Archived decisions
Agenda Item: 6
HAMPSHIRE COUNTY COUNCIL
Decision Report :
Decision Maker: |
Pension Fund Panel | ||||
Date of Decision: |
21 November 2008 | ||||
Decision Title: |
Review of the Fund's business plan | ||||
Decision Reference: |
438 | ||||
Report From: |
County Treasurer | ||||
Contact name: |
Anthony Dodridge | ||||
Tel: |
01962 847407 |
Email: |
|||
EXECUTIVE SUMMARY
1) Summary of Decision Area:
1.1. Review of the Hampshire Pension Fund's business plan.
2) Issues Covered in Report:
2.1. The Government's 10 principles for the management of final salary pension schemes requires funds to draw up a forward-looking business plan, including a training plan for both the trustees and officers involved in their management and administration.
2.2. The Hampshire Pension Fund's business plan includes a commitment to review and revise the plan annually, and to evaluate performance against the action plan. The Panel last reviewed the plan in November 2007.
2.3. This report:
· sets out an updated business plan
· looks briefly at performance against the action plan over the last year.
3) Recommendations:
3.1. That, subject to any amendments the Panel may wish to make, the updated business plan be approved.
3.2. That the progress on the action plan be noted.
MAIN REPORT
1) Purpose of the Report:
1.1. Review of the Hampshire Pension Fund's business plan and progress against the action plan.
2) The Business Plan
2.1. A draft updated version of the business plan is attached as Appendix 1. Apart from the action plan section, few changes to the business plan are necessary. These changes are highlighted in Appendix 1.
2.2. Following the implementation of the new management structure from January 2007, the focus has moved to managing the Fund's investment performance to achieve the returns required by the investment strategy. This has been reflected in the updated action plan.
2.3. In most cases, the fund managers' targets apply over rolling three or five year periods, equivalent to an average economic cycle. As the business plan indicates, the Panel most recently considered a report on the performance of the managers to enable an assessment of the results since their appointments in January 2007 to 30 September 2008 at its last meeting on 7 November 2008.
3) Performance against the action plan
3.1. The business plan approved by the Pension Fund Panel in November 2007 included several actions for completion by March 2010. Progress against these action points are summarised below. It should be noted that there is no requirement to formally review the Fund's Funding Strategy Statement until November 2009, which is in advance of the next triennial actuarial valuation.
Planned action Deadline Progress
Set employers' contribution December Completed during
rates for April 2008 to 2007 December 2007
March 2011 following the
completion by the actuary
of the actuarial valuation of
the Fund at 31 March
2007
Respond as necessary to Ongoing in New scheme
Government consultation the lead-in implemented as
papers on the new-look to April planned
Local Government Pension 2008
Scheme (LGPS) being
planned for implementation
from April 2008
Planned action Deadline Progress
Amend and re-publish the November Incorporated into the
Fund's Governance Policy 2008 Hampshire Pension
Statement, if necessary, Fund annual report
and publish a governance and accounts 2007/08,
compliance statement once which was published in
the Government has September 2008.
confirmed its best-practice Reported to this
principles for such meeting (item 9)
statements - by 1 March
2008. The Government
subsequently deferred the
deadline for publication until
1 November 2008
Publish a Pension Progress reported to
Administration Strategy, this meeting (item 12)
following consultation with
the other employing
authorities
Consider and, if Ongoing Now reached 10% of
appropriate, agree portfolio at £250m and
alternative investments as further investments
recommended by the Fund's suspended until review
advisers in May 2009
Monitor the performance Ongoing Performance to
of the Fund's investment 30 September 2008
managers reported on
7 November 2008
Review the Fund's Annually in Reported to this
Statement of Investment November meeting
Principles
Review the Fund's November During 2009/10
Funding Strategy 2009
Statement, in partnership
with the Fund's actuary and
participating employers
Review this business plan Annually in Reported to this
and review progress November meeting
against the action plan
Review management fees Annually in Reported to this
and transaction costs November meeting
Planned action Deadline Progress
Keep Panel members' Ongoing Opportunities for
training needs under training seminars etc
review have been made
available to Panel
members
Prepare for the next Ongoing During 2009/10
actuarial review of the
Fund as at 31 March 2010
4) Recommendations:
