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Factors Affecting Valuation Outcome Liabilities Gilt Yields Inflation Increase in Earnings Mortality AssumptionsAssets Expected Investment Returns Employers’ Contributions Future Service Assumptions Deficit/Surplus Position Recovery Period Phasing-In of Changes in Level of Contributions
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West Yorkshire Pension FundWest Yorkshire Pension Fund
Councillor Ian GreenwoodCouncillor Ian GreenwoodChair of
West Yorkshire Pension Fund Joint Advisory Group and Investment Advisory Panel
West Yorkshire Pension Fund – Funding Levels
107
82
95
87
90
76
63
68
2001 Valuation
2004 Valuation
2007 Valuation 'Like for Like'
2007 Valuation – Actuary
2007 Valuation – Final
31 March 2008 Interim Review
15 October 2008 Estimate
31 October 2008 Estimate
Factors Affecting Valuation Outcome
LiabilitiesLiabilities• Gilt Yields• Inflation• Increase in Earnings• Mortality Assumptions
AssetsAssets• Expected Investment Returns
Employers’ Contributions• Future Service Assumptions• Deficit/Surplus Position• Recovery Period• Phasing-In of Changes in Level of Contributions
Valuation
2001 2004 2007 March2008
October2008
£m £m £m £m £m
Assets 4,666 4,563 7,306 7,272 5,700
Liabilities 4,353 5,555 8,102 9,518 9,100
(Deficit)/Surplus 313 (992) (796) (2,246) (3,400)
Funding Level 107% 82% 90% 76% 63%
West Yorkshire Pension FundWest Yorkshire Pension FundAssets and LiabilitiesAssets and Liabilities
2007 Actuarial Valuation
• The analysis of the change in deficit between 2004 and 2007 is as follows:
Analysis £mDeficit as at 31 March 2004 -992Investment Gain versus valuation assumptions 1,359
Change in gilt yields -618Change in assumptions(e.g. mortality) -393
Impact of smoothing and phasingof contributions -202
Other factors(e.g. membership movements) +50
Deficit as at 31 March 2007 -796
2007/082007/08 2006/072006/07 2005/062005/06 2004/052004/05£m £m £m £m
ContributionsEmployers 206.0 190.2 156.5 132.5
Employees 93.6 90.2 84.6 78.6
299.6 280.4 241.1 211.1
Benefits Payable
Pensions 207.8 192.0 179.2 168.3
Lump Sums 76.7 66.5 37.1 36.9
15.1 21.9 24.8 5.9
Investment Income 219.7 196.6 183.5 155.0
Positive Cash Flow 234.8 218.5 208.3 160.9
West Yorkshire Pension FundWest Yorkshire Pension FundPositive Cash flowPositive Cash flow
7Mercer
RPI 4%pa, 2007 valuation planned employer contributions
0
200
400
600
800
1000
1200
1400
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
£ M
illio
ns
Year
Net
Projected Contributions
Total Benefit Payments
Projected Investment Income
8Mercer
RPI 5%pa, 2007 valuation planned employer contributions
0
200
400
600
800
1000
1200
1400
1600
1800
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
£ M
illio
ns
Year
Net
Projected Contributions
Total Benefit Payments
Projected Investment Income
9Mercer
RPI 4%pa, employer contributions at future service rate only
0
200
400
600
800
1000
1200
1400
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
£ M
illio
ns
Year
Net
Projected Contributions
Total Benefit Payments
Projected Investment Income
10Mercer
RPI 4%pa, 2007 valuation planned employer contributions, investment income ignored
-400
-200
0
200
400
600
800
1000
1200
1400
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
£ M
illio
ns
Year
Net
Projected Contributions
Total Benefit Payments
UK Equity Risk PremiumUK Equity Risk Premium
0
2
4
6
8
10
12
1924 1930 1936 1942 1948 1954 1960 1966 1972 1978 1984 1990 1996 2002 2008ERP: Rolling 25-year basis ERP average = 3.7%
Valuation of the US Stock Market
2001 Valuation 2004 Valuation 2007 Valuation
Future Service 11.3 10.2 13.2
Recover (Surplus)/Deficit (2.7) 3.8 2.6
8.6 14.0 15.8
West Yorkshire Pension FundWest Yorkshire Pension FundAverage Employers’ Contribution RateAverage Employers’ Contribution Rate
