benefits.
The actuarial present value of promised retirement benefits is to be calculated similarly to the
defined benefit obligation under IAS19. There are three options for its disclosure in pension fund
accounts;
showing the figure in the Net Assets Statement, in which case it requires the statement to
disclose the resulting surplus or deficit;
as a note to the accounts; or
by reference to this information in an accompanying actuarial report.
If an actuarial valuation has not been prepared at the date of the financial statements, IAS26
requires the most recent valuation to be used as a base and the date of the valuation disclosed.
The valuation should be carried out using assumptions in line with IAS19 and not the pension
fund’s funding assumptions.
I have been instructed by the administering authority to provide the necessary information for the
Staffordshire Pension Fund, which is in the remainder of this note.
Balance sheet
31 March 2011 31 March 2012
Year Ended
£m
£m
Present value of promised retirement benefits
3,627 4,027
Liabilities have been projected using a roll forward approximation from the latest formal funding
valuation as at 31 March 2010. I estimate this liability at 31 March 2012 comprises £2,110m in
respect of employee members, £557m in respect of deferred pensioners and £1,360m in respect
of pensioners. The approximation involved in the roll forward model means that the split of
scheme liabilities between the three classes of member may not be reliable. However, I am
satisfied the aggregate liability is a reasonable estimate of the actuarial present value of benefit
promises. I have not made any allowance for unfunded benefits.
The above figures include both vested and non-vested benefits, although the latter is assumed to
value.DRAFT
have a negligible value.
DRAFT
It should be noted the above figures are appropriate for the administering authority only for
preparation of the accounts of the pension fund. They should not be used for any other purpose
(i.e. comparing against liability measures on a funding basis or a cessation basis).
32

notesDRAFT DRAFT
Assumptions
The assumptions used are those adopted for the administering authority’s IAS19 report as
required by the Code of Practice. These are given below. I estimate that the impact of the change
of assumptions to 31 March 2012 is to increase the actuarial present value by £126m.
Financial assumptions
My recommended financial assumptions are summarised below:
31 March 2011
31 March 2012
Year ended
% p.a.
% p.a.
Inflation / Pension Increase Rate 2.8% 2.5%
Salary Increase Rate 5.1%* 4.8%**
Discount Rate 5.5% 4.8%
*Salary increases are 1% p.a. nominal for the period to 31 March 2012 reverting to the long term rate thereafter
**Salary increases are 1% p.a. nominal for the three years to 31 March 2015 reverting to the long term rate thereafter
Longevity assumption
As discussed in the accompanying report, the life expectancy assumption is based on the fund’s
VitaCurves with improvements from 2007 in line with Medium Cohort and a 1% p.a. underpin.
Based on these assumptions, the average future life expectancies at age 65 are summarised below:
Males
Females
Current pensioners
21.2 years
23.4 years
Future pensioners*
23.3 years
25.6 years
*Future pensioners are assumed to be currently aged 45
This assumption is the same as at 31 March 2011.
Commutation assumption
An allowance is included for future retirements to elect to take 50% of the maximum additional
tax-free cash up to HMRC limits for pre-April 2008 service and 75% of the maximum tax-free
cash 2008 service.
Professional notes
This paper accompanies my covering report titled ‘Actuarial Valuation as at 31 March 2012 for
IAS19 purposes’ dated April 2012. The covering report identifies the appropriate reliances and
limitations for the use of the figures in this paper, together with further details regarding the
professional requirements and assumptions.
Prepared by:-
Douglas Green FFA
31 May 2012
For and on behalf of Hymans Robertson LLP
Financial statements
F i n a n c i a l s t a t e m e n t s
DRAFT
DRAFT% p.a.
DRAFT2.5%
DRAFT4.8%**
33

F i n a n c i a l s t a t e m e n t s
Notes to the accounts
We have prepared the financial statements in line with the requirements of the Local Government
Pension Scheme Regulations 1997 and the Local Government Pension Scheme (Management and
Investment of Funds) Regulations 2009 as amended.
They have been prepared in line with the Statement of Recommended Practice (SORP) The
Financial Reports of Pension Schemes (as amended in 2007) and follow the 2011/2012 Code of
Practice on Local Authority Accounting in the United Kingdom issued by the Chartered Institute
of Public Finance and Accountancy (CIPFA).
More information on the pension fund, including the Fund Governance Statement, the Statement
of Investment Principles and the Funding Strategy Statement can be found at www.staffspf.org.uk.
1 Basis of preparation
When preparing the pension fund financial statements we have adopted the following significant
accounting policies, which were applied consistently.
2 Accounting policies
Investments
Stocks and shares traded through the Stock Exchange Electronic Trading Service (SETS), are
valued on the basis of the latest bid (buying) price.
Pooled investment vehicles are valued at the bid market price provided by the relevant fund
managers, which reflects the market value of the underlying investments.
The value of fixed-interest investments in the fund’s investment portfolio does not include
interest earned but not paid at the year end, which is included separately within accrued
investment income.
UK directly held property investments are stated at their value on the open-market based on an
annual independent valuation (by Jones Lang Lasalle dated 11 April 2012), as at 31 March 2012.
The valuation has been made in accordance with the RICS Valuation - Professional Standards,
March 2012, published by the Royal Institute of Chartered Surveyors (RICS).
The investment manager, private-equity, hedge-fund and alternatives valuations are based on the
latest investor reports and financial statements provided by the fund managers of the underlying
funds up to 31 March 2012. Investments quoted on the stock market are valued at the bid market
price quoted on that stock market.
Derivative contracts are valued at bid market price.
Acquisition costs are included in the cost of buying investments, and note 10 gives transaction costs
for the year.
Investment income is recognised as follows:
Interest income as it accrues;
DRAFT
Dividend income on the date the shares are quoted ex-dividend;
Property related income, which primarily consists of rental income, is received in advance and
is accrued into the correct year.
34

