The Fund's actuary estimated that the funding level of the Scottish Homes Pension Fund was 104.7% at 31 March 2017. Achievement of full funding meant that the Fund no longer needed to take investment risk by investing in equities and property. Instead, the Fund was able to minimise risk by investing solely in bonds, specifically UK gilts. These financial instruments move proportionately with liability values.
After a year of significant change, the year to 31 March 2019 brought no change to the strategy allocation of 100% bonds and this should not change until at least the results of the next actuarial valuation (March 2020) are known. At that point in time, the actuary will amend financial and demographic estimates based on actual experience over the prior three years.
|31 March 2018||31 March 2019|
Shortly after the end of March 2018, the final sale of property assets was completed, leaving the Fund entirely invested in index‐linked gilts and cash. The index linked gilts were structured to broadly match the expected liability payments as they fall due. Given that the Fund had achieved full funding, the Pensions Committee approved a new investment objective in June 2018: "to match the cash flow from gilt income and redemption payments as closely as possible with the expected liability payments of the fund"
Detailed analysis of the Scottish Homes liabilities was undertaken during 2018/19 to ensure that the invested assets are as closely matched with the liability profile as possible, taking into consideration the expected duration of liabilities and whether they are fixed or index‐linked in nature.