Archived decisions

Pension Fund Accounts

Fund account See 2005/06 2006/07

note £'000 £'000

Dealings with members and employers

Contributions receivable

Employers - normal 4 103,764 121,117

Employers - special 4 3,614 4,631

Employers - additional 4 14 6

Members - normal 4 41,461 44,126

Members - additional voluntary 4 1,030 1,203

Transfers in

Individual transfers 23,250 16,943

Benefits payable

Pensions 4 (90,813) (96,783)

Commutation of pensions and lump sum retirement benefits 4 (15,476) (22,870)

Lump sum death benefits 4 (1,472) (1,989)

Payments to and on account of leavers

Group transfers out (1,162) 0

Individual transfers out (19,389) (12,194)

Refunds of contributions (382) (86)

State Scheme Premiums (203) (9)

Administrative expenses 5 (1,625) (1,768)

Net additions (withdrawals) from dealings with members 42,611 52,327

Returns on investments

Investment income

Interest from fixed interest securities 448 7,223

Dividends from equities 48,644 55,815

Income from index-linked securities 7,015 46

Income from pooled investment vehicles 13,938 10,141

Net rents from properties 4,870 5,413

Interest on cash deposits 4,049 10,332

Other 115 142

Change in market value of investments

realised 165,889 315,414

unrealised 275,957 (242,122)

Taxation (4,881) (5,382)

Investment management expenses 5 (4,422) (5,563)

Net returns on investments 511,622 151,459

Net increase (decrease) in fund during the year 554,233 203,786

Add opening net assets of the Scheme 2,159,394 2,713,627

Closing net assets of the Scheme 2,713,627 2,917,413

Net assets statement See 31 March 2006 31 March 2007

note £'000 £'000

Investments at market value

Fixed interest securities 12 9,852 122,115

Index-linked securities 12 291,810 4,865

Equities 7, 10,12 1,606,834 1,734,964

Pooled investment vehicles 8,12 560,567 593,801

Property 12 103,418 110,950

Property unit trusts 0 27,898

Other alternative investments 0 1,052

Cash deposits 111,948 291,077

Total invested 2,684,429 2,886,722

Net current assets and liabilities

Contributions due from employers 9,787 11,003

Other current assets 21,304 21,848

Current liabilities (1,893) (2,160)

Net assets - balance of fund 2,713,627 2,917,413

Reconciliation of net movement of assets of the fund

Opening net assets 2,159,394 2,713,627

Net income available for investment:

net additions from dealings with members' 42,611 52,327

investment income less expenses 69,776 78,167

Revenue surplus 112,387 130,494

Change in market value of investments 441,846 73,292

Closing net assets 2,713,627 2,917,413

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 214 other scheduled and admitted bodies.

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 2006/07 employees contributed £45.3m and employers £125.8m to the Fund. Contributions are calculated as a percentage of salary. 25,666 people were receiving pensions from the Fund at 31 March 2007.

During the year the Fund's investment management arrangements were reviewed and at the end of the year the investments were managed by several companies based in London:

- Aberdeen Asset Management Limited

- AllianceBernstein

- Legal & General Investment Management

- Newton Investment Management

- Schroder Investment Management

- SG Asset Management

- State Street Global Advisors

- Western Asset Management

There are also property portfolios managed by CB Richard Ellis (who took over Cordea Savills' portfolio with effect from January 2007) and Arlington.

The Fund also appointed Northern Trust as its first global custodian with effect from August 2006.

The Pension Fund Panel directs the management of the Fund. This consists of nine county councillors. There is also one representative of the two city unitary authorities (Portsmouth and Southampton), and one representative of the 11 district councils and other employers in Hampshire co-opted to the Panel; both 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 regularly to discuss performance and approve their management strategies.

2 Accounting policies

Accounting standards

The accounts have been prepared in accordance with the Code of Practice on Local Authority Accounting in the UK 2006 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 pension Statement of Recommended Practice (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 2007

- 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 2007 translated into sterling at the rate that day

- the UK property portfolio - open market value at 31 March 2007 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 a phased increase in the employers' contribution rates paid by both scheduled and admitted bodies would be necessary to meet the Fund's long-term liabilities. The rate paid by scheduled bodies was 250% in 2005/06, 275% in 2006/07 and will rise to 295% in 2007/08. The rate paid by most admitted bodies was 240% in 2005/06, 265% in 2006/07 and will rise to 295% in 2007/08.

The next actuarial valuation of the Fund as at 31 March 2007 is currently under way.

4 Contributions and benefits

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

5 Administrative and investment management expenses

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

6 Investment returns

The return on the Fund in 2006/07 was 5.3%.

In the three years to 31 March 2007 a return of 13.1% a year was achieved.

7 Ten largest UK equity holdings

At 31 March 2007 the ten largest UK equity (company share) holdings by market value were as follows:

8 Five largest pooled investment holdings

At 31 March 2007 the five largest pooled investment vehicle holdings were as follows:

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

11 Unlisted investments

There were no unlisted investments held by the Fund.

12 Investment transactions

The equivalent figures for purchases and sales in 2005/06 were £1,180.4m and £1,085.2m.

13 Contingent liabilities

The Fund had no contingent liabilities on 31 March 2007.

14 Capital commitments

The Fund had no capital commitments at 31 March 2007.

15 Property

All the Fund's directly owned property is held as freehold.

16 Independent property valuer

In December each year the directly held properties in the UK property portfolio are independently valued by Colliers CRE, Chartered Surveyors.

17 Rent reviews

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