Financial statements
F i n a n c i a l s t a t e m e n t s
Contributions
Normal contributions, both from members and from employers, are accounted for in the
payroll month they relate to, at the rates given on the rates and adjustments certificate. Extra
contributions from the employer are accounted for in line with the agreement under which they
are paid, or when they are received if there is no agreement. Amounts not due until future years
are classed as a deferred debtor.
Transfer values
Transfer values represent the amounts either due to the fund from new members previous
pension funds, or which the fund is due to pay to the new pension funds of members who have
left the fund. Transfer values are accounted for on a receipts basis.
Foreign currency transactions
Dividends, interest and the purchase and sale of investments in foreign currencies have been
accounted for at the spot rates at the date of transaction. Where forward foreign exchange
contracts are in place for assets and liabilities in foreign currencies, the exchange rate set out in
the contract is used. Other assets and liabilities in foreign currencies are given in sterling at the
rates of exchange that apply at the end of the financial year.
Surpluses and deficits arising when converting currency are dealt with as part of the change in
market value of investments.
Investment management expenses
Investment management expenses, including performance-related expenses, are accounted for on
an accruals basis and are recognised before any VAT the fund can recover. Performance related
fees were £1.27m in 2011/2012 (£1.07m in 2010/2011).
Administrative expenses
DRAFT
All staff costs of the pensions administration team are charged to the fund. A proportion of
management, accommodation and other support services are charged to the fund based on
Staffordshire County Council policy. All administrative expenses are accounted for on an accruals
basis.
Taxation
The fund is exempt from paying tax on interest received and on the proceeds of investments sold.
The fund may suffer withholding tax on overseas investments in the country of origin. Where this
is not recoverable it is accounted for as a fund expense when it arises.
Benefits payable
Under the pension fund rules, members may receive a lump-sum retirement grant on top of their
annual pension. Lump-sum retirement grants are accounted for from the date of retirement.
Other benefits are accounted for on the date the member leaves the fund or dies.
35

F i n a n c i a l s t a t e m e n t s
2 Accounting policies (continued)
Financial instruments
The fair value of financial instruments is defined as the amount for which an asset could be
exchanged, or a liability settled between knowledgeable, willing parties in an arms length
transaction.
The financial instruments of the pension fund have to be classified into the following categories
under International Financial Reporting Standards (IFRS):
Financial assets and liabilities at fair value through profit or loss, these have two categories:
Designated, where assets and liabilities are measured at fair value with fair value changes through
profit and loss and; Held for trading, where financial assets and liabilities are held for the purpose
of selling in the short term for which there is a pattern of short term profit making.
Available for sale financial assets: any financial asset designated on initial recognition as
available for sale.
Loans and receivables: any financial asset with fixed or determinable payments not quoted in
the open market such as debtors.
Held to maturity investments: any financial asset which is intended to be held to maturity at
amortised cost.
Other financial liabilities measured at amortised cost using the effective interest rate.
DRAFT
36

F i n a n c i a l s t a t e m e n t s
3 Pension fund investments 2011/2012
Funds are invested through several investment managers. The percentage of the market value of investment
assets held by each of these managers at the end of the financial year is shown below.
31 March 2011 31 March 2012
External fund manager £ 000 % £ 000 %
Standard Life Investments (UK equity) 257,068 10% 262,787 10%
State Street Global Advisors (global index tracking) 808,344 31% 808,253 30%
Insight Investment (UK Government conventional and index-linked bonds) 263,722 10% 265,077 10%
Aberdeen Fund Management (global equity) 188,305 7% 200,302 8%
JP Morgan Asset Management (global equity) 191,440 7% 187,207 7%
Legal & General Investment Management (UK Government index-linked bonds) 68,394 3% 68,452 3%
Longview Partners (global equity) 93,447 4% 100,908 4%
Record Currency Management (currency hedging) (6,748) 0% 1,809 0%
Sarasin & Partners (global equity) 189,430 7% 182,796 7%
Colliers International UK plc (property) 187,489 7% 234,669 9%
Russell Investments (emerging markets equity) 66,924 3% 62,461 2%
Pictet Asset Management (emerging markets equity) 57,971 2% 50,001 2%
Goldman Sachs Asset Management (hedge funds) 28,341 1% 28,350 1%
Financial Risk Management (hedge funds) 24,425 1% 24,120 1%
Morgan Stanley Investment Management (alternatives) 0 0% 33,250 1%
Schroder Investment Management (alternatives)* 0 0% 33,250 1%
Various private equity managers (private equity) 79,261 3% 94,181 3%
Director of Finance and Resources (centrally held) 99,894 4% 25,519 1%
2,597,707 100% 2,663,392 100%
* At 31 March 2012 the fund manager held cash pending purchase of alternatives on 2 April 2012.
The fund lends stock in return for payment. The table below summarises the value of the stock lent out by
the fund at the end of the year.
DRAFT
31 March 2011 31 March 2012
£ 000 £ 000
Equities - UK 22,814 44,583
Equities - Overseas 21,368 43,609
Index linked - UK 10,694 7,519
Fixed interest - UK 9,076 92,044
63,952 187,755
Securities released to a third party under the stock-lending agreement are included in the net assets
statement to reflect the fund’s continuing economic interest in those securities.
Collateral holdings, supporting the loans, are not identified as individual loans, but are kept in a pooled
structure. As security for the stocks on loan, as at 31 March 2012, the fund held £200.180 million (£68.944
million at 31 March 2011) of collateral in the form of government obligations (such as gilts) and equities.
Income received from stock-lending activities was £0.179 million for the year ending 31 March 2012
(£0.145 million for year ending 31 March 2011). This is included within the investment income figure shown
on the pension fund account.
37

