Archived decisions

The Pension Fund Accounts

Revenue Account See 2003/04 2004/05

. note £'000 £'000

Contributions and benefits

Contributions from:

                Employees 37,367 40,129

                Employers 81,314 90,889

Transfer values received 18,163 16,776

                      136,844 147,794

Benefits payable:

Pensions 81,967 84,930

Lump sum benefits 13,627 15,366

Transfer values paid 14,965 12,389

Refunds of contributions 563 546

Contributions equivalent premium 300 215

Administrative expenses 4 1,279 1,555

                      112,701 115,001

Net additions from dealings with members 24,143 32,793

Returns on investments

Investment income 5 52,584 60,664

Commission and other income 84 45

Change in market value of investments:

                realised 1,377 73,057

                unrealised 302,061 71,622

Gross return on investments 356,106 205,388

Investment management expenses 4 -3,754 -3,922

Net return on investments 352,352 201,466

Total change in market value of fund 376,495 234,259

Opening net assets of the scheme 1,548,640 1,925,135

Closing net assets of the scheme 1,925,135 2,159,394

                      376,495 234,259

Net Assets Statement 31 March 2004 31 March 2005

Investments at market value

UK fixed-interest bonds 28,810 10,209

UK index-linked bonds 216,145 248,819

UK equities 7, 10 733,089 861,063

North American equities 102,350 109,746

Japan equities 96,880 99,820

Europe equities 164,249 186,098

Other overseas equities 21,379 23,652

Unit trusts 8 389,390 409,950

Property 70,840 86,335

                      1,823,132 2,035,692

Cash temporarily invested with Hampshire County Council 51,204 77,883

Cash held by external investment managers 35,431 28,521

                      1,909,767 2,142,096

Current assets

Debtors 17,464 19,674

Less: current liabilities

Creditors -2,096 -2,376

Net current assets 15,368 17,298

Net assets - balance of fund 1,925,135 2,159,394

RECONCILIATION OF NET MOVEMENT

OF ASSETS OF THE FUND

Opening net assets 1,548,640 1,925,135

Net income available for investment:

                net additions from dealings with members 24,143 32,793

                investment income less expenses 48,914 56,787

Revenue surplus 73,057 89,580

Change in market value of investments 303,438 144,679

Closing net assets 1,925,135 2,159,394

Notes to the Pension Fund Accounts

1 Operations and management

The Hampshire Pension Fund covers employees of Hampshire County Council, Portsmouth and Southampton City Councils and all district councils in Hampshire, except teachers, for whom separate arrangements apply. It also covers other scheduled and admitted bodies (see page ?).

Detailed government regulations control rates of contribution and scales of benefits. Benefits are normally in the form of a lump sum and annual pension. In 2004/05 employees contributed £40.1m to the Fund. Contributions are calculated as a percentage of salary. 23,586 people were receiving pensions from the Fund at 31 March 2005.

During the year the Fund's investments were managed by three companies based in London:

    - Deutsche Asset Management Limited

    - Schroder Investment Management

    - SG Asset Management

There is also a property portfolio managed by Cordea Savills, Chartered Surveyors.

The Pension Fund Panel directs the management of the Fund. Following the elections in May 2005, this now consists of nine county councillors. There is also a representative of the two city unitary authorities (Portsmouth and Southampton), and a representative of the 11 district councils in Hampshire co-opted to the Panel. Both these representatives have full voting rights. Two representatives of the Fund's pensioners and contributors are co-opted to the Panel, also with full voting rights. There is also an independent adviser who attends Panel meetings. The Panel meets the managers twice a year to discuss performance and approve their management strategies.

2 Accounting policies

Accounting standards

The accounts have been prepared in accordance with the Statement of Recommended Practice (SORP) 1 on Pension Scheme Accounts, and the Code of Practice on Local Authority Accounting issued by the Chartered Institute of Public Finance and Accountancy. The accounts summarise the transactions and net assets of the Fund. They do not take account of future liabilities to pay pensions and other benefits. See note 3 for the actuarial position of the Fund, which does take account of such liabilities.

Basis of preparation

Income and expenditure are generally credited and debited to the revenue account when earned or incurred, not when received or paid (that is, on an accruals basis). However, transfer values paid and received have been included on a receipts and payments basis as recommended in the SORP.

Investments

Investments are shown in the accounts at their market value, which has been determined as follows:

- FTSE-100 and Reserve List stocks are valued using the SETS last traded price

- other listed securities and securities on other domestic markets - mid-market price at the close of business on 31 March 2005

- unlisted securities - using latest dealings, professional valuations, asset values and other appropriate financial information

- investments held in overseas securities - mid-market price at the close of dealing on 31 March 2005 translated into sterling at the rate that day

- the UK property portfolio - open market value at 31 March 2005 as estimated by the Fund's property advisers.

Acquisition costs

The cost of acquiring property and securities includes brokerage commission, legal fees and stamp duty.