4.1. Please see recommendations outlined on the Executive Summary.
CORPORATE OR LEGAL INFORMATION:
LINKS TO THE CORPORATE STRATEGY | ||||
Yes |
No | |||
Hampshire safer and more secure for all |
||||
Corporate Business plan link no (if appropriate) |
||||
Maximising well-being |
||||
Corporate Business plan link no (if appropriate) |
||||
Enhancing our quality of place |
||||
Corporate Business plan link no (if appropriate) |
||||
OR |
||||
This proposal does not link to the Corporate Strategy but, nevertheless, requires a decision because: | ||||
OTHER SIGNIFICANT LINKS: | ||
Links to Previous member decisions: | ||
Title |
Ref |
Date |
Direct Links to Specific Legislation or Government Directives | ||
Title |
Date | |
Section 100 D - Local Government Act 1972 - background documents | |
The following documents discuss facts or matters on which this report, or an important part of it, is based and have been relied upon to a material extent in the preparation of this report. (NB: the list excludes published works and any documents which disclose exempt or confidential information as defined in the Act.) | |
Document |
Location |
None |
n/a |
Integral Appendix B
COMPREHENSIVE RISK & IMPACT ASSESSMENT:
Race and Equality Impact assessment
Race and equality impact assessment has been considered in the development of this report and no adverse impact has been identified.
Crime prevention issues
The County Council has a legal obligation under Section 17 of the Crime and Disorder Act 1998 to consider the impact of all the decisions it makes on the prevention of crime. The proposals in this report have no impact on the prevention of crime.
Appendix 1
BUSINESS PLAN
Mission and objectives
The County Council, as administering authority for the Hampshire Pension Fund, has delegated responsibility for the management of the Fund's investments to the Pension Fund Panel through its Governance Committee. The Panel consists of nine county councillors, a member to represent the unitary city councils of Portsmouth and Southampton, a member to represent the 11 district councils, and two representatives of the Fund's pensioners and contributors. All Panel members have voting rights. There is also an independent adviser to the Panel, Mr Harvey Cole, who attends all Panel meetings.
The Panel's mission is to provide an efficient and effective pension scheme for all employees and pensioners of all eligible employers in Hampshire, in accordance with the requirements of the legislation for the Local Government Pension Scheme (LGPS).
The Panel's objectives:
· To achieve a 100% funding level over the long term, which means that all current and future fund liabilities can be met
· To maintain a stable employers' contribution rate in the long term
· To respond promptly to legislative changes affecting the LGPS and pension provision generally
· To comment fully on consultation papers dealing with pension matters in the interests of the Fund's participating employers and members within the deadlines set
· To make sure that the Fund follows best practice as recommended by the Government, the Local Government Pensions Committee (LGPC), the National Association of Pension Funds (NAPF) and other organisations specialising in pensions matters
· To keep abreast of all developments affecting the LGPS by undertaking training and/or taking advice from external fund managers, external consultants and County Council officers as appropriate
· To make arrangements for keeping the Fund's participating employers and members fully informed about matters affecting them.
The funding level and employers' contribution rate
The Panel seeks to achieve a 100% funding level and stable contribution rate by:
· drafting and maintaining a Funding Strategy Statement, in partnership with the Fund's actuary and participating employers. This sets out the background and parameters to be used by the actuary when carrying out actuarial valuations, and the duties of the County Council as administering authority and the Fund's other employers
· commissioning a full actuarial valuation of the Fund every three years as required by law to determine employers' contribution levels. The actuary completed a valuation of the Fund at 31 March 2007 during 2007/08 - the next actuarial valuation of the Fund is due to take place as at 31 March 2010
· arranging interim actuarial valuations if developments mean that the funding level can be expected to have changed
· commissioning an asset/liability study following valuations or as necessary to help determine the best asset allocation needed to meet the Fund's liabilities
· seeking tenders for the provision of actuarial and consultancy services - the current actuary is Hewitt Associates Limited, who were re-appointed for a five-year period with an option to extend for a further five years, after a tender process completed in spring 2005
· where an actuarial valuation reveals a past service deficit, agreeing employers' contributions with the actuary to recover the deficit.
