UK - Northumberland County Council pension fund has delayed its triennial asset liability modelling (ALM) study until the autumn because of local councillor elections.

Documents from the latest committee meeting of the £699.2m (€871.8m) local government pension scheme (LGPS) showed a review of the pension fund panel's adviser, currently Watson Wyatt, would also be delayed until after May.

The pension fund panel has a duty to regularly review the fund's performance and the effectiveness of decisions, which it undertakes in the form of an ALM study every three years, unless there is a significant change needed, such as the termination of Capital International's £95m global equity mandate in April 2007. (See earlier IPE story: Capital stands firm amid performance "blip")

Northumberland's last review was in January 2005, in which it decided to adopt a target asset allocation of 30% in UK equities, 30% in overseas equities, 25% in bonds, 10% in property and 5% in private equity, although in November it appointed Alliance Bernstein and Prudential M&G to replace Capital.  (See earlier IPE story: Northumberland taps two for global equity)

The next ALM study was scheduled in early 2008, however in the documents from the meeting on February 15 2008, the panel suggested as the study sets the asset allocation for the fund in the medium to long-term, "the timing of the review is not crucial".

As a result, the chairman of the panel "opted to defer the review until after the May 2008 local elections for the new Northumberland unitary council because change in membership of the panel may occur, and it would be better if the ALM study decisions are made by the same panel of members as will implement the decisions which come out of it".

Normally the pension fund panel carries out the ALM study soon after the actuarial valuation results are available, before holding two meetings to specifically discuss the ALM study and to make decisions on the asset allocation and the fund management structure.

The latest actuarial valuation was conducted on March 31 2007, which revealed a funding level of 71% and average contribution rates of 22.1% of pensionable pay, which meant the original panel meetings should have been held in March and April.

But because they have now been delayed until after the local elections, the report of the finance director suggested the ALM study and the panel meetings might have been postponed until "possibly autumn" - more than six months after they were scheduled.

In addition, the documents confirmed the review of Watson Wyatt, who recently confirmed they are in the process of withdrawing from the local authority investment consultancy market, would also be delayed. (See earlier IPE story: Surrey to seek advice as WW leaves LA market)

Watson Wyatt was most recently reappointed as the panel's adviser in 2000, however, the original appointment dates back more than 10 years earlier, so a formal review of the open-ended contract has been a "long-standing item" in the pension fund's business plan.

Despite this, the committee documents showed in the November meeting it was agreed the timing of the review should be delayed until after the May 2008 local elections for the new Northumberland unitary council, on the basis that any new members following the elections may prefer to learn about the work of the committee with the "benefit of the continuity of advice", before undertaking the review.

The Northumberland County Council pension fund currently covers 45 separate employers, including Northumberland County Council and the six district councils within Northumberland, though a reorganisation of local government in April 2009 could lead to an increase in contributions as the number of contributing employers is reduced.

In addition, documents from the meeting suggested it was possible the changes to make Northumberland a 'one-tier' instead of 'two-tier' system of government "may also be an opportunity for government to compel LGPS funds to amalgamate into regional funds".

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com