Agendas, reports and minutes

Minutes of Meeting of the Pensions Committee held in the Council Chamber, Council Headquarters, Glenurquhart Road, Inverness on Thursday 19 February 2015 at 1.30pm.

Present:

Mr D Fallows, Mr K MacLeod, Mrs H Carmichael, Mr J Ford, Mr R Laird, Mr B Lobban, Mr A Mackinnon,

Mr E Macniven, Ms L Mackay

Non Members Present

Mr G Mackenzie, Ms M Smith

Officials in attendance:

Mr D Robertson, Head of Corporate Finance, Finance Service
Mr C MacCallum, Payroll & Pensions Manager, Finance Service
Ms M Bruce, Senior Audit Manager, Audit Scotland
Mrs L Dunn, Principal Administrator, Corporate Development Service
Mr A MacInnes, Administrative Assistant, Corporate Development Service

Also in attendance:-

Mr R Warden, Hymans Robertson
Mr R Bilton, Hymans Robertson

Mr D Fallows in the Chair

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

1.Apologies for Absence
   Leisgeulan

Apologies for absence were intimated on behalf of Dr D Alston, Mr T Maclennan and Mr B Thompson.

2.Declarations of Interest
   Foillseachaidhean Com-pàirt

There were no declarations of interest.

3. The Highland Council Pension Fund - Actuarial Valuation as at 31 March 2014
    Maoin Pheinnsein Chomhairle na Gàidhealtachd – Luachadh Actuaraidh mar aig 31 Màrt 2014

Mr Richard Warden and Mr Robert Bilton of Hymans Robertson gave a presentation on the actuarial valuation of the Highland Council Pension Fund as at 31 March, 2014.

It was confirmed that the main purpose of the valuation was to review the financial position of the Fund and to determine the rate at which the employing bodies participating in the Fund should contribute in the future to ensure that the existing assets and future contributions would be sufficient to meet future benefit payments from the Fund.

Overall the actuarial valuation had shown a positive set of results and it was confirmed that the pension fund was in a strong position. The funding level had shown a slight decline since the 2011 valuation and contribution rates for employers were likely to be higher and details of how contribution rates would be set were provided.

Following the presentation, there was a question and answer session for Members during which the following comments were made:-

• In terms of the salary increase assumption, this was based on long term future expected rates of inflation and a premium was added to reflect expected salary growth in real terms. It was expected that salaries would increase by 1% above future inflation rates.  As at 31 March 2014 the assumed salary increase was 4.5%.  While this might not look realistic in the short term, all the assumptions looked to the long term e.g. 20/30/40 years.  The current economic climate had been taken into consideration and the salary increase assumption had reduced from 5% in 2011;
• The Council’s contribution rate would increase by 0.5% per annum to 19.5% at the end of the year.  In monetary terms, 0.5% would equate to £600,000 which was well within budget assumptions; and
• It was queried how the funding level for the pension fund of 96.2% compared with other Scottish local authorities.  On the basis of the information available, it was understood that Highland’s pension fund was better than average.

The Chair thanked Mr Warden and Mr Bilton for their extremely comprehensive and detailed presentation.

4. Funding Strategy Statement
    Aithris Ro-innleachd Mhaoineachaidh

There had been circulated Report No. PC/01/15 by the Director of Finance which sought approval from Members on the proposed Funding Strategy Statement (FSS) for the Highland Council Pension Fund. The FSS had been developed in conjunction with the Council’s Actuaries and addressed basic funding issues; calculating contributions for individual employers; and funding strategy and links to investment strategy. A copy of the Strategy was attached as Appendix A to the Report.

In discussion, the financial responsibility for the deficit to the pension fund if a contractor with admitted status went into liquidation was queried.  It was advised that this would depend on the conditions of the contract that the Council had entered into.  For example, it might be the case that as part of the contract, the Council would pick up any deficit, or there might be a bond or guarantee as part of the contract to take care of any liability.  While this scenario had not yet happened, it was reflected in the risk strategy for the fund that was in place.  It was advised that only when the Council transferred services over to a contractor did they become an admitted body to the scheme.

The Committee APPROVED the implementation of the Funding Strategy Statement with effect from 1 March 2015.

5. Annual Audit Plan 2014/15  (External Audit Report)
    Plana Sgrùdaidh Bliadhnail 2014/15 (Aithisg Sgrùdaidh bhon Taobh A-muigh)

There had been circulated Report No. PC/02/15 by Audit Scotland which presented their annual audit plan setting out the work they planned to undertake as part of the audit of the pension fund.

It was confirmed that the plan mainly focused on the audit of the financial statements and the risks associated with that.

The comment was made that it was reassuring that Officers were continuing to review processes for managing and monitoring intercompany accounts, which had been a concern in the past.

The Committee NOTED the Annual Audit Plan for 2014/15.

6. Pension Fund Administration
    Rianachd Maoin Peinnsein

There had been circulated Report No. PC/03/15 by the Director of Finance which updated Members on matters relating to the administration of the Highland Council Pension Fund.

The Report confirmed that following discussion with representatives from the University of the Highlands and Islands, an application for Admitted Body status was expected to be received in respect of a new Company “University of Highlands and Islands Shared Services”. The employees of the Company would consist of current employees of the University and partnership universities across Scotland. Approximately 18 employees would be involved in the transfer and the University of the Highlands and Islands was proposing to act as guarantor for the pension liabilities of the new Company.  Subject to the necessary financial safeguards being in place, the Committee was asked to approve in principle the application.

The Committee NOTED the report and APPROVED, in principle, the application for Admitted Body status in respect of the ‘University of Highlands and Islands Shared Services’ subject to the appropriate financial safeguards being in place.

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 November 2014, the terms of which were APPROVED.

The meeting closed at 2.45 pm.