The Trustees last wrote to you in March regarding the impact of low inflation on the Fund. This prompted some members to ask specific questions about this, all of which we have responded to individually. From your letters it is clear that we need to keep you up to date with matters affecting the Fund, in particular how inflation and investment returns bear on decisions the Trustees have to make.
As Trustees we are bound by the Fund's rules. These rules do not guarantee that pensions will increase every year. However, in past years when the Fund has performed well, we have increased pensions on a discretionary basis. Between 1987 and 1998, these increases exceeded inflation. The decision not to award a discretionary increase in 1999 was taken in the light of the Fund's reduced income which was caused by low inflation, low interest rates and lower investment returns. It was not an easy decision, but we must consider the long term benefits of all the members.
Looking to the future, the Fund faces a number of challenges, including the prospect of continued low inflation and associated low investment returns. The decisions we make now will affect our ability to pay members' benefits in the future. This year, our annual Trustees' report showed that, since 1992, the Fund enjoyed five years of good investment performance followed by two relatively poor years. This was not helped by the withdrawal in 1997 of tax relief on UK equity investments. The fact that the Fund is 'mature' - the average age of members is high and contribution income from employed members is relatively low - poses yet another challenge. Despite all this, our Fund has still done better than the average pension fund over the past five years. Nevertheless, the Trustees will continue to seek ways of maximising the return on the Fund's investments.
The 1999 Actuarial Valuation will help us plan the way forward. This is a short and long term financial health check, which has been carried out as at 31 March 1999. The Trustees will consider the valuation very carefully and take professional advice. We will take account of many issues, including the current economic climate and future liabilities for members' benefits. This will be finalised during the first part of next year and we will be writing to you with the findings. Meeting benefit promises and protecting the security of members' interests are our main considerations - not just in 2000 but in 2040 and beyond.
As mentioned earlier we will write to you again next year. In the meantime, if you have any specific questions please telephone the Member Liaison Service on 01372 2002 00. Alternatively, you may wish to write to the Chief Executive at the address on this letter.
With best wishes for Christmas and the Millennium New Year.