Lancashire fund drops below £3bn
UK - Lancashire County Council has revealed the value of its pension fund dropped more than £730m in the year to March 2009 to £2.93bn (€3.43bn).
Figures from the annual pension fund report, presented to Lancashire Council earlier this week, revealed the market value of its investments was the primary cause of the drop as they lost £815.9m over the period.
The largest falls in value were recorded by investments in pooled investment vehicles, which decreased by £433.2m, while equity investments dropped by £265m and other falls of £55m and £68m were seen in fixed interest securities and property respectively.
The annual accounts revealed the size of the pension fund had therefore slipped from £3.67bn in March 2009 to £2.93bn a year later, a loss of around £736m as the net return on investment was shown as -£753m.
The further decline of the pension's funding position follows an interim valuation by the scheme's actuaries in December which noted the funding level had fallen from 84% in March 2007 to around 60% in December 2008, with the next triennial valuation scheduled for 2010. (See earlier IPE article: Lancashire cancels manager search)
In addition, the annual report provided an update on the Council's £10m investment in the Icelandic bank Landsbanki - of which £2.487m belonged to the pension fund - following the collapse of the bank in October 2008.
The report noted following steps by the Icelandic government and the appointment of a resolution committee, the latest presentation of the bank's affairs "indicates that recovery of between 90% and 100% of principal and interest up to 14 November 2008 could be achieved".
Lancashire revealed it had used a "mid-point position" in the accounts of the pension fund by assuming a recovery of 95% of the investment by 2012, which resulted in an impairment of £474,846.
That said, it admitted the recovery of the majority of its investment is subject to "uncertainties and risks" such as the impact of exchange rates, and confirmation that deposits enjoy preferential creditor status, which is likely to have to be tested through the Icelandic courts.
It noted the failure to secure preferential creditor status would have a "significant impact upon the amount of the deposit that is recoverable", as the total assets of the bank only equate to one third of its liabilities, meaning the recoverable amount may only be 33p in the £1 compared to its assumed rate of 95p.
Meanwhile, minutes from the council's pension fund appointments committee meeting in May revealed it intended to offer the role of independent investment advisers for the fund to Eric Lambert and Noel Mills following the resignation of the previous adviser Mike Collett for reasons of ill-health.
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