Agendas, reports and minutes

Minutes of Meeting of the Pensions Committee held in the Council Chamber, Council Headquarters, Glenurquhart Road, Inverness on Friday 14 November 2014 at 10.10 am.

Present:
 
Mr D Fallows,Mr K MacLeod,Mrs H Carmichael,Mr N Donald,Mr J Ford,Mr C Macaulay,Mr A Mackinnon,Mr T Maclennan,Ms L MacKay

Officials in attendance:

Mr D Robertson, Head of Corporate Finance, Finance Service
Mr C MacCallum, Payroll & Pensions Manager, Finance Service
Ms D Sutherland, Audit and Risk Manager, Finance Service
Mr S Boyle, Assistant Director, Audit Scotland
Ms M Bruce, Senior Audit Manager, Audit Scotland
Ms R Moir, Principal Administrator, Corporate Development Service
Mr A MacInnes, Administrative Assistant, Corporate Development Service

An asterisk in the margin denotes a recommendation to the Council.  All decisions with no marking in the margin are delegated to the Committee.

Preliminaries

Pension Boards

At the start of the meeting, the Chair briefed the Committee on discussions at the Local Government Pensions Conveners’ Group in relation to Pension Boards.  It was advised that the legislation establishing Pension Boards would be implemented from 1st April, 2015.  At this point Scheme Administrators (all 80 Members of The Highland Council, who had delegated the governance of the Pension Scheme to the Pensions Committee) would require to appoint Members to the Pension Board and Trade Unions/Comhairle nan Eilean Siar and other Employers’ representatives would also require to do the same (a minimum of four Members from each side).  The purpose of the Board was to oversee the governance of the Pension Scheme.  Executive decisions on the scheme would remain with the Pensions Committee.  It was anticipated that legislation on this matter would be finalised by the end of 2014 and then a report would be submitted to Council setting out the remit and membership of the Pension Board.

1.Apologies for Absence
Leisgeulan

Apologies for absence were intimated on behalf of Mr R Laird, Mr B Thomson and Mr E Macniven.

2.Declarations of Interest
Foillseachaidhean Com-pàirt

Mr A Mackinnon declared a financial interest in the items to be discussed at the meeting on the grounds that his spouse was an employee of the  Council but, having applied the test outlined in Paragraphs 5.2 and 5.3 of  the Councillors’ Code of Conduct, concluded that his interest did not  preclude his involvement in the discussion.

3.Annual Report on the 2013/14 Audit (External Audit Report)
Aithisg Bhliadhnail mu Sgrùdadh 2013/14 (Aithisg Sgrùdaidh bhon Taobh A-Muigh)

There was circulated Report No. PC/10/14 by Audit Scotland providing a summary of their findings arising from the 2013/14 audit of Highland Council Pension Fund.  The report summarised the auditor’s opinions and conclusions and reported on any significant issues arising from the audit.

It was reported that Audit Scotland had given an unqualified audit opinion that the financial statements of Highland Council Pension Fund gave a true and fair view of the financial transactions during the year ended 31 March, 2014 and of the amount and disposition of its assets and liabilities at that date. 

It was advised that the last triennial funding valuation, undertaken by the scheme actuary as at 31 March 2011, concluded that the scheme was 97% funded; a slight decline from the 2008 valuation.  The 2014 valuation was currently in progress.  Initial indications were that the funding level would have fallen since the 2011 valuation due to reductions in real bond yields although asset returns had been slightly higher than expected.

Further, it was reported that the fund’s governance arrangements were generally sound and were supported by appropriate systems of internal control, although controls over the operation and monitoring of the intercompany accounts for transactions with the Council required improvement.

In terms of the future, it was advised that The Local Government Pension Scheme (Scotland) Regulations 2014 defined the new scheme which would replace the current one from 1 April, 2015.  There were some significant changes, including moving from a final salary scheme to a career average revalued earnings basis.

