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UNIVERSITY OF YORK PENSION FUNDContributing Members Annual Report Year-end 2018

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UNIVERSITY OF YORK PENSION FUND

Welcome!Welcome to the Contributing Member’s Annual Report.

Since the last report, the Fund’s triennial valuation has been completed. The triennial valuation is an assessment of the scheme’s financial health which takes place every three years. I’m pleased to be able to report that at the date of the assessment (31 July 2017) the scheme was again in surplus. Since that date, the Trustee has also reviewed the funding position as at 31 July 2018. This showed that the surplus had increased from that calculated at 31 July 2017. You can read more about this in the Summary Funding Statement later in this Report.

It has been another busy year in the pensions world, so as well as the positive news about the funding position, this year’s Report also provides an update on the changes that have happened through the year. It contains a summary of the Fund’s accounts and the performance of its investments. The Report also gives an update on the governance and administration activities of the Fund.

Please visit the Fund’s website for the latest information. The website is regularly updated and you’ll find a number of important documents

there, including the latest Scheme Guide and documents from the recently completed triennial valuation.

The following documents are also available, but are not routinely published on the Fund’s website:

§ The Statement of Funding Principles

§ The Statement of Investment Principles

§ The shorter Actuarial Report as at 31 July 2018

§ The Trustee’s Annual Report and Accounts

If you would like to see or receive a copy of a document which is not on the Fund’s website, have any questions about any aspects of the Fund, or would like further information on accounts or rules please contact the Pensions Team.

We welcome your feedback on all areas of the Fund, so if you have suggestions for improvements or would like to see more information available on certain areas, please do get in touch and let us know.

Best wishes,

Gillian Hamilton, Company Secretary

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Registered Address: University of York Pension Trust Company Limited Heslington Hall, H/B30 Heslington, York, YO10 5DD

Telephone: 01904 32 4805 or 01904 32 4782 Website: www.york.ac.uk/pensions E-mail: [email protected]

All information contained within this booklet is correct at time of going to press, but may be subject to change. In the event of any discrepancy between the information contained in this booklet and the overriding legislation that governs pensions or the Trust Deed and Rules of the University of York Pension Fund, the Trust Deed and Rules and overriding legislation will apply. The University of York Pension Fund and its administrators are not authorised to give financial advice. Members requiring financial advice may wish to speak to an independent financial adviser.

http://www.york.ac.uk/pensions

mailto:[email protected]

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ContentsWelcome! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Fund governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Professional advisers . . . . . . . . . . . . . . . . . . . . . . . . . . 9

Administration report . . . . . . . . . . . . . . . . . . . . . . . . 10AVCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Changes to the rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Employers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Tier change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10GMP equalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Pensions for unmarried partners . . . . . . . . . . . . . . . . . . 12Nomination forms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Estimates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Limits to pension saving . . . . . . . . . . . . . . . . . . . . . . . . . 13MPAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15Lost pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Using your personal information . . . . . . . . . . . . . . . . . . 16Keep us updated! . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Investment and financial report . . . . . . . . . . . . . . . .17Asset allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17Membership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Income and expenditure . . . . . . . . . . . . . . . . . . . . . . . . . 19

The University of York Pension Fund Summary Funding Statement July 2018 . . . . . . . . . . . . . . . 20Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20How the Fund operates . . . . . . . . . . . . . . . . . . . . . . . . . . 20How much money does the Fund need? . . . . . . . . . . . . 20Actuary’s report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20The importance of the University . . . . . . . . . . . . . . . . . 22The Pensions Regulator . . . . . . . . . . . . . . . . . . . . . . . . . . 22

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Fund governanceBOARD OF DIRECTORSThe University of York Pension Fund is administered by the University of York Pension Trust Company Limited. The Trustee Company has nine directors, who have met on four occasions during the financial year to the end of July 2018. The Directors for the year have been:

Independent ChairDirector AppointedMr I F Shepherd 22 July 2010 Retired Scheme Actuary

Employer Nominated Directors – appointed by the Council of the University of YorkDirector AppointedMrs H Fraser-Krauss 29 September 2017 Deputy Registrar and Director of Corporate and Information Services

Mr J Greenwood 25 November 2016 Director of Commercial Services

Mr J Lister 13 March 2017 previous Lay Member of University Council

Mr A Murgatroyd 29 September 2017 Finance

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Member Nominated Directors – nominated and elected by the Fund membersDirector AppointedMr J Coates 13 March 2016 Library & Archives

Mrs L Feasby 1 August 2017 External Relations

Mr T Franklin 13 March 2016 Retired (ex-Registrar’s and Planning)

Mr M Hodgkinson 1 August 2017 Biology

The Member Nominated Directors are elected by Fund members and each serve a term of four years. They retire by rotation and may be re-elected. The next scheduled election is due to take place in 2020.

One Pensioner Representative served for the whole the year, being Mr K Whitehead.

The Secretary of the Fund is Miss G Hamilton, who is also appointed by the University to run the administration of the Fund.

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Professional advisers

Actuary Mr D Joy First Actuarial Mayesbrook House Lawnswood Business Park Leeds West Yorkshire LS16 6QY

Auditors BHP Chartered Accountants 2 Rutland Park Sheffield S10 2PD

Bankers HSBC plc 13 Parliament Street York North Yorkshire YO1 8XS

Bankers Lloyds Banking Group 3rd Floor Lisbon House 116 Wellington Street Leeds LS1 4LT

Custodian JP Morgan 1 Chaseside Bournemouth BH7 7DA

Insurance brokers Aon UK Limited The Leadenhall Building 122 Leadenhall Street London EC3V 4AN

Investment adviser Mr R Slater Deloitte Total Reward and Benefits Limited Saltire Court 20 Castle Terrace Edinburgh EH1 2DB

Solicitors Walker Morris LLP Kings Court 12 Kings Square Leeds LS1 2HL

Investment managers Aberdeen Standard Investments 6 St Andrew Square Edinburgh EH2 2BD

Schroder Investment Management 1 London Wall Place London EC2Y 5AU

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Administration report

AVCSThe Fund provides an additional way to save for your retirement through its additional voluntary contribution (AVC) facility, provided by Aegon. AVCs are a flexible, tax efficient way of saving more for your retirement. Once you have set up an AVC policy, you can increase, decrease, stop or re-start your contributions depending upon your circumstances. Your AVC policy can be used in a number of ways, including taking it as a tax free cash lump sum (subject to limits), drawing it as a pension or transferring it out of the Fund to drawdown in a number of smaller lump sums.

If you’re interested in finding out more or taking out an AVC, there’s lots of information about how to do so on our website: https://www.york.ac.uk/admin/hr/pensions/uoy/extra-ways-to-save/

CHANGES TO THE RULESThere has only been one change to the Fund’s rules during the year. This increased the options available to members for using the money they have invested in the Fund’s AVC facility.

EMPLOYERSDuring the year, a further one of the University’s subsidiary companies ceased to be an employer of active members of the Fund.

The staff in York Science Park Limited (YSPL) were transferred to YCL and YSPL ceased to participate in the Fund from 30 April 2018.

The most up to date list of which employers participate in the Fund can be found on the Fund’s website (details at the start of this Report).

TIER CHANGEOn 1 October 2018 the three-year election window opened, which allowed members contributing in the Lower Tier (where benefits build up at a lower rate, but cost less) to move into the Upper Tier (where benefits are built up quicker, but cost more). During this window

https://www.york.ac.uk/admin/hr/pensions/uoy/extra-ways-to-save/



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members in the Upper Tier could also choose to move into the Lower Tier. The window closed on 28 October 2018.

