Archived decisions

AT A MEETING of the PENSION FUND PANEL held at The Castle, Winchester on Friday 25 May 2007.

Chairman:

p Councillor T.K. Thornber, CBE

Vice Chairman:

p Councillor M.F. Cartwright

Councillors:

p F.G. Allgood p M.N. Kemp-Gee

p B.D. Dash p A.R. Ludlow

a A.G. Dowden p J.J.W. Maxwell

p P.R.C. Hutcheson

Co-opted members:

a Councillor I.R. Carr (Test Valley Borough Council)

p Councillor J. Moulton (Southampton City Council)

p Mr E.W. Hughes (pensioners' representative)

p Mr P Reynolds (employee representative)

Independent adviser:

p Mr H. Cole.

148 APOLOGIES FOR ABSENCE

      Councillors A.G. Dowden and I.R. Carr gave their apologies.

149 DECLARATIONS OF INTEREST

      Members were mindful that, where they believed they had a personal or prejudicial interest in any matter to be considered at the meeting, they should, normally at the time of the debate, declare their interest and, having regard to the circumstances described in paragraphs 9, 10, 11 and 12 of the County Council's Code of Conduct, consider whether to leave the meeting whilst the matter was discussed.

      Councillor M.F. Cartwright declared a personal prejudicial interest in connection with the report on Property (Minute 162 below refers) and left the room during the discussion of this item and the presentation by representatives of CB Richard Ellis.

150 CHAIRMAN'S COMMUNICATIONS

      No Chairman's communications were received.

151 DEPUTATIONS

      No deputations were received.

152 MINUTES

      The Minutes of the meeting held on 11 May 2007 were confirmed as a correct record and signed by the Chairman.

153 LOCAL GOVERNMENT PENSION SCHEME - NEW LOOK SCHEME FROM APRIL 2008

      The Panel considered a report of the County Treasurer (Item 6 in the Minute Book) concerning current proposals from the Government for a new look Local Government Pension Scheme from April 2008. The Government had announced in November 2006 that the new Scheme would continue to offer benefits calculated on contributors' final salaries but with an accrual rate of 1/60th per year of service. Lump sums on retirement would not be paid unless individual contributors chose to commute part of their pensions.

      The Government had undertaken to have three sets of regulations for the new look Scheme in place by 1 April 2007. So far it had issued only one set, on benefits, membership and contributions. Those regulations included many errors and omissions which would need correction. The regulations on scheme administration had been issued for consultation but the third set, on transitional arrangements, had not yet been published.

      RESOLVED:

      (a) That the current position on the new look Local Government Pension Scheme be noted.

      (b) That the County Treasurer write to members of the Panel with further information on the Government's decision to restructure the ill-health provision in the new Scheme so that part of the benefit would be met by employers from their revenue budgets.

      (c) That the County Treasurer report to the Panel on the full proposals when all three sets of the regulations are in place.

154 HAMPSHIRE COUNTY COUNCIL - NEW EARLY RETIREMENT POLICY

      The Panel received and noted a report of the County Treasurer (Item 7 in the Minute Book) regarding a new early retirement policy for Hampshire County Council. The previous policy used some powers which the Government had changed as it considered them to be age discriminatory. As a result, a new policy on early retirement, compliant with the new powers, had been agreed by the Employment in Hampshire County Council Committee on 29 March 2007.

155 PROSPECTS FOR THE ACTUARIAL VALUATION AT 31 MARCH 2007

      The Panel considered a report of the County Treasurer (Item 8 in the Minute Book) regarding the prospects for the triennial actuarial valuation of the Hampshire Pension Fund at 31 March 2007. Initial indications of the likely outcome for employers' contribution rates would be available from the Fund's actuary, Hewitt Bacon & Woodrow, in October 2007 and the final results in December 2007. Hewitt Bacon & Woodrow had provided a preliminary projection of the employers' contribution rate of 20.1% as a percentage of pay. This would be an increase compared with the current rate of 17.7% reflecting recent trends in longevity. However, much more work on the valuation remained to be done by Hewitt Bacon & Woodrow before the employers' contribution rate would be finalised.

      RESOLVED:

      (a) That the County Treasurer write to members of the Panel setting out the assumptions used by the actuary in the valuation at 31 March 2004.

      (b) That the remainder of the report be noted.

