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

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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. DRAFT 8
I n v e s t m e n t r e p o r t DRAFT 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 DRAFT DRAFT Global equities UK Bonds Property Cash 9
Page 1 and 2: Staffordshire Pension Fund Annual r
Page 3 and 4: Contents 2 3 9 18 27 53 55 Chairman
Page 5 and 6: F u n d m a n a g e m e n t Governa
Page 7 and 8: 7 F u n d m a n a g e m e n t Pensi
Page 9: F u n d m a n a g e m e n t Adminis
Page 13 and 14: I n v e s t m e n t r e p o r t DRA
Page 15 and 16: I n v e s t m e n t r e p o r t Inv
Page 17 and 18: I n v e s t m e n t r e p o r t Inv
Page 19 and 20: I n v e s t m e n t r e p o r t Cur
Page 21 and 22: F u n d m e m b e r s h i p Benefit
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Page 25 and 26: F u n d m e m b e r s h i p Benchma
Page 27 and 28: F u n d m e m b e r s h i p Custome
Page 29 and 30: Financial statements Staffordshire
Page 31 and 32: F i n a n c i a l s t a t e m e n t
Page 35 and 36: notesDRAFT DRAFT Assumptions The as
Page 37 and 38: Financial statements F i n a n c i
Page 55 and 56: G l o s s a r y Glossary of terms A
Page 57 and 58: C o n t a c t s If you have any que

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

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