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University of Aberdeen Superannuation & Life Assurance Scheme (UASLAS)
Funding and Investment
11 June 2013
2
Funding and investment
“Can you explain why the monetary value of the fund at present is more than last year, whilst the perceived hole is larger?”
“Can you explain why the monetary value of the fund at present is more than last year, whilst the perceived hole is larger?”
3
Monetary value of fund
31-Jul-10 31-Jul-11 31-Jul-12 30-Apr-13
81.0
88.692.3
106.1
£m
4
Investment returns
+7.9% per annum– 2 years (approx*) to 30 June 2012
+17.4%– 9 months to 31 March 2013
*From 7 September 2010, date of change of investment manager
5
How are the assets invested?20%
50%
15%
15%
Equities (UK) Equities (World ex UK)Corporate Bonds Government Bonds (Gilts)
6
Investment returns: equity indices31
-Dec
-93
03-J
ul-9
403
-Jan
-95
03-J
ul-9
503
-Jan
-96
03-J
ul-9
603
-Jan
-97
03-J
ul-9
703
-Jan
-98
03-J
ul-9
803
-Jan
-99
03-J
ul-9
903
-Jan
-00
03-J
ul-0
003
-Jan
-01
03-J
ul-0
103
-Jan
-02
03-J
ul-0
203
-Jan
-03
03-J
ul-0
303
-Jan
-04
03-J
ul-0
403
-Jan
-05
03-J
ul-0
503
-Jan
-06
03-J
ul-0
603
-Jan
-07
03-J
ul-0
703
-Jan
-08
03-J
ul-0
803
-Jan
-09
03-J
ul-0
903
-Jan
-10
03-J
ul-1
003
-Jan
-11
03-J
ul-1
103
-Jan
-12
03-J
ul-1
203
-Jan
-13
-
100
200
300
400
500
FTSE All Share FTSE All World (Ex UK)
7
Investment returns: bond indices30
-Nov
-98
30-N
ov-9
9
30-N
ov-0
0
30-N
ov-0
1
30-N
ov-0
2
30-N
ov-0
3
30-N
ov-0
4
30-N
ov-0
5
30-N
ov-0
6
30-N
ov-0
7
30-N
ov-0
8
30-N
ov-0
9
30-N
ov-1
0
30-N
ov-1
1
30-N
ov-1
2
-
100
200
300
£Stg Non-Gilts (>15yr) Index-Linked (I-L) Gilts (>5yr)
8
Asset classes compared01
-Jan
-07
01-J
an-0
8
01-J
an-0
9
01-J
an-1
0
01-J
an-1
1
01-J
an-1
2
01-J
an-1
3
-
100
200
FTSE All Share FTSE All World (Ex UK)£Stg Non-Gilts (>15yr) I-L Gilts (>5yr)
9
The question again?
“Can you explain why the monetary value of the fund at present is more than last year, whilst the perceived hole is larger?”
“Can you explain why the monetary value of the fund at present is more than last year, whilst the perceived hole is larger?”
10
Deficit
31-Jul-10 31-Jul-11 31-Jul-12 30-Apr-13
15.820.1
38.2 37.8
£m
11
Putting it in context
Source: National Institute of Economic and Social Research (NIESR)
12
UASLAS not unique
13
14
Two sides to every deficit
31-Jul-10 31-Jul-11 31-Jul-12 30-Apr-13
81.088.6 92.3
106.196.8
108.7
130.5
143.9
Assets Liabilities
£m
15
Annual increases
31-Jul-11 31-Jul-12 30-Apr-13(9 mths)
7.5
3.7
13.811.9
21.8
13.4
4.4
18.1
-0.4
Assets Liabilities Deficit
£m
16
Liabilities
Significant increases in “value”– Does this make sense?
Halifax house price index (Scotland)– 393 Q2 2012– 407 Q1 2013 +3.6% in 9 months
17
Bank of England base rates
18
0
2
4
6
8
10
12
14
16
18
1973
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2001
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2003
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2005
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2007
2008
2009
2010
2011
2012
2013
%
Changes in Bank Rate, Minimum Lending Rate, Minimum Band 1 Dealing Rate, Repo Rate and Official Bank Rate1,2,3,4
Min Lending Rate
Min Band 1 Dealing Rate
Repo Rate
Official Bank Rate
1 - Bank Rate, Minimum Lending Rate, Repo Rate and Official Bank Rate are interest rates. The Minimum Band 1 Dealing Rate are discount rates.2 - Data refer to the miminum published rate the Bank discounted bills to relieve money market shortages (excludes late assistance and repurchase and sale agreements).3 - 16.9.92, UK leaves the European Exchange Rate Mechanism. MLR set at 12%, raised to 15% (with effect from 17.9.92; never implemented).4 - The official bank rate paid on commercial bank reserves.
Date
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Mortgage example
2007/2008 2012/2013
72,300
-
£500 a monthBase rate + 2%7% p.a. interest
25 year term
£500 a monthBase rate + 2%
2.5% p.a. interest25 year term
2007/2008 2012/2013
72,300
111,900
20
Annuity rates (monetary cost)
Jul-10 Jul-11 Jul-12 Apr-13
24.225.5
29.5
34.1
26.427.8
32.434.1
Male Female
£m
21
In a nutshell
One person’s liability
is another person’s asset
22
Any questions?