We saw a big response to the opportunity to move this time, with almost 50 members choosing to move into the Upper Tier. You can find a more detailed breakdown of the membership of the Fund later on in the Report.

The next scheduled opportunity for members in the Lower Tier to move into the Upper Tier will be during October 2021. The next scheduled opportunity for members in the Upper Tier to move into the Lower Tier will be during October 2019.

GMP EQUALISATIONOn 26 October 2018, the High Court ruled that pension benefits accrued on and between 17 May 1990 and 5 April 1997 should be equalised in order to alter the impact of Guaranteed Minimum Pensions (GMPs), which accrued differently for men and women, and which were payable from different ages. It is currently unclear how this ruling should be implemented in practice. The Trustee is monitoring the case for further developments and considering the impact on the scheme’s liabilities and benefits payable.

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PENSIONS FOR UNMARRIED PARTNERSA reminder that a dependant’s pension from the Fund is only payable to a Spouse or registered Civil Partner. In order to count as a Spouse or Civil Partner under the Rules of the Fund, the marriage or registered civil partnership must have taken place before your employment ends. A spouse or registered civil partner who you marry or form a registered civil partnership with after your employment ends may still be entitled to a pension from the Fund, but in most cases this would be

either a significantly smaller amount or nothing at all.

A pension is not payable from the Fund to an individual to whom you are not married or with whom you have not formed a registered civil partnership. So, co-habiting partners or “common-law” spouses do not qualify to receive a pension from the Fund.

If you have any questions about your own personal circumstances, please contact the Pensions Team using the details at the start of this booklet for further information.

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NOMINATION FORMSCopies of nomination forms are available for you to download from the Fund’s website. Completing a nomination form allows you to let the Trustee know your wishes for who you would want to receive any lump sum that would be payable in the event of your death.

Completing a form only takes a few minutes, but can make the process of administering an Estate much easier on those left behind. If you haven’t completed a nomination form within the last three years, please complete a nomination form. If you don’t have internet access or access to a printer, please contact the Pensions Team using the details at the start of this booklet, and we’ll send a paper copy out to you.

ESTIMATESIf you require an illustration of what your retirement benefits may be in the future, email the Pensions Team with the assumed date of retirement you would like them to use in your estimate calculation. You can only have one estimate of your benefits per year, but may ask the team to model up to three different scenarios within that one request. The team will provide the figures as quickly as possible, but during busy times it can take up to two months for the figures to be prepared, so please leave plenty of time to ask for figures if you require them for a specific purpose eg. a meeting with a financial adviser.

LIMITS TO PENSION SAVINGThe pension savings you can make tax free each year are limited to the annual allowance (AA). The standard AA is £40,000. A reduced AA applies for individuals with taxable income over £110,000 (before pension savings are taken into account). The AA will start to reduce once income allowing for pension savings exceeds £150,000. It will reduce by £1 for every £2 of income above £150,000, tapering down to a minimum of £10,000 for those with income of £210,000 or more.

The pension savings you can make tax free over your lifetime are

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limited to the lifetime allowance (LTA). From 6 April 2018, the LTA was £1,030,000; it will rise to £1,055,000 from 6 April 2019. If your pension savings are worth more than this when you take your benefits, you’ll have to pay a tax charge unless you have some form of LTA protection. Further details of the changes to the LTA, including protection, are available from HMRC’s website:

https://www.gov.uk/hmrc-internal-manuals/pensions-tax-manual

If you have taken a form of HMRC protection, you should send the Pensions Team a copy of the certificate you received from HMRC.

MPAAAs was noted in the last Report, the Government reduced the money purchase annual allowance (MPAA) to £4,000.

The MPAA applies to individuals who have flexibly accessed a pension in a money purchase pension scheme but who are also continuing to make contributions to a money purchase pension scheme.

