Archived decisions

AT A MEETING of the PENSION FUND PANEL held at The Castle, Winchester on Tuesday 21 July 2009.

Chairman:

p Councillor M.N. Kemp-Gee

Councillors:

p F.G. Allgood p D.A. Kirk

p C. Carter p B. Tennent

p B.D. Dash p T. Thacker

p A.G. Dowden a T.K. Thornber, CBE

Co-opted members:

p Councillor P. Giddings (in place of Councillor Carr) (Test Valley Borough Council)

a Councillor D. Jones (Portsmouth City Council)

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

p Mr P. Reynolds (employee representative)

Independent adviser:

p Mr H. Cole

10 APOLOGIES

      Councillors T.K. Thornber, I.R. Carr and D. Jones gave their apologies.

11 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.

12 MINUTES

      The Minutes of the meeting held on 8 July 2009 were confirmed as a correct record and signed by the Chairman.

      Matters arising thereon:

      Pension Fund Representatives (Minute 5(g))

      The Panel discussed whether a sixth member should be nominated to the informal sub-group on investments and agreed that this was unnecessary and that the membership of the informal sub-group should remain as set out in minute 5(f).

      Economic and Financial Background (Minute 7)

      The independent adviser provided an oral update on recent developments covering the prospects for economic recovery, the de-coupling of global economies, the prospects for emerging markets, smaller companies and gold.

13 CHAIRMAN'S COMMUNICATIONS

      There were no communications.

14 ADMISSION BODIES RISK MODEL

      The Panel considered a report of the County Treasurer (Item 5 in the Minute Book) regarding the results of a risk assessment model for the Pension Fund's admission agreements with community and other employers that have been admitted to the Pension Fund.

      The risks concerned the ability of these employers to meet deficits that might arise should they wish to leave the Pension Fund, if no guarantees were already in place.

      A model had been developed with the Fund actuary, Hewitt, to assess the strength of covenant of each admission body. It had identified a need to improve documentation on the admission agreements and to consider changes to the investment strategy to mitigate risks and avoid unaffordable increases in the employers' contribution rate at the next actuarial valuation. Further work was required to develop an action plan to implement these improvements.

      RESOLVED:

      That the County Treasurer continues to work with the Fund Actuary to develop an action plan to cover deficits that could arise with admission bodies on withdrawing from the Fund, together with an agreed underwriting plan to reduce the risks of default and to smooth contribution rates at the next actuarial valuation.

15 ZURICH AVC PROVIDER UPDATE

      The Panel considered a report of the County Treasurer (Item 6 in the Minute Book) giving an update on Zurich, the Pension Fund's provider of investment services for Additional Voluntary Contributions (AVCs). This followed a report to the Panel in May 2008 on action that had been taken by Zurich to improve communication with employees and administrative processes. The Treasurer reported that there had been further improvements in the processes used by Zurich and take-up by employees had increased by 10%.

      RESOLVED:

    That no further action be taken in reviewing, or adding to, the existing AVC provider

16 NOMINATION FOR PAYMENT OF DEATH GRANT

      The Panel considered a report of the County Treasurer (Item 7 in the Minute Book) regarding extending the facility for members of the Pension Fund to nominate who would receive any lump sum payable on their death. Only active employees were currently able to make a nomination and these nominations ceased when employees retired or left the pension scheme (known as deferred members). This facility could be changed to allow pensioners and deferred members to make nominations, at no extra cost to the Pension Fund.

      RESOLVED:

    That the facility to nominate who should receive a death grant be extended to deferred and pensioner members of the Fund from 1 April 2009.

17 GOVERNANCE OF THE LOCAL GOVERNMENT PENSION SCHEME - GOVERNMENT CONSULTATION

      The Panel considered a report of the County Treasurer (Item 8 in the Minute Book) regarding a consultation paper issued by the Government on the governance of the Local Government Pension Scheme. The Government sought views, in particular, on improving training for Panel members and their ability to access facilities and expenses for their work, and on publicity and communication with employees and employers.

      The Panel had agreed at the last meeting to arrange additional bespoke training sessions for Panel members in autumn 2009. They had also agreed to develop a training plan and maintain training logs. On publicity and communication, the Pension Fund had complied fully with requirements to communicate with both employees and employers.

      RESOLVED:

    That the County Treasurer be authorised to draft and agree a response to the consultation paper with the Chairman and Vice-Chairman of the Panel, incorporating the views of the Panel expressed at the meeting.

18 GOVERNMENT CONSULTATION - LOCAL GOVERNMENT PENSION SCHEME: DELIVERING AFFORDABILITY, VIABILITY AND FAIRNESS

      The Panel considered a report of the County Treasurer (Item 9 in the Minute Book) regarding a consultation paper issued by the Government on delivering affordability, viability and fairness in the Local Government Pension Scheme. The Government sought views on options for changes to the Scheme's solvency requirements or investment strategies to limit the possible impact on employers and council tax payers of the actuarial valuation at 31 March 2010.

      The consultation paper said that a uniform 100% funding target could become artificial and imposed significant short-term cost pressures on employers during times of economic downturn and falling investment returns. Measuring the scheme against an actuarially-derived notional 100% funding target automatically created the concept of a deficit event whenever the funding ratio falls below 100%. This was frequently misinterpreted by commentators as creating an immediate, and global, cost penalty for council tax payers. A longer term view should be taken, given the strong liquidity of the Scheme, the constitutional permanence of local government and the strong employers' covenant.

      The Panel welcomed the proposal that each fund should develop a financing plan to manage the funding of its long-term liabilities on a prudent, reasonable and realistic basis that took into account local budgetary constraints and the impact on employers' contribution rates and the council tax.

      RESOLVED:

    That the County Treasurer be authorised to draft and agree a response to the consultation paper with the Chairman and the Vice-Chairman of the Panel, to be circulated to the Panel for comments.

19 NORTHERN TRUST - ANNUAL REPORT

      The Panel considered a report of the County Treasurer (Item 10 in the Minute Book) regarding the services provided by Northern Trust over the last year as the Pension Fund's global custodian of assets. Northern Trust had continued to perform satisfactorily.

      RESOLVED:

    That the satisfactory performance and quality of global custodian services being provided by Northern Trust be noted.

20 PENSION FUND CASH MANAGEMENT

      The Panel considered a report of the County Treasurer (Item 11 in the Minute Book) reviewing the policy for managing the Pension Fund's cash balance. The Pension Fund continued to receive a surplus of cash each year from contributions exceeding benefits paid. This cash would be required to finance the planned increase in the property portfolio and to meet draw downs for the Fund's private equity investments.

      RESOLVED:

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

21 EXCLUSION OF PRESS AND PUBLIC

      RESOLVED:

      That the public be excluded from the meeting during the following item 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 report.

22 ACTUARIAL SERVICES (EXEMPT)

      The Panel considered an exempt report from the County Treasurer on Hewitt's appointment as actuary (Item 13 in the Minute Book).
      [SUMMARY OF A MINUTE WHICH CONTAINS EXEMPT INFORMATION]

23 PROPERTY PORTFOLIO (EXEMPT)

      The Panel considered an exempt report from the County Treasurer on the Pension Fund's property portfolio (Item 14 in the Minute Book).
      [SUMMARY OF A MINUTE WHICH CONTAINS EXEMPT INFORMATION]