3 Actuarial position

Investment policy for the Fund is to maximise the growth in its value and to ensure that its future liabilities can be met while keeping employers' contribution rates stable.

The actuary completed a valuation of the Fund at 31 March 2004 during 2004/05. The actuary calculated that employers' contributions would need to increase to a higher level for a period of 25 years for scheduled employers in the Fund, and 40 years for most employers admitted to the Fund, to meet the Fund's long-term liabilities. Phased increases in employers' contribution rates were put in place. The rate paid by scheduled bodies in 2004/05 was 225%, and will rise to 250% in 2005/06, 275% in 2006/07, and 295% in 2007/08. The rate paid by admitted bodies in 2004/05 was 210%, and will rise to 240% in 2005/06, 265% in 2006/07, and 295% in 2007/08.

The next actuarial valuation of the Fund is due to take place as at 31 March 2007.

4 Administrative and investment management expenses

The figures in the revenue accounts are broken down in the following table:

          2003/04 2004/05

          £'000 £'000

Administrative expenses

Pension administration costs and

other overheads 1,203 1,396

Office and other administrative expenses 76 159

          1,279 1,555

Investment management expenses

Investment management expenses 3,048 3,290

Property manager's expenses 425 240

Actuary's and other fees 281 392

          3,754 3,922

5 Income from investments

The figures in the revenue account are broken down in the following table:

          2003/04 2004/05 £'000 £'000

UK bonds 10,873 12,056

UK equities 27,062 30,499

Overseas bonds 17 14

Overseas equities 8,547 12,618

Property 6,127 4,986

Interest on cash holdings 3,104 4,233

Less irrecoverable tax -3,146 -3,742

          52,584 60,664

6 Investment returns

The return on the Fund in 2004/05 (as measured by Russell Mellon) was 10.7%.

In the three years to 31 March 2005 a return of 3.2% a year was achieved.

7 Ten largest UK equity holdings

At 31 March 2005 the ten largest UK equity (company share) holdings by market value were as follows:

    £'000

Vodafone Group plc 63,959

BP plc 55,605

HSBC Holdings plc 53,389

GlaxoSmithKline plc 47,738

Shell Transport and Trading plc 43,360

Royal Bank of Scotland Group plc 39,021

Prudential plc 19,554

Barclays plc 18,380

Rio Tinto plc 16,819

AstraZeneca plc 15,817

8 Five largest unit trust holdings

At 31 March 2005 the five largest unit trust holdings were as follows:

    £'000

Deutsche Funds Index Linked Bond Fund 92,728

Schroder North American Equity Fund 62,037

Deutsche Fixed Income Sterling Credit Fund 53,288

Schroder Unit Trusts All Maturities Corporate Bond Fund 35,538

Deutsche Investment Funds MG Sterling Bond Fund 33,982

9 Concentration of investments

During the year, no individual investment reached 10% of the value of the net assets of the Fund.

10 Analysis of UK equity investments by industrial sector

      £'000

Resources (mining, oil and gas) 132,628

Basic industries (chemicals, construction, forestry, steel) 29,374

General industries (aerospace, defence, electronics, engineering) 27,830

Cyclical consumer goods (vehicles, household goods) 2,495

Non-cyclical consumer goods (beverages, food, health,

pharmaceuticals) 130,848

Cyclical services (general retailers, leisure, media, restaurants) 148,758

Non-cyclical services (food retailers, telecommunications) 111,423

Utilities 21,131

Information technology 12,904

Financials 243,672

      861,063

11 Unlisted investments

There were no unlisted investments held by the Fund.

12 Investment transactions

 

Market value at 1 April 2004

Purchases

Sales

Change in value

Market value at 31 March 2005

 

£'000

£'000

£'000

£'000

£'000

UK fixed interest bonds

28,810

82,647

-101,385

137

10,209

UK index-linked bonds

216,145

191,913

-166,583

7,344

248,819

UK equities

733,089

225,193

-183,965

86,746

861,063

North American equities

102,350

70,447

-68,156

5,105

109,746

Japan equities

96,880

55,653

-47,799

-4,914

99,820

Europe equities

164,249

105,640

-109,901

26,110

186,098

Other overseas equities

21,379

18,022

-19,401

3,652

23,652

Unit trusts

389,390

246,377

-238,737

12,920

409,950

Property

70,840

7,950

-

7,545

86,335

           

Total

1,823,132

1,003,842

-935,927

144,645

2,035,692

The equivalent figures for purchases and sales in 2003/04 were £1,042.3m and £960.8m.

13 Contingent liabilities

The Fund had no contingent liabilities on 31 March 2005.

14 Capital commitments

The Fund had no capital commitments at 31 March 2005.

15 Property

All of the Fund's property is held as freehold.

16 Independent property valuer

In December each year the properties in the UK property portfolio are independently valued by Montagu Evans, Chartered Surveyors.

17 Rent reviews

All properties held in the UK property portfolio are subject to upward-only rent reviews every five years.