4 Contributions receivable
Employers
2010/2011 2011/2012
£ 000 £ 000
Normal 108,786 99,492
Actuarial strain 12,814 17,707
Scheme members
Normal 38,264 36,292
Total 159,864 153,491
Employer’s normal contributions include payments for past deficits as agreed by the actuary. The
31 March 2010 valuation’s common contribution rate was 26.8% in total, of which 10.6% related
to recovering past deficits.
These contributions can be analysed by type of member body as follows.
Staffordshire County Council 66,903 66,741
Scheduled bodies 82,948 77,695
Admitted bodies 10,013 9,055
Total 159,864 153,491
5 Transfers in
2010/2011 2011/2012
£ 000 £ 000
Individual transfers in from other schemes 11,237 9,382
6 Benefits payable
DRAFT
2010/2011 2011/2012
£ 000 £ 000
Pensions 91,163 98,863
Commutations and lump-sum retirement benefits 31,730 35,603
Lump-sum death benefits 3,359 2,947
Total 126,252 137,413
These benefits can be analysed by type of member body as follows.
Financial statements
F i n a n c i a l s t a t e m e n t s
Staffordshire County Council 59,286 60,161
Scheduled bodies 60,343 71,043
Admitted bodies 6,623 6,209
Total 126,252 137,413
38

F i n a n c i a l s t a t e m e n t s
7 Payments to and on account of leavers
2010/2011 2011/2012
£ 000 £ 000
Individual transfers to other schemes 9,056 6,744
Group transfers to other schemes* 0 46,000
Payments for members joining state scheme 7 1
Refunds to members leaving service 36 27
*The group transfer figure for 2011/2012 represents the transfer of assets relating to the movement of
Staffordshire Probation Service staff to the West Midlands Pension Fund. At 31 March 2012 the fund had a
remaining commitment of £3.75m to finalise the transfer of staff. This was paid on 10 August 2012.
Total 9,099 52,772
8 Administrative expenses
2010/2011 2011/2012
£ 000 £ 000
Administration and processing 2,090 2,033
Actuarial services 176 195
External audit fee 47 43
Other expenses 173 396
Printing and publications 50 29
Total 2,536 2,696
9 Investment income
2010/2011 2011/2012
£ 000 £ 000
DRAFT
Fixed-interest securities 11,802 6,478
Dividends from equities 22,476 24,631
Income from index-linked securities 142 1,278
Income from pooled investment vehicles 772 946
Rents from property 10,511 12,832
Interest on cash deposits 713 613
Stock lending 145 179
Other 201 357
46,762 47,314
Withholding tax we cannot recover (490) (462)
Total investment income 46,272 46,852
39

10 Investment reconciliation
Value at 1 Purchases Sales Change in Value at 31
April 2011 at cost proceeds market value March 2012
£ 000 £ 000 £ 000 £ 000 £ 000
Fixed-interest securities 164,012 28,062 (54,863) 27,623 164,834
Equities 908,065 404,714 (384,663) (11,351) 916,765
Index-linked securities 99,614 29,420 (46,888) 18,067 100,213
Pooled investment vehicles 1,005,822 612,956 (651,077) 25,719 993,420
Derivatives (6,984) 7,783,281 (7,764,430) (10,096) 1,771
Property 187,427 49,624 0 (2,688) 234,363
Other 132,027 50,294 (8,094) 5,674 179,901
2,489,983 8,958,351 (8,910,015) 52,948 2,591,267
Cash deposits (central) 99,615 25,452
Managers and central cash 8,109 816 46,673
2,597,707 53,764 2,663,392
Outstanding dividend entitlements
and recoverable withholding tax 5,885 5,900
Amount receivable for sales
of investments 6,141 2,702
Amounts payable for
purchases of investments (4,939) (3,358)
Amounts due (to) / from broker (243) 0
Total 2,604,551 2,668,636
Transaction costs are included in the cost of purchases and sales proceeds and include fees,
commissions, stamp duty and other fees. Transaction costs we were charged during 2011/2012
were £3.28 million (£2.75 million in 2010/2011). As well as the transaction costs shown, we were
also charged indirectly through the bid-offer spread (the difference between bid prices and offer
prices) on investments and within pooled investment vehicles.
The fund does not hold any individual investments that exceed 5% of the total value of net assets
at 31 March 2012 (also nil at 31 March 2011).
As at 31 March 2012 the fund was committed to entering into the following investments:
£57.12m of private equity investments (£72.91m at 31 March 2011);
£1.62m of UK pooled property fund investments (£2.70m at 31 March 2011);
£0.57m of UK directly held property investments (£8.72m at 31 March 2011).
Financial statements
F i n a n c i a l s t a t e m e n t s
DRAFT
A further analysis of the market value of investments at 31 March 2012 is given overleaf
40