156 TACTICAL ASSET ALLOCATION AND CURRENCY OVERLAY

      The Panel considered a report of the County Treasurer (Item 9 in the Minute Book) on the advantages and disadvantages of applying tactical asset allocation and currency overlay to the Fund's investments following the review of investment management arrangements implemented from 1 January 2007. The Panel had previously agreed a strategic asset allocation for the Fund between the various asset classes. This would be managed within tolerance ranges of +/-10% around these allocations, before rebalancing of the portfolios would be necessary. In addition, a tactical asset allocation manager could be employed to vary the asset allocation if they thought that particular sectors or markets might provide better returns in the short term. However, this could conflict with the global approach to investment adopted by the Panel and the strategic decision to allocate part of the Fund to UK index linked bonds reflecting the nature of the Fund's liabilities.

      A specialist currency manager could also be employed to protect the Fund from currency movements on its global assets and seek additional returns from active currency management. However, hedging the portfolio to sterling could negate some of the potential returns over the longer term from investing in global assets. The global managers also sought to achieve part of their target returns from active currency management.

      RESOLVED:

      (a) That the Fund's strategic asset allocation be reviewed after each triennial actuarial valuation.

    (b) That the County Treasurer be authorised to rebalance the investment managers' portfolios to keep the Fund's strategic asset allocation within the ranges set out in Table 2 of the report.

    (c) That no action be taken to apply tactical asset allocation to the Fund's investments.

    (d) That no action be taken to apply currency overlay to the Fund's investments.

    (e) That tactical asset allocation and currency overlay be reconsidered when the strategic asset allocation was next reviewed.

    (f) That active currency management be considered as part of the Fund's alternative investments portfolio.

157 CASH MANAGEMENT

      The Panel considered a report of the County Treasurer (Item 10 in the Minute Book) regarding a policy for the management of the Fund's cash balance. The policy included holding cash on a temporary basis whilst the Fund's increased investment in property was completed. Part of the cash balance was equitised, pending those investments, to maintain exposure to equity markets. In the longer term, a minimum cash balance of £20m would be maintained with additional cash above that level transferred to the Fund's managers for investment. The County Treasurer would report to the Panel annually on the Fund's cash balance.

      RESOLVED:

    That the County Treasurer be authorised to manage the Fund's cash balance in accordance with the policy set out in the report.

158 EXCLUSION OF PRESS AND PUBLIC

      RESOLVED:

      That the public be excluded from the meeting during the following items of business, as it is likely, in view of the nature of the business to be transacted or the nature of the proceedings, that if members of the public were present during that item there would be disclosure to them of exempt information within Paragraph 3 of Part 1 of Schedule 12A to the Local Government Act 1972, and further that in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, for the reasons set out in the reports.

159 COSTS AND SUMMARY OF TRANSITION (EXEMPT)

      The Panel received and noted an exempt report of the County Treasurer (Item 12 in the Minute Book) on the transition in December 2006 from the former investment management arrangements to the new managers.
      [SUMMARY OF A MINUTE WHICH CONTAINS EXEMPT INFORMATION]

160 ALTERNATIVE INVESTMENTS PORTFOLIO - UPDATE (EXEMPT)

      The Panel considered an exempt report of the County Treasurer (Item 13 in the Minute Book) on the progress on investing the Fund's alternative investment portfolio and the arrangements for taking decisions on investment opportunities.
      [SUMMARY OF A MINUTE WHICH CONTAINS EXEMPT INFORMATION]

161 GOVERNANCE FOR OWNERS (EXEMPT)

      The Panel considered an exempt report of the County Treasurer (Item 14 in the Minute Book) on an opportunity to invest in the Governance for Owners European Focus Fund.
      [SUMMARY OF A MINUTE WHICH CONTAINS EXEMPT INFORMATION]

162 PROPERTY (EXEMPT)

      The Panel considered an exempt report of the County Treasurer (Item 15 in the Minute Book) on the progress of the Fund's property portfolios over the last six months. The Panel also received a presentation on the Fund's UK property portfolio from the manager CB Richard Ellis.
      [SUMMARY OF A MINUTE WHICH CONTAINS EXEMPT INFORMATION]

163 TENDERS FOR THE PROVISION OF ADVISORY SERVICES FOR THE ALTERNATIVE INVESTMENTS PORTFOLIO (EXEMPT)

      The Panel considered an exempt report of the County Treasurer (Item 16 in the Minute Book) setting out details of the firms shortlisted to provide investment advisory services for the Fund's alternative investments portfolio.
      [SUMMARY OF A MINUTE WHICH CONTAINS EXEMPT INFORMATION]

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