As the Fund is not a money purchase pension scheme, you are able to make your normal contributions to your annual allowance threshold. However, if

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you are making contributions to a money purchase pension scheme (either separately from the Fund, or through the Fund’s AVC facility) then you may be affected by the MPAA and may have to pay additional tax on any contributions you make over the MPAA limit.

If you have flexibly accessed benefits and may be affected by the MPAA, you should provide the Pensions Team with a copy of the notification of this that you will have been issued with by your other pension provider.

LOST PENSIONSIf you have lost track of any pension savings built up elsewhere, there is a tracing service available.

https://www.gov.uk/find-pension-contact-details

USING YOUR PERSONAL INFORMATIONWe wrote to you last year about the General Data Protection Regulations (GDPR) which came into force on 25 May 2018. The Trustee and their advisers will only use your personal information for the administration and financial management of the Fund. It will only be shared with third parties where there is a legal obligation to do this or where it is necessary for the proper administration of the Fund. For information on how your information is used, how we maintain the security of your information and your rights to access information we hold on you, please refer to the data protection policy we sent you earlier this year or contact the Trustee care of the Company Secretary.

KEEP US UPDATED!Please remember to keep us updated with any changes to your personal circumstances. This includes a change of address or a change of name. If you have recently gotten married or divorced, you should fill in a new nomination form too.

It is also helpful if you can supply us with a personal e-mail address and/or telephone number so that we can contact you quickly in case of any enquiries. Please let us know of any changes in writing.



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Investment and financial reportResponsibility for the implementation of the investment principles was held by the Trustee, who approved the investment strategy during the year.

The Fund invests in a diversified range of funds, with an approximate 80:20 split between its growth and matching asset portfolios. As at 31 July 2018, the investments were primarily managed by Schroders, except for a private equity mandate and a ground rent mandate managed by ASI.

ASSET ALLOCATIONThe asset allocation of the Fund and the long-term strategic benchmark for the current and prior period are shown in the table below.

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%UK

equityGlobal equity

Corporate bonds

Private equity

Property Cash Ground rent

Infrastructure equity

Direct lending

Fund 2018

Benchmark 2018

Fund 2017

Benchmark 2017

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MEMBERSHIPThe charts below show the change in the Fund’s membership by category and by tier for active members for the year end to July 2018.

Membership by category

900

800

700

600

500

400

300

200

100

0Contributors Deferred Pensioner Spouse Children

2018

2017

Num

ber

of m

embe

rs

Whilst membership of the Third Tier has almost doubled since last year, overall, the total number of active members has shown a downward trend since it reached a peak in July 2013.

Contributing members by Tier

600

500

400

300

200

100

0Upper Tier Lower Tier Third Tier

Num

ber

of m

embe

rs

2018

2017

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INCOME AND EXPENDITUREDetailed below is an abridged version of the income and expenditure of the Fund to 31 July 2018. Full details are published in the Fund’s Annual Report and Accounts, which is available to members upon request.

Income (excluding investment income)2018 2017

Employer contributions £2,866,763 £3,105,975

Employee contributions £1,433,577 £1,572,937

Transfers in £164,929 £20,493

Other income £642 £140,772

Total income (excluding investment income) £4,465,911 £4,840,177

Expenditure2018 2017

Benefits paid or payable £4,853,502 £4,925,239

Payments to and on account of leavers £149,944 £22,411

Administrative expenses £362,442 £264,651

Other payments £53,454 £55,535

Total expenditure (£5,419,342) (£5,267,836)

Return on investments2018 2017

Investment income £2,889,439 £2,850,527

Change in market value of investments £10,646,725 £15,205,018

Investment management (£143,901) (£163,721)

Net return on investments £13,392,263 £17,891,824

Net assets of the scheme2018 2017

At 1 August £171,288,983 £153,824,818

At 31 July £183,727,815 £171,288,983

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The University of York Pension Fund Summary Funding Statement July 2018INTRODUCTIONThis statement is being sent to you on behalf of the Trustee of The University of York Pension Fund (the “Fund”).