F i n a n c i a l s t a t e m e n t s
10a Analysis of investments
31 March 2011 31 March 2012
£ 000 £ 000
Fixed-interest securities
UK public-sector quoted 164,012 6% 164,834 6%
UK quoted 0 0% 0 0%
Overseas public-sector quoted 0 0% 0 0%
Overseas quoted 0 0% 0 0%
164,012 6% 164,834 6%
Equities
UK quoted 331,221 13% 337,761 13%
Overseas quoted 576,844 22% 579,004 22%
908,065 35% 916,765 35%
Index linked
UK public sector 99,614 4% 100,213 4%
Other 0 0% 0 0%
99,614 4% 100,213 4%
Pooled investment vehicles
UK 347,998 13% 332,757 12%
UK index linked 68,394 3% 68,452 3%
Overseas 589,430 23% 592,211 22%
1,005,822 39% 993,420 37%
All companies operating unit trusts or managed funds are registered in the United Kingdom.
Derivatives (see note 11)
Forwards (6,984) 0% 1,771 0%
(6,984) 0% 1,771 0%
Property
UK directly held property 163,135 6% 206,595 8%
UK pooled property funds 24,292 1% 27,768 1%
DRAFT
187,427 7% 234,363 9%
Other
Alternatives 0 0% 33,250 1%
Hedge funds 52,766 2% 52,470 2%
Private equity 79,261 3% 94,181 3%
132,027 5% 179,901 6%
Cash
External deposits 99,615 4% 25,452 1%
Sterling 5,004 0% 40,079 2%
Overseas cash 3,105 0% 6,594 0%
107,724 4% 72,125 3%
Total 2,597,707 100% 2,663,392 100%
41

F i n a n c i a l s t a t e m e n t s
11 Derivative contracts
A significant proportion of the funds quoted equity portfolio is in overseas stock markets. To reduce the
volatility associated with fluctuating currency rates, the fund has appointed Record Currency Management
to carry out a dynamic currency hedging mandate using their proprietary approach to currency hedging.
31 March 2011 31 March 2011 31 March 2012 31 March 2012
Assets Liabilities Assets Liabilities
£ 000 £ 000 £ 000 £ 000
Forward foreign currency contracts* 40,081 (47,065) 33,399 (31,628)
The open forward foreign currency contracts at 31 March can also be analysed by sterling against the
following major currencies.
31 March 2011 31 March 2011 31 March 2012 31 March 2012
Assets Liabilities Assets Liabilities
£ 000 £ 000 £ 000 £ 000
Canadian Dollar 1,931 (2,653) 278 (481)
Swiss Franc 4,982 (5,651) 1,568 (1,206)
Euro 12,615 (15,923) 5,239 (4,523)
Japanese Yen 2,575 (5,075) 12,198 (10,028)
United States Dollar 17,978 (17,763) 14,116 (15,389)
Other 0 0 0 (1)
40,081 (47,065) 33,399 (31,628)
* The gross assets and liabilities at 31 March 2011 have been restated from those shown in last years accounts
to show the true level within the forward foreign currency contracts at the time. The net balance of liabilities
at 31 March 2011 remains unchanged.
DRAFT
42

F i n a n c i a l s t a t e m e n t s
12 Investment management expenses
A breakdown of the costs we had to pay in connection with the investment of the fund is set out below.
2010/2011 2011/2012
£ 000 £ 000
Management and administration fees 6,837 7,152
Custody fees 262 176
Performance measurement services 95 81
Other 738 1,096
Total 7,932 8,505
13 Directly held property fund account
A summary of the income and expenses associated with the funds directly held property is given below.
2010/2011 2011/2012
£ 000 £ 000
Rental income 10,511 12,832
Direct operating expenses (775) (1,139)
Net gain/(loss) 9,736 11,693
14 Directly held property net asset account
The account below reconciles the movement in the funds investments in directly held property.
2010/2011 2011/2012
£ 000 £ 000
Balance at start of year 153,775 163,135
Purchases at cost 18,803 47,291
Sale proceeds (14,247) 0
Change in market value 4,804 (3,831)
DRAFT
Balance at 31 March 163,135 206,595
43

F i n a n c i a l s t a t e m e n t s
15 Current assets
2010/2011 2011/2012
£ 000 £ 000
Contributions due
Employers 17,344 16,278
Members 2,858 2,667
Cash balances 416 1,332
HM Revenue & Customs 11 11
Payments made in advance 62 0
Other 1,518 898
Total 22,209 21,186
An analysis of current assets by type of body is given below.
2010/2011 2011/2012
£ 000 £ 000
Central government bodies 10,440 9,309
Other local authorities 10,667 10,714
NHS bodies 36 47
Public corporations and trading funds 0 0
Other entities and individuals 1,066 1,116
Total 22,209 21,186
16 Current liabilities
2010/2011 2011/2012
£ 000 £ 000
Investment management expenses (2,202) (2,756)
Income received in advance (3,004) (3,837)
Benefits payable (3,259) (3,251)
Other (1,032) (612)
Total (9,497) (10,456)
DRAFT
An analysis of current liabilities by type of body is given below.
2010/2011 2011/2012
£ 000 £ 000
Central government bodies 0 (26)
Other local authorities (1) (123)
NHS bodies 0 (30)
Public corporations and trading funds 0 0
Other entities and individuals (9,496) (10,277)
Total (9,497) (10,456)
44