During discussion, the following points were raised by Members:-

• It was noted that the costs of the Pension Fund had increased and it was explained that this was due to the change in number of pensioners, which had increased.  It was expected that the profile of the Fund would change over the next 20 years.  At present there were more contributions to the Fund than there were pension payments, but this would change over time.  Therefore the Fund would require to utilise cash from its investments to pay for its ongoing liabilities.
• It was noted that the ratio of the Fund’s net assets to liabilities compared well with that of other Scottish Funds.

The Committee NOTED the report.

4.Pension Fund Administration
Tabhartasan agus Rianachd Maoin Peinnsein

There was circulated Report No. PC/11/14 by the Director of Finance which updated Members on matters relating to the administration of the Highland Council Pension Fund.

It was confirmed that pension contributions from scheme employers were all being received on time and all contributions were up to date.  Two scheme employers were currently in negotiation with Highland Council Pension Fund in regard to other costs associated with participation in the scheme, e.g. costs related to early release of benefits and termination valuation costs.  An update report on these negotiations would be submitted to a future meeting.

Continuing, the annual staffing budget for Pensions Administration was £108k and was currently reporting a £19k underspend.  Actuaries’ fees for pre-arranged work for the period to September 2014 were £6075.  In terms of the Triennial valuation, the initial results of the valuation exercise had been reviewed and the Actuaries were working on a final report which would be presented to the February, 2015 meeting of the Committee.

The Committee NOTED the details of the report.

5.Internal Audit Reports – Matters arising from the Statement of Internal Control 2013/14 and Pension Payments
Aithisgean In-sgrùdaidh – Gnothaichean ag èirigh bho Aithris In-Smachd 2013/14 agus Pàighidhean Peinnsein

There was circulated Report No. PC/12/14 by the Head of Internal Audit and Risk Management which provided details of two audits completed since the last report to the Pensions Committee on 14 August 2014.  These audits related to a review of the systems of internal control operated within the Pension Fund during 2013/14 and Pension Fund Payments 2013/14.  These audits now completed the 2014/15 plan of work for the Pension Fund.

It was advised that an audit opinion of substantial assurance had been given as the internal systems of control were considered to be reliable but some scope for improvement was identified.  In terms of Pension Fund Payments 2013/14 an audit opinion of full assurance had been given as four of the audit objectives were fully achieved with the other two substantially achieved.

The Committee NOTED the Final Internal Audit Reports for 2013/14.

6.Discretionary Policies: Employing Authority
Poileasaidhean Fo Ùghdarras: Ùghdarras Fastaidh

There was circulated Report No. PC/13/14 by the Director of Finance and the Head of People and Performance which reviewed the Council’s discretionary policies under the Local Government (Scotland) Pension Scheme 2008 and 2015.

The Discretionary Policies were first agreed in 1998 and should be reviewed every five years.  The last full review took place in 2008 however changes such as flexible retirement and a change to the Voluntary Severance Scheme had been introduced since that date.

It was advised that individual elements of the Employing Authority Discretions had been reviewed since 2008 and the purpose of the report was to present a full list of proposals for approval, which were included as an appendix to the report.  It was advised that no changes were proposed to the current position. 

Changes introduced as part of the 2015 scheme regulations might require a review of the Council’s Voluntary Severance Scheme, and a separate report would be submitted to Resources Committee if changes were required.

The Committee AGREED:

i.  the recommendations contained in Appendix 1 of the report;

ii. that all policies be reviewed in 2018; and

iii.that, in line with the main scheme policy, there be an "opt out" provision allowing reconsideration of any specific discretion if the  special circumstances of an individual case merit it.

7.Investment Sub Committee: Minutes of Meeting
Fo-chomataidh Tasgaidh: Geàrr-chunntas na Coinneimh

There was circulated Minutes of meeting of the Investment Sub-Committee held on 14 August, 2014, the terms of which were APPROVED.

The meeting closed at 10.40 am.