Investment of the Fund
The Panel seeks a return on the Fund's investments which will enable 100% funding to be achieved and its liabilities to be met with a stable employers' contribution rate. Hewitt Associates Limited advised after their most recent asset/liability study in 2005 that this means aiming to achieve an overall investment return 2.5% a year above that on a low-risk portfolio, (defined as a portfolio invested 85% in index-linked gilts and 15% in fixed interest gilts). The Panel aims to achieve this by:
· using the results of asset/liability studies and other analyses to set benchmark asset allocations and performance targets for external investment managers
· reviewing managers' performance against those targets over three-year and five-year rolling periods at Panel meetings held in the spring and autumn of each year - performance will also be monitored over one-year periods at those meetings
· reviewing annually in the spring the size of and need for each manager's portfolio in the light of their performance in each financial year
· appointing investment managers for standard periods of five years, with options to extend for a further five years subject to satisfactory performance, although all such appointments may be terminated at any time with one month's notice. Contracts will not normally be terminated in the first three years for below-target performance
· reviewing the level of transaction costs (brokerage and stamp duty) incurred in the previous 12 months by the external managers on the Fund's behalf in the autumn of each year
· delegating to the County Treasurer responsibility for monitoring the managers' performance between Panel meetings.
Arrangements for investing additional voluntary contributions (AVCs)
The Panel aims to make sure there is a wide and varied selection of high-performing investment options for fund contributors who wish to make additional voluntary contributions (AVCs).
The current AVC providers for contributors to the Fund are Zurich and Equitable Life. The performance and options offered by these providers will be reviewed by the Panel as necessary.
Legislative changes
The Panel aims to respond promptly to legislative changes with implications for the management and administration of the Fund by:
· closely monitoring new legislation affecting the LGPS or pension provision generally - this role is delegated to the County Treasurer
· considering reports on the implications for the Fund of relevant draft legislation
· agreeing any actions necessary to ensure full compliance when the final legislation is enacted, including meeting any deadlines.
Consultation papers
The Panel aims to play an active role in responding to and commenting on consultation papers on pensions matters on behalf of fund employers and members. In doing so it seeks to ensure high standards of corporate governance and best practice, and to further the best interests of contributors and pensioners.
Best practice
The Panel will ensure that the Fund follows best practice as recommended by the Government, the Local Government Pensions Committee (LGPC), the National Association of Pension Funds (NAPF), the Chartered Institute of Public Finance and Accountancy (CIPFA) and other organisations specialising in pensions matters. It has delegated responsibility for achieving this to the County Treasurer.
Decision-making
The Panel will take advice as necessary to ensure that all decisions are in the best interests of the Fund and its members. Advice is provided as necessary by:
· the County Treasurer and his staff
· the actuary
· the Fund's external investment managers
· the Fund's independent external adviser and sounding board, Mr Harvey Cole
· other consultants.
Developments and training plan
The Panel aims to keep abreast of all developments affecting the LGPS by undertaking training and/or taking advice when necessary from external fund managers, external consultants and County Council officers.
The Panel also expects the County Treasurer and relevant members of his department (who are the Panel's main advisers) to keep up to date with developments in pensions and investment matters and to undertake training as required. Hampshire County Council has been given the `Investor in People' award, which shows its commitment to identifying and providing for learning and development opportunities for its staff.
Communications with participating employers and Fund members
The Panel will make arrangements to keep the Fund's participating employers and members fully informed about matters that affect them by publishing:
· an annual report on the Fund for each financial year, to be available for an Annual General Meeting of the Fund's employers held in September of each following financial year
· an annual leaflet for the Fund's pensioners and contributors which will contain key information about the management and investment of the Fund, changes and developments in the LGPS, service standards and contact points
· an annually updated employees' guide to the Scheme
· an annual newsletter to pensioners.
Review and evaluation of business plan
The Panel will review and revise the business plan annually in November and will evaluate performance against the action plan.
Actions to March 2010
Monitor the performance of the Fund's investment managers.
Consider and, if appropriate, agree alternative investments as recommended by the Fund's advisers, after review in May 2009.
Publish a pension administration strategy, following consultation with the other employing authorities.
Complete the following annual reviews - deadline November 2009:
- the Fund's Statement of Investment Principles
- the Fund's Funding Strategy Statement
- the governance compliance statement (if necessary)
- this business plan, including reviewing progress against the action plan
- the Fund's management fees and transaction costs.
Keep Panel members' training needs under review.
Prepare for the next actuarial review of the Fund as at 31 March 2010.