F i n a n c i a l s t a t e m e n t s
17 Additional voluntary contributions
As well as joining the fund, scheme members can pay into an additional voluntary contributions
(AVC) scheme run by three AVC providers. Contributions are paid directly from scheme members
to the AVC providers.
The contributions are not included within the fund accounts, in line with regulation 4(2)(b) of the
Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009. The
table below shows the activity for each AVC provider in the year.
Clerical Equitable Life Standard
Medical Assurance Life
£ 000 £ 000 £ 000
Opening value of the fund 1,116 999 2,550
Income 114 1 216
Expenditure (218) (149) (417)
Change in market value 45 17 108
Closing value of the fund 1,057 868 2,457
18 Related-party disclosure
Staffordshire Pension Fund is administered by Staffordshire County Council. The county council
incurs expenditure in relation to the administration of the fund and is subsequently reimbursed by
the pension fund.
The pension fund holds a small amount of its assets in cash to meet short term commitments. This
cash is managed by the Staffordshire County Council Treasury and Pension Fund team in line with
the fund’s Annual Investment Strategy which sets out the permitted counterparties and limits.
Staffordshire County Councillors can join the fund. As at 31 March 2012, six members of the
Pensions Committee and the Pensions Panel had taken up this option.
19 Deferred debtor
A transfer was made from the fund to the Civil Service Pension Scheme on 1 April 2005 in respect
of magistrates courts. As at 31 March 2011 agreement had been reached that the fund was due a
payment that represented the shortfall between the assets held and the liabilities retained within the
fund. The shortfall of £8.512 million, including a allowance for the delay in receipt of 3.765%, meant
10 payments were due to the fund of £1.004 million. These payments commenced in 2011/12 and
the current assets figure at note 15 (Contributions due - employers) records the £9.036 million due
at 31 March 2012.
liabilityDRAFT
20 Deferred liability
DRAFT
at 31 March 2012.
DRAFT
A transfer was made to the fund by the Environment Agency of £0.188m on 30 November 2011 in
respect of pre 1974 Water Company Pensions increase recharges. The amount reflects the value of
the annual pension increase recharges as at 31 March 2011 and means no further pension increase
recharge invoices were be payable by the Environment Agency from 1 April 2011.
The balance from the Environment Agency represents income received in advance and will be
released to the revenue account over 14 years. £0.013m has been transferred in 2011/12 and
£0.013m will be released per year until 2024/2025. The current liabilities figure at note 16 (Income
received in advance) includes the remaining £0.175m to be released at 31 March 2012.
45

F i n a n c i a l s t a t e m e n t s
21 Classification of financial instruments
The net assets of the fund disclosed in the Net Asset Statement and under Note 10 are made up of the
following categories of financial instruments. No financial instruments were reclassified during 2011/2012.
The analysis below and in subsequent notes on financial instruments does not include the pension fund’s
directly held property as it is not a financial instrument. This is treated under a different accounting standard
(IAS 40 Investment Property) and is disclosed under Note 13 - Directly held property fund account, and
Note 14 - Directly held property net asset account.
31 March 2012 Designated as fair value Loans and Financial liabilities
through profit and loss receivables at amortised cost Total
£ 000 £ 000 £ 000 £ 000
Financial assets
Fixed-interest securities 164,834 0 0 164,834
Equities 916,765 0 0 916,765
Index-linked securities 100,213 0 0 100,213
Pooled investment vehicles 993,420 0 0 993,420
UK pooled property funds 27,768 0 0 27,768
Hedge funds 52,470 0 0 52,470
Private equity 94,181 0 0 94,181
Alternatives 33,250 0 0 33,250
Derivatives 1,771 0 0 1,771
Cash 0 73,457 0 73,457
Other investment balances 8,602 0 0 8,602
Current assets 0 19,854 0 19,854
2,393,274 93,311 0 2,486,585
Financial liabilities
Current liabilities 0 0 (10,456) (10,456)
Other investment balances (3,358) 0 0 (3,358)
(3,358) 0 (10,456) (13,814)
2,389,916 93,311 (10,456) 2,472,771
The previous years data is given below.
31 March 2011 Designated as fair value Loans and Financial liabilities
through profit and loss receivables at amortised cost Total
£ 000 £ 000 £ 000 £ 000
Financial assets
Fixed-interest securities 164,012 0 0 164,012
Equities 908,065 0 0 908,065
Index-linked securities 99,614 0 0 99,614
Pooled investment vehicles 1,005,822 0 0 1,005,822
UK pooled property funds 24,292 0 0 24,292
Hedge funds 52,766 0 0 52,766
Private equity 79,261 0 0 79,261
Cash 0 108,140 0 108,140
Other investment balances 12,026 0 0 12,026
Current assets 0 21,793 0 21,793
2,345,858 129,933 0 2,475,791
Financial liabilities
Derivatives (6,984) 0 0 (6,984)
Current liabilities 0 0 (9,497) (9,497)
Other investment balances (5,182) 0 0 (5,182)
(12,166) 0 (9,497) (21,663)
2,333,692 129,933 (9,497) 2,454,128
DRAFT
46

F i n a n c i a l s t a t e m e n t s
22 Net gains and losses on financial instruments
The gains and losses recognised in the accounts in relation to financial instruments are made up
as follows.
2010/2011 2011/2012
£ 000 £ 000
Financial assets
Fair value through profit and loss 153,015 56,779
Loans and receivables 1,338 816
Financial liabilities
Fair value through profit and loss (8,865) 0
Loans and receivables 0 0
Financial liabilities measured at amortised cost 0 0
23 Fair value of financial instruments
145,488 57,595
The following table summarises the carrying values of the financial instruments by class against their fair
values.
31 March 2011 31 March 2012
Carrying Fair Carrying Fair
value value value value
£ 000 £ 000 £ 000 £ 000
Financial assets
Fair value through profit and loss 1,943,634 2,345,858 2,062,269 2,393,274
Loans and receivables 129,933 129,933 93,311 93,311
.
Financial Liabilities
Fair value through profit and loss (5,182) (12,166) (3,358) (3,358)
Loans and receivables 0 0 0 0
Financial liabilities measured at amortised cost (9,497) (9,497) (10,456) (10,456)
DRAFT
2,058,888 2,454,128 2,141,766 2,472,771
47

