Agenda item

The Committee received a presentation from the Head of Pensions that provided an overview of the pension fund valuation and a general update (for copy see file of minutes).

P Cooper, Head of Pensions gave a presentation that provided an overview of how the pension scheme and the valuation process worked.  He explained that the scheme had over 60,000 members and over 100 participating employers, with the money that was invested on their behalf into a diversified portfolio of assets via the Border to Coast Pensions Partnership. There were two sides i) investments and ii) liabilities which were evaluated and assessed to set the contribution rates for 3 years and what impact that would have on the budget.  An annual accountancy exercise was carried out on the markets that set the pension strategy to ensure it stayed on a strong course as the local authority wanted to maintain the scheme.  The key considerations were inflation and pay growth, investment returns, mortality rates, climate risk, cashflows and regulations.  The Pension Committee set targets for the investment strategy to maintain funding.

Councillor A Watson asked if there was a budget for pensions administration.

P Cooper replied that nothing came from the councils budget for administration as this was dealt with within the finance team and was fully recharged to the Pension Fund. Investment fees overtime had increased with the value of the assets that in turn increased the asset management fee.  He noted it was volatile.

P Darby advised that the pension fund assets were managed on behalf of the pension committee.  The investment had to achieve the best value of return for the pensioners / participating authorities within the Fund.  The Section 151 officer was charged with evaluating this and what was in the best interests of the pension fund. 

Mr C Robinson queried if there was pressure to exit investing in fossil fuels to make money to try to change the organisation to invest in something different.

P Cooper acknowledged that was a huge pressure to stop investing in fossil fuels.  There was pressure on the group to increase investment elsewhere but there was a challenge as there was a need to make returns.  The organisation had a strong investment team that engaged to try to change the company’s behaviour and try to effect change.

P Darby added that the government regulated the company to encourage pension funds and put more and more weight behind the company for more sustainable solutions.

Mr I Rudd asked if the accounts were largely significant and had more reserves in the pension as a positive movement. He added that the Malvern scheme had more pensioners than current employees and questioned if this would preset the problem with the new scheme with current employees.

P Cooper responded that there was an increase in the mature scheme nationally and the pension fund was not the problem but there was always the challenge that more was paid out in pension than contributions received.  The pension fund was not supported through a cash investment strategy and was done in a different way like a UK corporation as investment was made in the private market to increase cash flow needs.

P Darby admitted that the accounts often looked strange, with valuation entries that went up and down which could distort the interpretation of the councils underlying financial performance.  The challenge was to support the pension fund and make the accounts clear and in line with private sector.

Resolved:

That the presentation be noted.