Strathclyde's pension deficit keeps growing
UK - Strathclyde pension fund has revealed its pension deficit more than doubled to £486m (€523m) at its last actuarial valuation, although a recent snapshot of the scheme’s position showed there has been a further fall in its funding position.
The valuation completed at 31 March 2008 showed the pension fund, administered by Glasgow City Council, was 95% funded with assets of £9.49bn and had liabilities of £9.98bn, resulting in a shortfall of £486m.
This compares to a deficit of £230m in 2005, when the scheme had a funding level of 97.1%, with Strathclyde attributing the fall to changes in financial and demographic assumptions.
However, figures from the pension fund committee meeting earlier this month showed by December 2008 the funding level of the scheme had dropped to 77%, as the value of the fund slipped to £8.13bn, while a “snapshot” of the fund’s position from January revealed the scheme had fallen to £7.72bn.
As a report on fourth quarter performance - a return of -4.4% against a benchmark of -4.9% - noted the scheme “continued to hold its position and not intervene or react to market events, but maintained its long-term strategy whilst getting regular updates”.
Members agreed at the meeting to establish a working party to explore potential revised investment strategies following a review of the existing allocation, which is 73% in equities, 12% in commercial property and 15% in bonds.
In its quarterly report to the committee, the council’s Investment Advisory Panel (IAP) highlighted the proposed future strategy comprising 15% in bonds, and between 70-73% in equities, and 12-15% in property.
Within the equity portfolio, however, the allocation to UK stocks will be reduced from 31.5% to between 19.9-21.2%, while overseas equities will be cut from 21.5% to around 15.1-16.8% with the excess used to boost global equity investment from 15% to 25%, and private equity from 5% to 10%.
The IAP noted despite the financial conditions the private equity portfolio should be “maintained rather than wound back” - and confirmed it had agreed to allocate a further £100m to Partners Group in 2009 - while stating it wanted to “keep under review” the possibility of expanding its property portfolio to include overseas property.
Elsewhere, a review of the scheme’s participation in securities litigations suggested the work of Northern Trust - the global custodian - in ensuring Strathclyde receives its share of settlements is “essentially passive”, so the scheme intends to trial a US law firm’s monitoring service to “establish whether the service provided by Northern Trust was sufficient or whether there could be real value in more active participation in securities litigation”.
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