F i n a n c i a l s t a t e m e n t s
24 Valuation of financial instruments carried at fair value
The fund is required to classify its investments into three levels of a fair value hierachy according to the
quality and reliability of information used to determine fair values. The three levels are detailed below.
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. Examples of
financial instruments classified as Level 1 are quoted equities and fixed-interest securities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset
or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). An example of a Level
2 financial instrument is a pooled property fund as they are not traded in a market that is considered
to be active and valuation techniques used to determine fair value use inputs based significantly on
observable market data.
Level 3 - Inputs for assets or liabilities that are not based on observable market data (unobservable
inputs). Such instruments would include private equity and hedge funds (fund of funds), which are
valued using valuation techniques that require significant judgement.
The following table provides an analysis of the financial assets and liabilities of the fund by the three
levels based on the level at which the fair value is observable.
31 March 2012
Level 1 Level 2 Level 3 Total
£ 000 £ 000 £ 000 £ 000
Financial assets
Fair value through profit and loss 2,183,834 29,539 179,901 2,393,274
Loans and receivables 93,311 0 0 93,311
Financial liabilities
Fair value through profit and loss (3,358) 0 0 (3,358)
Loans and receivables 0 0 0 0
Financial liabilities at amortised cost (10,456) 0 0 (10,456)
2,263,331 29,539 179,901 2,472,771
The previous years data is given below.
31 March 2011
Level 1 Level 2 Level 3 Total
£ 000 £ 000 £ 000 £ 000
assetsDRAFT DRAFT
Financial assets Fair value through profit and loss 2,189,539 24,292 132,027 2,345,858
Loans and receivables 129,933 0 0 129,933
DRAFT
Financial liabilities
Fair value through profit and loss (5,182) (6,984) 0 (12,166)
Loans and receivables 0 0 0 0
Financial liabilities at amortised cost (9,497) 0 0 (9,497)
2,304,793 17,308 132,027 2,454,128
48

F i n a n c i a l s t a t e m e n t s
25 Nature and extent of risks arising from financial instruments
The primary objective of the fund is to ensure that sufficient funds are available to meet all
pension liabilities as they fall due for payment. The fund aims to do this by adopting an investment
strategy that balances risk and return.
The majority of the fund is invested through external managers. Each has an investment
management agreement in place which sets out the relevant benchmark, performance target, asset
allocation ranges and any restrictions.
Risks are managed through diversification; by investing across asset classes, across managers and
styles and ensuring managers maintain a diversified portfolio of investments within their mandate.
The majority of the fund is invested in liquid investments.
Market risk
Market risk is the risk of loss from fluctuations in market prices, interest rates or currencies. The
fund is exposed through its investment portfolio to all these market risks.
Market risk also represents the risk that the value of a financial instrument will fluctuate caused
by factors other than those mentioned above. These changes can be caused by factors specific to
the individual instrument or those affecting the market in general and will affect each asset class
the pension fund holds in different ways.
A high proportion of the fund is invested in equities and therefore fluctuation in equity prices
is the largest risk the fund faces. The fund relies on the fact that it has positive cash flows and a
strong employer covenant to underpin its investment in equities and maintains its high exposure
to equities over the long term as they are expected to deliver higher returns.
The fund manages market risk through a diversified investment portfolio and instructing individual
investment managers to diversify investments within their own individual portfolios in line with
their investment strategies and mandate guidelines. The Pensions Panel and Pensions Committee
regularly receive reports which monitor such risks.
Market risk – sensitivity analysis
DRAFT
In consultation with the fund’s Investment Advisor the following movements in market prices have
been judged as possible for the 2012/2013 financial year. The potential market movements figures
also allow for interest rate and currency rate fluctuations.
Asset type
Potential market movements
UK equity 18%
Overseas equity 21%
Private equity 29%
UK fixed-interest bonds 13%
UK Index-linked bonds 10%
Corporate bonds 12%
Cash 1%
Property 14%
Alternatives 12%
This movement in the market prices would have increased or decreased the net assets at 31
March 2012 to the amounts shown on the next page.
49

F i n a n c i a l s t a t e m e n t s
DRAFT
Market risk – sensitivity analysis (continued)
31 March Percentage Value on Value on
2012 change increase decrease
Asset type £ 000 % £ 000 £ 000
UK fixed-interest securities 164,834 13% 186,262 143,406
UK equities 337,761 18% 398,558 276,964
Overseas equities 579,004 21% 700,595 457,413
UK index-linked securities 100,213 10% 110,234 90,192
UK pooled investments 332,757 18% 392,653 272,861
UK index-linked pooled investments 68,452 10% 75,297 61,607
Overseas pooled investments 592,211 21% 716,575 467,847
Forward foreign currency contracts 1,771 0% 1,771 1,771
Property 234,363 14% 267,174 201,552
Hedge funds 52,470 12% 58,766 46,174
Private equity 94,181 29% 121,493 66,869
Alternatives 33,250 12% 37,240 29,260
Cash 72,125 1% 72,846 71,404
Outstanding dividend entitlements and
recoverable withholding tax 5,900 0% 5,900 5,900
Amount receivable for sales of investments 2,702 0% 2,702 2,702
Amounts payable for purchases of investments (3,358) 0% (3,358) (3,358)
2,668,636 3,144,708 2,192,564
Interest rate risk
Interest rate risk is the risk that the fair value of a financial instrument will fluctuate because of
changes in market interest rates.
Changes in market interest rates would affect the value of the fund’s fixed-interest and index-linked
securities. The amount of income the fund generates from its cash holdings would also be affected.
Foreign currency risk
Foreign currency risk represents the risk that the fair value of financial instruments when
expressed in sterling will fluctuate because of changes in foreign exchange rates.
A significant proportion of the fund’s quoted equity portfolio is in overseas stock markets. To
reduce the volatility associated with fluctuating currency rates, the fund has appointed Record
Currency Management to carry out a dynamic currency hedging mandate.
Credit risk
DRAFT
Credit riskDRAFT
Credit risk is the risk that the counterparty to a financial instrument will fail to meet an
obligation and cause the fund to incur a financial loss. The biggest exposure the fund has to this
risk is through its investment in bonds, which is managed through investing in government bonds.
The fund is also exposed to credit risk through the custodian and other investment managers that
hold assets. The fund minimises credit risk through the careful selection and monitoring of high
quality counterparties. Assets and cash held by the custodian are in the pension fund’s name.
Through its stock lending programme the fund is exposed to the collateral provided by the
borrower against the securities lent. To manage this risk the collateral permitted is restricted to
government obligations (such as gilts) and equities; collateral is held in excess of the securities lent.
50

