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Penfriend
Issue 2 November 2006

Welcome to the second edition of Penfriend, the newsletter for Lothian Pension Fund
pensioners. This gives you a summary of our annual report, including investment performance
for 2005/06, and reports on the results of the survey included in the first issues of Penfriend.

Annual Report 2005/06
The following is a summary of our Annual Report and Accounts 2005/06. You can download a
full copy from our website, www.lpf.org.uk, under ‘publications’, or contact us to request a copy.

Membership details

Scheme membership grew by 6.3%, of which 3.5% was due to taking on the Scottish Homes
Fund.

2006 2005
Active members 32,077 31,269
Deferred members 12,183 10,817
Pensioners and dependents 21,659 19,908
Total 65,919 61,994

Actuarial valuations

The Lothian Pension Fund and Lothian Buses Fund were valued by the Fund Actuary at 31
March 2005. The funding level for the Lothian Pension Fund was 85%, down from 96% in
2002. The funding level for the Lothian Buses Fund was 96%, down from 116% in 2002. The
full reports can be found on our website, www.lpf.org.uk

The actuarial valuation for the Scottish Homes Fund was carried out based on data as at 30
June 2005. The funding level for this fund was 81%. The Scottish Executive acts as Guarantor
to the Scottish Homes Fund and will make necessary future contributions in accordance with a
formula approved by the Fund Actuary.

The decline in funding was as expected, given poor market returns; a reduction in the expected
return from UK government bonds; and the fact that people are living longer. An increase in
employer contributions, changes to the investment strategy and changes to the regulations of
the Scheme are expected to improve funding levels in the future.

Your pension is guaranteed by law and is completely safe.

Investment and accounts

The Lothian Pension Fund had a positive return of 28.4% for 2005/06, which is 0.4% over its
benchmark. Over the last three years, the Fund has produced a 22.5% return. Over ten years,
it has produced an 8.4% return, which is well ahead of inflation at 2.6% and average earnings at
4.2%.
Total Annualised Returns for 2005/06
(% )

30
25
20 LothianPension
Fund
15
Benchmark
10
5
0
1 year 3 years 10 years

The Lothian Buses Fund had a positive return of 30.2% for 2005/06, which is 4.6% over its
benchmark. Over the last three years, the Fund has produced a 21.4% return. Over ten years,
it has produced a 9.5% return.

25
Lothian Buses
20 Fund
15 Benchmark

0
1 year 3 years 10 years

Over 2005/06, the Lothian Pension Fund received £153,918,000 in employee and employer
contributions and transfers in from other schemes. Its investments returned £581,269,000. It
paid out £94,891,000 in benefits and other expenditure. The Lothian Buses Fund received
£6,772,000 in contributions and transfers and its net return on investments was £42,405,000. It
paid out £5,692,000.

The net assets of the Lothian Pension Fund at 31 March 2006 were £2,729,306,000, an
increase of £640,296,000 over the year. The net assets of the Lothian Buses Fund were
£188,370,000, an increase of £43,485,000.

Investment strategy review

Hymans Robertson, the Fund’s investment consultant, was asked to review our investment
strategy. The review concentrated on managing the risk-return balance more effectively by
varying investment currently concentrated in UK equities. The new strategy will open up wider
global markets and provide more opportunities to invest in faster growing economies and
alternative investments.
Your opinions
In the last issue of Penfriend we included a survey to find out what you thought about our
services. We received over 1,500 replies, giving us valuable feedback. Thank you to
everyone who replied.

What you said Typical comments What we will do
89% of you said that the ‘It makes you feel you are not We will produce Penfriend
newsletter was a good forgotten.’ twice a year.
idea. ‘Good that pensioners are getting
the information that they need.’
‘It keeps you up to date…but I
would like it to be more like a
small magazine.’
5% of you didn’t think ‘A waste of time and money.’ If you would prefer not to
the newsletter was a receive Penfriend in the
good idea. future, please contact Ruth
Fry (see ‘contact’ below) and
ask to be taken off the
mailing list.
91% said that the ‘Having details in print ‘from the We will include updates on
articles were interesting. horse’s mouth’ makes things pensions issues, a summary
much clearer.’ of our annual report and
other subjects of interest to
pensioners.
88% of you said that ‘Any time I have had to make We have thanked our staff for
staff were always contact the staff are very helpful.’ their efforts and asked them
helpful. to keep up the good work.
57% commented that ‘Give out a list of who to contact We have included a contact
you weren’t always sure for specific enquiries.’ list in this issue (see ‘contact’
who to contact at the below). We have asked for a
Lothian Pension Fund, contact number to be added
and some suggested a to the payslips next time they
phone number on the are redesigned.
payslip.
Only 18% of you were ‘At 89 I am an old dog past We will continue to send this
aware that we had a learning new tricks!’ newsletter to keep you up to
website. date with the Funds’
performance and relevant
pension information.
52% of you wanted to ‘I expect to receive a monthly We are investigating whether
keep your monthly payslip and consider that this is we can send payslips
payslips. 27% would not an area where the Fund monthly to those who want
prefer twice a year and should try to make savings.’ them and less often to people
17% said you would be ‘Leave our payslips alone as all who do not. This could save
content with yearly you’re doing is using the saving a lot of money for the Fund:
payslips. on postage to send us more junk much more than is spent on
mail.’ this newsletter!
A few people asked if we ‘My husband and I both receive As payslips are printed and
could save postage by pensions separately, could they sent by an automatic mailing
putting husbands’ and be sent together?’ system, it is unlikely that they
wives’ payslips in the will be able to make this
same envelope. change in the near future.
Several of you ‘I would be content with a yearly We are hoping to introduce
suggested providing payslip if I could get updates this option in the future, so
payslips by email. online.’ that you will be able to
choose between email and
post.
Some of you asked for ‘Pension is always on time – These comments were
your thanks to be thank you!’ passed on to relevant staff,
passed on for the prompt who were very grateful for
payment of your the positive feedback.
pensions.

