Archived decisions

AT A MEETING of the PENSION FUND PANEL held at The Castle, Winchester on 29 November 2002.

PRESENT:

Councillors: T.K. Thornber, CBE (Chairman); B.D. Dash; Mrs S.M. Glasspool DL; P.R.C. Hutcheson; W.H. Wheeler.

Pensioners' representative: Mr E.W. Hughes.

Employees' representative: Mr D Offord.

Independent consultant: Mr. H. Cole

42 DECLARATIONS OF INTEREST

    Councillor T.K. Thornber declared a pecuniary interest in Equitable Life and a non-pecuniary interest in Eagle Star, in connection with the report on Additional Voluntary Contributions (AVC) Providers (Minute No. 51 below refers).

43 CHAIRMAN'S COMMUNICATIONS

    No Chairman's communications were received.

44 DEPUTATIONS

    No deputations were received.

45 MINUTES

    The Minutes of the meeting held on 14 November 2002 were confirmed as a correct record and signed by the Chairman.

46 GOVERNMENT CONSULTATION PAPERS ON RETIREMENT BENEFIT OPTIONS AND SIMPLIFICATION OF THE LOCAL GOVERNMENT PENSION SCHEME

    The Panel considered a report of the County Treasurer (Item 5 in the Minute Book) on two recent discussion papers issued by the Government on the future of the Local Government Pension Scheme. The first discussion paper set out options for making the retirement benefit package more attractive for employees. The Panel took the view that the scheme was an important part of the staff recruitment and retention package and should be retained for both new and existing employees for as long as the Government considered feasible. The Panel also considered that the Government should offer a second, more flexible scheme for new employees to which existing employees could transfer if they chose.

    The Panel supported the aims of the second discussion paper to simplify the existing Scheme where possible and to improve the ways in which information on the Scheme would be made available.

    RESOLVED:

    (i) That the Government be encouraged to retain the existing Local Government Pension Scheme for new and existing employees, and to consider offering a second, more flexible scheme for new employees to which existing employees could transfer if they chose.

    (ii) That the County Treasurer be authorised, in conjunction with the Chairman, to respond to the two discussion papers by the deadlines set, on the basis of the view's expressed by the Panel (and other employers) and the comments in the report, in the light of the forthcoming Green Paper on pension reform and the circular from the Local Government Pensions Committee to be issued in February 2003.

47 ITEM OF URGENT BUSINESS: GOVERNMENT CONSULTATION PAPER ON THE LOCAL GOVERNMENT PENSION SCHEME (MANAGEMENT AND INVESTMENT OF FUNDS) REGULATIONS 1998


    With the agreement of the Chairman, in accordance with Section 100B(4) of the Local Government 1972, the Panel considered, as a matter of urgency, a report of the County Treasurer (Item 16 in the Minute Book) on a consultation paper issued by the Government on the Management and Investment of Funds Regulations. It was noted that the deadline for responses to the Consultation Paper was Tuesday, 21 January 2003.

    It was reported that although of limited relevance to the Fund, the proposed increase in the limits would add flexibility to the management of investments. Proposed controls on the process of approving these new limits were considered too prescriptive and should be resisted.

    RESOLVED:

    (i) That the County Treasurer prepare a response to the consultation paper on the Fund's behalf based on the comments in the report.

    (ii) That the County Treasurer report to a future meeting of the Panel concerning the adoption of the new investment limits when the proposed amendments to the Regulations become effective.

48 HAMPSHIRE PENSION FUND - DISTRICT AUDIT REPORT ON MANAGEMENT ARRANGEMENTS

    The Panel considered a report of the County Treasurer (Item 6 in the Minute Book) on a recent report by the District Auditor on the management arrangements for the Fund which listed a number of strengths as well as highlighting three areas for further consideration. The first concerned the use of the 40 year horizon to restore funding levels to 100%. The Panel confirmed its view that the 40 year period was reasonable but would take the views of the actuary at the next valuation of the Fund. Secondly, the Panel also noted the need to strengthen the minutes of its meetings in relation to reviews of fund manager performance and the actions taken. The third area concerned the adequacy of training for Members and this was considered separately by the Panel in conjunction with the report on the agenda on the Business Plan.

    RESOLVED:

    (i) That the many positive comments from the District Auditor on the Fund's management arrangements be welcomed.

    (ii) That the reasonable use of the 40 year period to restore funding levels to 100% at the 2001 valuation be reiterated, but the actuary be asked to review again its use for the 2004 valuation depending upon stock market conditions at that time.

    (iii) That the actuary be requested to assess the effect of under or over performance of each manager, and the Fund collectively, against the scheme-specific benchmark, on the overall level of funding and employers' contributions rates, at the next valuation at March 2004.

49 HAMPSHIRE PENSION FUND - BUSINESS PLAN

    The Panel considered a report of the County Treasurer (Item 7 in the Minute Book) on a forward-looking business plan drawn up following the recommendations of the Myners report. It included a training plan with a list of training topics for the members of the Panel to indicate their training needs. The Panel discussed arranging a training session with one of the fund managers early in 2003, after which they would complete the training needs list.

