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Suffolk No.1 fund deficit nears £700m

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  • Suffolk No.1 fund deficit nears £700m

UK - The deficit of Suffolk County Council's main pension fund has more than quadrupled over the past two years to £690m (€800.8m).

Figures from the draft statement of accounts for 2008-09 show the 'Pension Fund No.1'  - which covers most employees and pensioners in local government - produced an investment return of -22.3% in 2008-09 and underperformed its benchmark by 1%, as a result of the falls in the stock markets.

Following the poor return, the report showed the value of the fund had dropped £266m from £1.31bn in March 2008 to £1.04bn a year later, as the negative return on investments equated to a loss of £301m, which was partially offset by £35m in employer and employee contributions.

However, even over a five- and 10-year period the fund's annual investment returns have been low, at 2.8% and 1.3% respectively, with the 10-year return significantly lower than the 2.1% local authority average and also below the levels of both price inflation and pay increases over the period.

Figures from the report showed at the last triennial valuation in March 2007 the Suffolk Council pension fund was 89.2% funded, with a deficit of just £158.4m, but an interim valuation at 31 March 2009 revealed the funding level has slipped to 60.5%, while the deficit had more than quadrupled to £690m.

Suffolk confirmed its pension fund committee is "continuing to keep the funding position of the fund under scrutiny," and added: "The next statutory valuation of the Pension Fund will be undertaken at March 2010, and the employer contributions for the period starting April 2011 will be assessed in the light of the situation of the fund at the valuation date."

At the end of March 2009, Suffolk Council revealed its main pension fund had allocated 59.3% of its assets to equities, 20.2% in bonds, 8.1% in property and 12.4% in other investments and temporary cash.

Meanwhile, the smaller Pension No.2 Fund (Ipswich Buses Ltd) also reported a fall in its net assets over the year from £15.4m to £12.3m, as the net return on investments was reported to be -£2.59m.

The scheme, which has around 230 members, was 94.9% funded at its last valuation in 2007 with a deficit of £842,000, but although the funding level dropped to 88% in 2008 an extra lump sum employer contribution of £130,000 was made in 2008-09 and further lumps sums of £136,000 and £143,000 will be paid into the scheme in 2009-10 and 2010-11 respectively.

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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