Virginia Retirement System Releases Annual Oversight Report

State trust fund increased $5.3 billon to $72.4 billion.

The Virginia Retirement System (VRS) reported in its recently released annual oversight report that its trust fund held $72.4 billion in assets as of March 31, an increase of $5.3 billion from a year ago, and that its investment return was 10.7% for the year ending March 31.

The one-year return outperformed the VRS’ benchmarks, however, the fund’s three-year return of 6.3%, and 10-year return of 5.1%, were below the 7.0% assumed rate of return.

“The General Assembly took significant steps this year to strengthen VRS, fully funding the annual required contribution and fully repaying previously deferred payments to VRS,” said William Howe, speaker of the Virginia House of Delegates, in a statement.

Some of those steps include legislation that allows VRS to hire outside counsel related to investments, new stress testing and reporting policies, and expansion of the role of the Virginia Research Investment Committee to authorize money from the Research Investment Fund to reimburse VRS for its investment services.

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“While this is good news,” said Howe, “there is significantly more work to be done.”

According to Howe, the VRS is only 71% funded, with unfunded liabilities exceeding $23 billion.

“The hybrid system reforms enacted several years ago were necessary changes, but the hybrid plan faces challenges of its own,” said Howe. “Voluntary contribution rates are low, resulting in lower income replacement rates for employees. These are important issues that the Commission will have the opportunity to address.”

Public equity, which remains the largest asset class for VRS, with $30 billion in assets, was the fund’s top-performing class, returning 14% over the past year. It has three- five- and 10-year returns of 6.5%, 9.7%, and 4.9%, respectively. Investment-grade fixed income, the system’s second-largest asset class at $13 billion, reported an annual return of 1.6%, and three-, five-, and 10-year returns of 2.3%, 2.8%, and 5.0%, respectively.

Total credit strategies, which has $12 billion in asset, returned 11.7% over the past year, and has three-, five-, and 10-year returns of 4.5%, 6.4%, and 5.9%, respectively. Real assets, which make up $9 billion of the portfolio, returned 10.9% over the past year, and has three-, five-, and 10-year returns of 11.7%, 11.9%, and 6.1%, respectively. Strategic opportunities, which accounts for $2 billion in assets, reported an annual return of 9.1%, and a three-year return of 3.1% (five- and 10-year returns were not available).

VRS administers retirement plans for employees of state and local governments, including the Teachers Plan and the State Employees Plan, which are VRS’ two largest plans. Other pension plans include the individual retirement plans for 589 local political subdivisions and plans for state police officers (SPORS), other Virginia state law officers, and judges. Ranked by value of assets, VRS is the nation’s 22ndlargest public or private pension fund, and serves approximately 675,000 members, retirees, and beneficiaries.

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UK Automatic Enrollment Surpasses 8 Million Mark

Every week, tens of thousands are joining workplace pensions through automatic enrollment.

The number of employees who have signed up for a workplace pension has surpassed 8 million since the launch of automatic enrollment in 2012, according to the UK’s The Pension Regulator (TPR).

“Reaching this 8 million figure is a formidable achievement and represents a huge number of people on the path to a more financially secure retirement,” said  Guy Opperman, minister for pensions and financial inclusion. “But we cannot be complacent, and as contribution rates rise, we know there is more to be done. That’s why our automatic enrollment review, which will report back later this year, is so vital to the future of this life-changing policy.”

The automatic enrollment policy was introduced to help the millions of workers who were not properly saving for retirement, as only one in three private sector workers were part of a workplace pension. The policy was set out in the Pensions Act 2008, which requires UK employers to automatically enroll certain members of their staff into a workplace pension plan, and contribute toward it. To be eligible for automatic enrollment, a worker must be at least 22 years old, but under state pension age, and working or ordinarily working in the UK with earnings of more than £10,000 ($12,900) a year.

Employers that don’t comply with the auto enrollment regulation may face fines, and those that comply late are expected to pay back any missed contributions to put employees in the position they would have been in if the employer had complied on time.

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According to TPR, as of the end of June, there were 8,165,000 workers with a workplace pension as a direct result of automatic enrollment. In June, 168,000 people gained workplace pensions because of automatic enrollment, and 44,328 more UK employers reported that they had completed their workplace pension responsibilities, bringing that total number to more than 642,000.

 “Tens of thousands more people every week are signing up to a new workplace pension through automatic enrollment,” said Darren Ryder, TPR’s director of automatic enrollment. However, he added that there are more than 500,000 more employers whose duties are still to begin during the coming months. “I would urge each and every one of them to check today that they know what they need to do and when they need to do it so they can seek our help if they need it.”

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