The primary purpose of this statement is to update you on the financial development of the Fund.

HOW THE FUND OPERATESThe University of York and other employers pay contributions to the Fund so that the Fund can pay benefits to its members.

The money to pay for members’ pensions is held in a fund, separate from the University. It is not held in separate funds for each individual member.

There has not been any payment from the Fund to the University since the date of the last Statement. Legislation would only permit a payment to the University once the Fund had enough assets to secure the accrued benefits with an insurance company.

HOW MUCH MONEY DOES THE FUND NEED?Estimates are carried out by the Scheme Actuary on a regular basis. Using this information, the Trustee can agree with the University the level of future contributions.

ACTUARY’S REPORT

The last actuarial valuation of the Fund was carried out as at 31 July 2017. At that date, the ongoing funding position was:

Value of assets £171.3m

Value of liabilities £154.5m

Surplus £16 .8mFunding level 111%

The previous statement noted that as at 31 July 2016 the funding level was estimated to be 102% with a surplus of around £2m. There has therefore been an improvement in the funding position to 31 July 2017.

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The main reasons for the improvement between 31 July 2016 and 31 July 2017 are the higher than expected investment returns achieved on the Fund’s assets over the period and the actuarial gain that has arisen on the Fund’s liabilities due to experience being more favourable than assumed (which has arisen due to carrying out the accurate triennial valuation as at 31 July 2017).

There has therefore been an improvement in the funding position since 31 July 2017. The main reasons for this are the higher

Since the 31 July 2017 valuation, the Scheme Actuary has prepared an actuarial report which provides an approximate update on the funding position of the Fund as at 31 July 2018. This report showed that the estimated funding position as at 31 July 2018 was:

Value of assets £183.7m

Value of liabilities £158.8m

Surplus £24 .9mFunding level 116%

than expected investment returns achieved on the Fund’s assets over the period and the change in the assumptions used to value the liabilities, in particular the lower expectation for future inflation.

The next formal actuarial valuation of the Fund is due as at 31 July 2020, but it may take until 31 October 2021 before the results of that valuation are finalised.

As part of the actuarial valuation, the law also requires an assessment to be made of the extent to which the assets would cover the liabilities of the Fund if the Fund were to be wound up. The last valuation, as at 31 July 2017, showed that the Fund’s assets represented approximately 56% of the cost of securing the Fund’s benefits with an insurer.

If the Fund were to wind up, the law requires the University to make a payment to the Fund that would enable the Trustee to secure 100% of members’ benefits with an insurance company. At 31 July 2017, the estimated amount required to achieve this was £134m. Inclusion of this information does not imply that University is thinking of winding up the Fund.

If the University became insolvent, the Pension Protection Fund (PPF) might be able to pay compensation

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to members. For details of the compensation payable by the PPF, please refer to the PPF website at:

www.pensionprotectionfund.org.uk

THE IMPORTANCE OF THE UNIVERSITYThe University of York is the Principal Employer. The Trustee’s objective is to be able to pay the pensions both now and in the future. The success of the Fund relies on the University’s continuing support to:

§ pay future running expenses of the Fund; and

§ meet any funding shortfall.

THE PENSIONS REGULATORThe Pensions Regulator (TPR) is the UK Regulator for work-based pension schemes. TPR has certain powers it can use if it has concerns about a scheme’s funding, but it has not used any of these powers in relation to this Fund.

ALTERNATIVE FORMATSIf you require this document in an alternative

format, please call us on 01904 32 4805. We are able to supply large print, braille and spoken word tapes and CDs of all our documents.

www.pensionprotectionfund.org.uk

york.ac.uk/pensions [email protected]

Photographs: Suzy Harrison, Alex Holland, John Houlihan, Mark Woodward43321 – york.ac.uk/design-print-solutions

http://www.york.ac.uk/pensions

mailto:[email protected]

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