F i n a n c i a l s t a t e m e n t s
Credit risk (continued)
Foreign exchange contracts are subject to credit risk in relation to the counterparties of the
contracts. The maximum credit risk exposure on foreign currency contracts is the full amount of
the foreign currency the fund pays when settlement occurs, should the counterparty fail to pay
the amount which it is committed to pay the fund.
Another source of credit risk for the fund is the cash it holds to meet short term commitments.
The cash is managed by the Staffordshire County Council Treasury and Pension Fund team in line
with the fund’s Annual Investment Strategy which sets out the permitted counterparties and limits.
In 2011/2012 investments were made with:
Staffordshire County Council’s banker, the Co-operative Bank (up to £5m - maximum one week).
AAA rated sterling Money Market Funds with same day access (lower of £30m or 50% of cash
held).
Banks and building societies that met the funds credit criteria (lower of £15m or 25% of cash
held - maximum 12 months).
At 31 March 2012, £25.452m was held in this way.
Liquidity risk
Liquidity risk represents the risk that the fund will not be able to meet its financial obligations as
they fall due. To manage this risk the fund holds an allocation of its assets in cash to meet short
term commitments.
The majority of the stocks held by the fund’s investment managers are quoted on major stock
markets and may be realised quickly if required. Less liquid investments such as property, private
equity and hedge funds currently make up a modest proportion of the total fund assets.
In the short-term we can borrow money on the money markets to cover any shortfall that may arise.
Overall there is very little risk that we will not be able to raise funds to meet our commitments.
DRAFT
Statement of Director of Finance and Resources
responsibilities
In preparing this pension fund report, the Director of Finance and Resources has;
selected suitable accounting policies and then applied them consistently
made judgements and estimates that were reasonable and prudent
complied with the Code of Practice on Local Authority Accounting
kept proper accounting records which were up to date
taken reasonable steps for the prevention and detection of fraud and other irregularities.
Director of Finance and Resources certificate
I certify that the pension fund report presents fairly the financial position of the pension fund as
at 31 March 2012 and its income and expenditure for the year ended 31 March 2012.
Andrew Burns BSc (Hons), CPFA, MBA
Director of Finance and Resources
51

Independent auditor’s report to the
Members of Staffordshire County Council
We have audited the pension fund accounting
statement included in the pension fund annual
report of Staffordshire County Council for the year
ended 31 March 2012 which comprise the fund
account, the net assets statement and the related
notes. The financial reporting framework that has
been applied in their preparation is the CIPFA/
LASAAC Code of Practice on Local Authority
Accounting in the United Kingdom 2011/12.
Respective responsibilities of the Chief
Financial Officer and the auditor
The Director of Finance and Resources is
responsible for the preparation of the pension
fund accounting statements and for being
satisfied that they give a true and fair view in
accordance with the CIPFA/LASAAC Code of
Practice on Local Authority Accounting in the
United Kingdom 2011/12. Our responsibility is
to audit and express an opinion on the pension
fund accounts in accordance with Part II of the
Audit Commission Act 1998, the Code of Audit
Practice 2010 – Local Government Bodies issued
by the Audit Commission and International
Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing
Practices Board’s Ethical Standards for Auditors.
This report, including the opinions, has been
prepared for and only for Staffordshire County
Council’s members as a body in accordance with
Part II of the Audit Commission Act 1998 and for
no other purpose, as set out in paragraph 48 of
the Statement of Responsibilities of Auditors and
of Audited Bodies – Local Government, published
by the Audit Commission in March 2010. We do
not, in giving these opinions, accept or assume
responsibility for any other purpose or to any
other person to whom this report is shown
or into whose hands it may come save where
expressly agreed by our prior consent in writing.
Scope of the audit of the financial
statements
An audit involves obtaining evidence about
the amounts and disclosures in the financial
statements sufficient to give reasonable
assurance that the financial statements are free
from material misstatement, whether caused by
fraud or error. This includes an assessment of:
whether the accounting policies are appropriate
to the pension fund’s circumstances and have
been consistently applied and adequately
disclosed; the reasonableness of significant
accounting estimates made by Staffordshire
County Council and the overall presentation
of the financial statements. In addition, we read
all the financial and non-financial information
in the Annual Report to identify material
inconsistencies with the audited financial
statements. If we become aware of any apparent
material misstatements or inconsistencies we
consider the implications for our report.
Opinion on financial statements
In our opinion the pension fund’s accounting
statements:
give a true and fair view, in accordance
with the CIPFA/LASAAC Code of Practice
on Local Authority Accounting in the
United Kingdom 2011/12, of the financial
transactions of the pension fund during the
year ended 31 March 2012, and the amount
and disposition of the fund’s assets and
liabilities as at 31 March 2012; and
have been properly prepared in accordance
with the CIPFA/LASAAC Code of Practice
on Local Authority Accounting in the United
Kingdom 2011/12.
Opinion on other matter
In our opinion, the information given in the
Annual Report for the financial year for which
the accounting statements are prepared is
consistent with the accounting statements.
DRAFT
Richard Bacon
For and on behalf of PricewaterhouseCoopers LLP
Appointed auditors
Birmingham
17 October 2012
Notes:
(a) The maintenance and integrity of the Staffordshire
Pension Fund website is the responsibility of senior
officers; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that may
have occurred to the financial statements since they were
initially presented on the website.
(b) Legislation in the United Kingdom governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
52

