Archived decisions
Agenda Item: 5
AT A MEETING of the PENSION FUND PANEL held at The Castle, Winchester on Friday 23 May 2008.
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
p A.G. Dowden p J.J.W. Maxwell
a P.R.C. Hutcheson
Co-opted members:
a Councillor I.R. Carr (Test Valley Borough Council)
a Councillor P. Giddings (deputy in place of Councillor I.R. Carr)
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.
202 APOLOGIES FOR ABSENCE
Councillors P.R.C Hutcheson, I.R. Carr and P. Giddings gave their apologies. Councillor T.K. Thornber left the meeting after item 18 on the Agenda to attend to other County Council business. Councillor M.F. Cartwright took the chair for the remainder of the meeting.
203 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 T.K. Thornber declared a personal and prejudicial interest in connection with the report on Additional Voluntary Contributions (AVC) - Service Provided by Zurich Financial Services Group (Minute 209 below refers) and took no part in the discussion. Councillor M.F. Cartwright chaired the meeting for that item.
204 CHAIRMAN'S COMMUNICATIONS
No Chairman's communications were received.
205 DEPUTATIONS
No deputations were received.
206 MINUTES
The Minutes of the meeting held on 2 May 2008 were confirmed as a correct record and signed by the Chairman.
Matters arising thereon:
Pension Fund Panel Representatives and the Timetable for Meetings with Fund Managers (Minute 195)
The County Treasurer reported that Southampton City Council had nominated Councillor J. Moulton to replace Councillor D. Harryman as the representative of the unitary authorities, following the elections on 1 May 2008.
207 LOCAL GOVERNMENT PENSION SCHEME - NEW LOOK SCHEME FROM 1 APRIL 2008
The Panel considered a report of the County Treasurer (Item 6 in the Minute Book) providing an update on the introduction of the new look Local Government Pension Scheme from 1 April 2008. The Government had issued three sets of regulations governing the implementation of the new scheme but these regulations had been delayed and still required further amendment. The Local Government Employers had made a complaint to the Government concerning the delays in finalising the regulations.
RESOLVED:
(a) That the current position be noted.
(b) That a further report be made when the full scheme is in place.
208 COST SHARING IN THE LOCAL GOVERNMENT PENSION SCHEME - GOVERNMENT CONSULTATION
The Panel considered a report of the County Treasurer (Item 7 in the Minute Book) concerning the County Council's response to the Government's consultation on proposed arrangements for sharing the cost of changes to the Local Government Pension Scheme between employees and employers. The County Council's response recognised the need to introduce cost sharing but the proposed cap on employer contributions at 14% of pay appeared to be too low as Hampshire's rate was already 14.5%. The practical implications of altering the employee contribution rate had not been adequately covered in the consultation document.
RESOLVED:
That the response to the Government's consultation on cost sharing be noted.
209 ADDITIONAL VOLUNTARY CONTRIBUTIONS (AVC) - SERVICES PROVIDED BY ZURISCH FINANCIAL SERVICES GROUP
The Panel considered a report of the County Treasurer (Item 8 in the Minute Book) on the provider of the Fund's in-house additional voluntary contributions (AVC) scheme, the Zurich Financial Services Group. Zurich had made a number of changes to their communication and administration processes over the past 18 months with the aim of improving their service. Their governance procedures included placing underperforming funds into a `remediation' category for further action to improve performance.
RESOLVED:
(a) That employees with investments in `remediation' be contacted by Pension Services.
(b) That a further report on the Zurich AVC scheme be made to the Pension Fund Panel in May 2009, to include updated growth statistics and quarterly governance reports.
(c) That, following the report in May 2009, the Pension Fund Panel assess whether an external review of the AVC provider and fees be required.
210 PENSION ADMINISTRATION STRATEGY
The Panel considered a report of the County Treasurer (Item 9 in the Minute Book) on the preparation of a pension administration strategy for the Hampshire Pension Fund. The Government had issued regulations allowing Local Government Pension Scheme funds to prepare and publish a pension administration strategy. It would focus on the ways that the County Council as administrative authority liaised with employers and its performance against defined service standards. Further progress was required by the County Council on the service standards before the pension administration strategy could be completed.
RESOLVED:
That an administration strategy is not produced immediately and that an update report be provided to the Pension Fund Panel's meeting in November 2008.
211 ADMITTED BODY STATUS - RESPONSE TO GOVERNMENT CONSULTATION
The Panel considered a report of the County Treasurer (Item 10 in the Minute Book) concerning the County Council's response to the Government's consultation on admitted body status provisions. These enabled contractors for local authority functions to provide transferring employees with continued access to the Local Government Pension Scheme. The Government was seeking views on whether further guidance or regulatory changes were necessary to make the provisions work as originally intended. The County Council as administering authority supported the provision of additional guidance but not statutory changes as the current regulations allow maximum flexibility for contracting out agreements.
RESOLVED:
That the County Council's response to the consultation as administering authority be noted, so that no additional risk from any changes to the guidance or regulatory regime for admitted bodies fell on the Pension Fund.