    RESOLVED:

    (i) That the draft business plan be approved.

    (ii) That separate half-day training events for Panel Members be organised for March and May 2003.

50 COMMENTS FROM HARVEY COLE

    The Panel considered a report of the County Treasurer (Item 8 in the Minute Book) that included a paper prepared by the Panel's independent consultant and sounding board, Mr Harvey Cole, on the economic and market background and the implications for the Panel's investment strategy. The Panel discussed whether the options outlined in the paper should be pursued further and considered whether to seek further advice about further major investment in retail property. The Panel agreed not to pursue the options further at this stage as the Fund's investment strategy, asset allocation, benchmark and targets had recently been established following the asset/liability study. The Panel agreed instead to consider the issues further at a future meeting of the Panel.

    RESOLVED:

    (i) That Mr Harvey Cole be thanked for his paper.

    (ii) That the issues raised be considered further at a future meeting of the Panel.

51 ADDITIONAL VOLUNTARY CONTRIBUTIONS (AVC) PROVIDERS

    The Panel considered a report of the County Treasurer (Item 9 in the Minute Book) on changes to with-profits investments announced recently by the Fund's AVC providers. Equitable Life had increased its early withdrawal penalty and reduced the pensions paid to with-profits annuity holders. The latter change did not affect the Fund's members. Eagle Star had announced that it no longer offered a with-profits investment option to new clients although existing clients, such as the Fund, could continue to contribute.

    The County Treasurer also reported on advice received from the Fund's actuary that no further contributions should be made to Equitable Life's unit-linked AVC fund because of a small risk that the fund may not be solvent and because Equitable Life had increased its initial charges on such contributions from 1% to 3.5%.

    RESOLVED:

    (i) That Equitable Life be instructed that, in future, AVC's be invested in the building society fund rather than the with-profits fund.

    (ii) That the other developments related to the with-profits funds at Equitable Life and Eagle Star, be noted.

52 PENSION FUND ANNUAL GENERAL MEETING

    The Panel received and noted a report of the County Treasurer (Item 10 in the Minute Book) on the successful fifth annual general meeting of the Hampshire Pension Fund held on 17 September 2002.

53 EXCLUSION OF PRESS AND PUBLIC

    RESOLVED:

    That, by virtue of paragraphs 7 and 12 of Part 1 of Schedule 12A of the Local Government Act 1972, the press and public be excluded from the meeting.

54 REVIEW OF THE ETHICAL PORTFOLIO MANAGED BY ISIS ASSET MANAGEMENT AND OTHER ETHICAL ISSUES (CONFIDENTIAL)

    The Panel considered a confidential report of the County Treasurer (Item 12 in the Minute Book) on arrangements for the management of the Fund's ethical portfolio.

    The County Treasurer also reported on an approach to the Chairman by a pressure group calling on the Fund to stop investing in companies involved with the arms trade. The Panel reviewed the Fund's holdings in companies partly engaged in defence related activities in the context of the legislative requirements to achieve the best financial return consistent with an acceptable degree of risk and other parts of the Fund's Statement of Investment Principles concerning socially responsible investment.
    [SUMMARY OF A MINUTE WHICH CONTAINS CONFIDENTIAL INFORMATION]

55 DEUTSCHE'S ASSET ALLOCATION PROPOSALS (CONFIDENTIAL)

    The Panel considered a confidential report of the County Treasurer (Item 13 in the Minute Book) on proposals by Deutsche Asset Management to use derivatives, within a separate asset allocation fund, to improve their returns from asset allocation decisions. It was noted that the issue had been discussed at the Panel's previous meeting, at which Deutsche's Chief Global Strategist had made a presentation to the Panel, and deferred pending further consideration.
    [SUMMARY OF A MINUTE WHICH CONTAINS CONFIDENTIAL INFORMATION]

56 MANAGERS' FEES, TRANSACTION COSTS AND SOFT COMMISSION ARRANGEMENTS (CONFIDENTIAL)

    The Panel received and noted a confidential report of the County Treasurer (Item 14 in the Minute Book) on the fees charged by the Fund's investment managers and the transaction costs incurred on brokerage and stamp duty, in the year to 30 September 2002. The Panel also noted the use made of soft commission arrangements by the Fund's managers in 2001.
    [SUMMARY OF A MINUTE WHICH CONTAINS CONFIDENTIAL INFORMATION]

57 THE FUND'S ACTUARIAL POSITION - THE IMPACT OF MARKET FALLS (CONFIDENTIAL)

    The Panel considered a confidential report of the County Treasurer (Item 15 in the Minute Book) outlining the actuary's comments on the impact of recent falls in equity markets and rises in bond markets on the Fund's funding level and on the options for action prior to the full actuarial valuation at 31 March 2004. The Panel also noted a sensitivity analysis of the effects of the equity and bond markets and the funding level.
    [SUMMARY OF A MINUTE WHICH CONTAINS CONFIDENTIAL INFORMATION]

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