G l o s s a r y
Glossary of terms
Actuarial valuation
This is when an actuary checks what the
pension scheme assets are worth and compares
them with the scheme’s liabilities. They then
work out how much the contributions from
employers must be so that there will be enough
money in the scheme when people get their
pensions.
Actuarial strain
This is a charge paid, or due to be paid, to the
pension fund for paying pensions early.
Additional voluntary contributions (AVCs)
This is an extra amount (contribution) a
member can pay to their own pension scheme
to increase the future pension benefits.
Benchmarks
These are investment performance standards
that we expect our investment managers to
achieve and against which we measure their
investment return.
Bid-market price
The price a buyer pays for a stock.
Collateral holdings
Assets pledged to a lender until the loan is
repaid. If the borrower does not pay off the
loan, the lender has the legal right to seize the
asset and sell it to pay off the loan.
Derivatives
Investments that derive their value from
underlying assets such as currencies or are
linked to indices such as a stock market index.
Financial instrument
A contract between two parties that involves
a monetary exchange for some type of debt or
asset.
Fixed-interest investments
Investments, mainly in stocks issued by the
government, which provide a fixed rate of
interest.
Hedge funds
An investment fund that undertakes a wide
range of investment and trading activities.
Index-linked securities
Investments in stock where the rate of interest
and capital value are linked to the rate of
inflation.
Investment management expenses
All expenses relating to managing the fund’s
investments.
Investment managers
Firms we appoint to deal with the fund’s
investments on a day-to-day basis.
Pensions Committee
A committee formed under the constitution
of the county council to deal specifically with
pension’s administration and investment.
Pensions Panel
An independent panel we set up to provide
advice on investments and to report to the
Pensions Committee.
Pooled investment vehicles
When assets of more than one investor are
combined.
Property
All buildings and land that the fund owns
including pooled property funds.
Refunds of contributions
The amount employees will receive if they stop
their pensionable employment within the first
three months of working for us (two years in
the past).
Socially responsible investment
Investments which take into consideration
social and environmental factors as well as
financial factors.
Stock lending
Lending some securities, such as stocks and
shares, corporate bonds and government
securities from the portfolios of one investor to
another approved investor, in return for a fee.
Transfer values
The amount that is available from one pension
to buy benefits in another pension when
employees join or leave a scheme.
Triennial valuation
An actuarial valuation that the pension fund
must undertake by law every three years.
Withholding tax
A tax on dividend income that is charged at the
source. Some of this may be recoverable and
some may not.
DRAFT
53

G l o s s a r y
Photo credits
The theme of this years annual report is the Diamond Jubilee as it was during 2011/2012 that HM
Queen Elizabeth 11 celebrated 60 years as monarch. The photos throughout this document add to
that theme as they are royal visits to Staffordshire during 2011/2012, the highlight being the visit
of the Queen on 20 July 2011.
It is with thanks to the people and organisations below that we have been able to reproduce the
photos contained in this document and credits are listed below.
Front inside cover - Her Majesty the Queen arriving on a visit to Lichfield Cathedral, 20 July 2011.
Photo courtesy of Robert Yardley Photography.
Page 2, 13 and 17 – Her Majesty the Queen on a visit to the National Memorial Arboretum,
Alrewas, 20 July 2011. The visit was to dedicate the names of the 112 UK military personnel who
were killed on duty in 2010. Photos courtesy of The National Memorial Arboretum.
Page 4 – The Earl of Wessex opening the new control room at Staffordshire Police Headquarters,
Stafford, 3 May 2011. Photo courtesy of Staffordshire Police Authority.
Page 7 – The Princess Royal on a visit to Staffordshire County Showground, 26 July 2011.
Photo courtesy of Ruth Downing, Rural Pictures.
Page 8 and 19 – The Earl of Wessex opening Sandyford Community Fire Station, 3 May 2011.
Photo courtesy of Staffordshire Fire and Rescue Service.
Below - Her Majesty the Queen attending the Royal Mercian and Lancastrian Yeomanry
Homecoming Service at Lichfield Cathedral where she presented Afghanistan operational medals
to service personnel outside the west door, 20 July 2011. Photo courtesy of The Express and Star.
DRAFT
54

C o n t a c t s
If you have any questions or need more information about our pension fund,
please contact the relevant person below.
Investment and fund management
Melanie Stokes –
Treasury and Pension Fund Manager
Phone: 01785 276330
E-mail: treasury.pensionfund@staffordshire.gov.uk
Benefits and contributions
Janet Caiazzo –
Pensions Manager
Phone: 01785 276441
E-mail: pensions.enquiries@staffordshire.gov.uk
Pensions payment
Andrew Noonan –
Human Resources Shared Service Centre
Phone: 01785 276347
E-mail: shared.service@staffordshire.gov.uk
Or, you can write to us at:
Treasury and Pension Fund
Staffordshire County Council
Wedgwood Building
Tipping Street
Stafford
ST16 2DH.
You can also visit our website at
www.staffspf.org.uk
The pensions team
DRAFT
If you would like this information in large print, in Braille,
on audio tape or CD, in British Sign Language or in any
other language, please ring 01785 278196.
55

DRAFT
58
Designed by Staffordshire County Council Print Commissioning Services. Phone: 01785 276051 63639/12