The full results of the survey are available on our website at www.lpf.org.uk in the ‘pensioners’
section. We’ll be repeating the survey with a sample of pensioners next year to make sure
we are on track and that our service is improving. Thank you for your input.

Always listening

When several pensioners told us that they hadn’t had enough information about what would
happen to their pension if they started work again, we made changes. The last issue of
Penfriend included a warning that if you start work for an employer which is a member of the
LGPS your pension could be reduced. And we’ve added the same information to retiral
letters and benefit statements. Notes will be added to forms as we redesign and reprint them,
and our website includes a link to the LGPS website, which gives further information.

Website

We’ve redesigned our website to make it clearer and easier to navigate. The new site is more
accessible: coloured typefaces are legible to people suffering from colour blindness and all
pages can be used with read-aloud software for the visually impaired. You can view previous
copies of Penfriend and find out about the Fund, as well as reading our full annual report and
investment details. Visit the site at www.lpf.org.uk

Children’s pensions
If you retired on or after 6 April 2006, a child in full-time education will now only receive a
pension in the event of your death to a maximum age of 23. Children who are dependent
because of a disability will continue to be able to receive a pension at any age.

If you retired before 6 April 2006, these rules will only apply to any children born after 5 April
2007.

Fighting fraud
Lothian Pension Fund is taking part in an exercise to ensure that public money is being spent
properly. We are obliged to protect the public funds we administer. To do so, we can share
information with other bodies responsible for auditing or administering public funds, in order to
prevent and detect fraud. Information will only be shared for these purposes: your details are
completely safe.

We are audited by Audit Scotland and they require us to take part in the National Fraud
Initiative (NFI). To do this, we are providing details of our pensioners to the auditors so that
they can compare these with information provided by other public bodies. This will make sure
that no pensions are being paid to people who are no are longer entitled to them; that pension
income is being declared when housing benefit is applied for; and that re-employed
pensioners are receiving the correct amount of pension.

You do not need to do anything. You may be contacted again in the future if NFI suggests you
are not receiving the correct amount of pension. However, if you do have any questions, you
should contact Carole Thomson, Assistant Pension Manager, tel 0131 529 4660, email
carole.thomson@edinburgh.gov.uk

A winning team
The Lothian Pension Fund won Best Trustee Development in the Professional Pensions
Magazine Pension Scheme of the Year Awards. It was also shortlisted in the categories of:
 Best Pensioner Communications
 Best Public Sector Scheme
 Best Benefit Statements
The Lothian Buses Fund won Best Small Scheme.

The Fund’s administration section retained the prestigious Charter Mark customer service
award at a recent inspection, being recognised as a best practice provider for customer
consultation and telling customers about our standards.
To be chosen by industry experts as being among the best in the UK is a credit to our team,
but we’re always looking for ways to make our service even better. Let us know what we can
do for you – see ‘Contact Us’ below.

Contact
The table below tells you who to get in touch with if you have a question about your pension.
We’re moving on 2 December, so if you’re writing to us please check that you are using the
right address. Our phone numbers and email addresses will stay the same.

Address before 2 December 2006:

City Chambers
High Street
Edinburgh
EH1 1YP

Address after 2 December 2006:

Waverley Court
4 East Market Street
Edinburgh
EH8 8BG

Issue Contact Telephone Email

How pension benefits are Our pensions administration 0131 pensions@lpf.org.uk
calculated team 529 4638

A change in your Our pensions administration 0131 pensions@lpf.org.uk
circumstances – for team 529 4638
example to notify a
marriage or death

Your tax code, what Payroll services 0131 529 4739 Bureau.services@ed
appears on your payslip or inburgh.gov.uk
a change in address or
bank account
The National Fraud Carole Thomson, Assistant 0131 529 4660 Carole.thomson@edi
Initiative Pensions Manager nburgh.gov.uk
This newsletter Ruth Fry, Communications 0131 Ruth.fry@edinburgh.
Officer 529 4510 gov.uk