212 PART-TIME PENSIONS CLAIMS - UPDATE
The Panel received and noted a report of the County Treasurer (Item 11 in the Minute Book) on progress made regarding claims from part-time employees in the Local Government Pension Scheme. The number of outstanding claims had been reduced from 31 at the start of 2007/08 to 18, at no cost to the Fund. It was anticipated that the remaining claims would be resolved in 2008/09.
213 ACTUARIAL VALUATION AT 31 MARCH 2007
The Panel received and noted a report of the County Treasurer (Item 12 in the Minute Book) on the outcome from the actuarial valuation of the Pension Fund at 31 March 2007. The Fund's funding level had improved from 68.6% to 76.6% but it was still necessary to increase the contribution rate for scheduled employers from 17.4% in 2007/08 to 19.1% by 2010/11 to cover the future service costs.
214 ANNUAL PERFORMANCE REVIEW OF NORTHERN TRUST AS GLOBAL CUSTODIAN OF THE HAMPSHIRE PENSION FUND
The Panel considered a report of the County Treasurer (Item 13 in the Minute Book) reviewing the services provided by Northern Trust as global custodian of the Fund. Northern Trust had performed satisfactorily since their appointment on 1 August 2006. Their fees had been partly offset by income generated from stock lending.
RESOLVED:
(a) That the satisfactory performance and quality of global custodian services provided by Northern Trust be noted.
(b) That the County Treasurer report to the Pension Fund Panel in November 2008 on the Fund's stock lending arrangements.
215 CASH MANAGEMENT
The Panel considered a report of the County Treasurer (Item 14 in the Minute Book) reviewing the policy for reviewing the Fund's cash balance. The policy included holding cash on a temporary basis whilst the Fund's investments in property and alternative investments were completed. Part of the cash balance had been equitised to maintain exposure to equity markets. That equitisation had been liquidated in mid December 2007 prior to the fall in the UK stock market but would be reconsidered if prospects for equities improved.
RESOLVED:
That the County Treasurer be authorised to manage the Fund's cash balance in accordance with the policy set out in the report.
216 ACQUISITION OF GOODMAN PROPERTY INVESTORS BY ABERDEEN ASSET MANAGEMENT
The Panel received and noted a report of the County Treasurer (Item 15 in the Minute Book) on the acquisition of Goodman Property Investors by Aberdeen Asset Management. No adverse implications for the Fund from the acquisition were expected. The risk from increasing the proportion of the Fund under Aberdeen's management from 20% to 22% as a result of this acquisition was not significant.
217 VIEWS ON WIDENING THE SELECTION OF INVESTMENTS
The Panel considered a report of the Panel's independent adviser Mr Harvey Cole (Item 16 in the Minute Book) on widening the selection of types of investment available to pension funds. These included commodities, currency, structured products, specialist global or emerging market equity funds and 130/30 funds.
RESOLVED:
That the independent adviser's comments be used as background to the discussions of the Panel.
218 STRUCTURED PRODUCTS
The Panel considered a report of the County Treasurer (Item 17 in the Minute Book) concerning investments in structured products. These were investment vehicles designed to protect investors' capital whilst providing some benefit from stock market rises. They could also provide protection for the Fund against falling equity markets. The County Treasurer and independent adviser had discussed the options for structured products with representatives of Rathbone Investment Management.
RESOLVED:
(a) That Rathbone Investment Management be invited to prepare a report on structured products including the advantages, disadvantages and options for the Fund.
(b) That Bramdean Asset Management be asked to prepare a similar report.
(c) That the County Treasurer investigate the feasibility of in-house management of a structured products portfolio by the County Treasurer in consultation with the Chairman and independent adviser.
(d) That the County Treasurer report to a future meeting of the Panel comparing these options for further consideration.
219 CURRENCY MANAGEMENT
The Panel considered a report of the County Treasurer (Item 18 in the Minute Book) reviewing the options for currency management. These included applying a passive currency overlay to the Fund's holdings denominated in overseas currencies and taking active currency management positions.
RESOLVED:
(a) That a passive currency overlay should not be applied to the Fund's listed equity and bonds portfolios.
(b) That Bramdean Asset Management be asked to include currency management within their portfolio of alternative investments.
(c) That Bramdean Asset Management be asked to select one or more currency manager to apply a passive currency overlay to the Fund's currency exposure for alternative investments and, as appropriate, to undertake active currency management.
(d) That the County Treasurer, in consultation with the Chairman and the independent adviser and, if appropriate, the Alternative Investments Sub-Group, be authorised to agree recommendations from Bramdean Asset Management on the appointment of currency managers within the alternative investments portfolio.
220 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 those items 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.
221 INVESTMENT MATTERS - UPDATE (EXEMPT)
The Panel considered an exempt report of the County Treasurer (Item 20 in the Minute Book) on the recent performance of the Fund's investment managers.
[SUMMARY OF A MINUTE WHICH CONTAINS EXEMPT INFORMATION]
222 ALTERNATIVE INVESTMENTS PORTFOLIO - UPDATE (EXEMPT)
The Panel considered an exempt report of the County Treasurer (Item 21 in the Minute Book) giving an update on the Fund's alternative investments portfolio.
[SUMMARY OF A MINUTE WHICH CONTAINS EXEMPT INFORMATION]