Agendas, reports and minutes

Pensions Committee and Board

Date: Thursday, 9 August 2018

Minutes: Read the Minutes

Minutes of Meeting of the Pensions Committee and Pension Board held in the Council Chamber, Council Headquarters, Glenurquhart Road, Inverness on Thursday 9 August 2018 at 10.30 am.
 
Present:
 
Pensions Committee
 
Mr R Bremner (by Video Conference);Mr C Fraser;Mr R Gale;Mr A Jarvie;Mr B Lobban;Mr D Louden;Mr P Saggers
 
Pension Board
 
Mr G Cruickshank, Highland Council;Mr A MacLeod, (substitute), Comhairle nan Eilean Siar;Mr R Fea, representative for other Employers;Mr M MacDonald (substitute), Unison;Mr D Main, Unite/Ucatt
 
Officials in attendance:
 
Mr E Foster, Head of Corporate Finance and Commercialism, Corporate Resources Service
Mr J Gibson, Joint Secretary (Trade Unions’ Side)
Mr C MacCallum, Payroll & Pensions Manager, Corporate Resources Service
Mrs M Grigor, Finance Manager (Corporate Budgeting, Treasury and Taxation)
Ms D Sutherland, Corporate Audit Manager, Corporate Resources Service
Ms C Stachan, Accountant, Corporate Resources Service
Mrs L Dunn, Principal Administrator, Chief Executive’s Service 
Mr A MacInnes, Administrative Assistant, Chief Executive’s Service
 
Also in attendance:-
 
Ms J Brown, Grant Thornton (External Auditor) (Item 12 only)
Mr A Gustinelli, Grant Thornton (External Auditor) (Item 12 only)
 
An asterisk in the margin denotes a recommendation to the Council.  All decisions with no marking in the margin are delegated to the Committee.
 
Mr R Gale in the Chair
 
1. Apologies for Absence
    Leisgeulan
 
Apologies for absence were intimated on behalf of Mrs H Carmichael, Mrs C Caddick and Mr B Thompson of the Pensions Committee and Ms L Munro, Mr C Nicolson, Ms L MacKay, Mr D Macdonald and Mr E Macniven of the Pension Board.
 
2. Declarations of Interest
    Foillseachaidhean Com-pàirt
 
There were no declarations of interest.
 
3. Recess Powers 
    Cumhachdan Fosaidh
 
The Committee NOTED that the Recess Powers granted by the Council at its meeting on 28 June 2018 had not been used in respect of this Committee.
 
4.   Internal Audit
 
4.a  Highland Council Pension Fund Internal Audit Annual Report 2017/18
       Aithisg In-Sgrùdaidh Maoin Peinnsein Chomhairle na Gàidhealtachd 2017/18
 
There was circulated Report No. PC/07/18 by the Corporate Audit Manager.
 
The Committee NOTED the content of the report, the audit opinion provided.
 
4.b Highland Council Pension Fund Internal Audit Annual Plan 2018/19
      Plana In-Sgrùdaidh Bliadhnail Maoin Peinnsein Chomhairle na Gàidhealtachd 2018/19
 
There was circulated Report No. PC/08/18 by the Corporate Audit Manager.
 
The Committee APPROVED the 2018/19 Audit Plan.
 
4.c Highland Council Pension Fund Internal Report – Pension Fund Payments
      In-Aithisg Maoin Pheinnsein Chomhairle na Gàidhealtachd – Pàighidhean Maoin Pheinnsein
 
There was circulated Report No. PC/09/18 by the Corporate Audit Manager.
 
Members welcomed that both actions relating to the audit review of Pension Fund payments had been completed.
 
With reference to the five audit opinions that could be given, such as ‘Substantial and Reasonable assurance’, it was explained that ‘Reasonable assurance’ was the standard term used as no system of control could provide an absolute assurance against material loss and this applied to a snapshot in time.  In addition, all individual audit reports contained an audit opinion ranging from full to no assurance.
 
The Committee NOTED the content of the report and the audit opinion provided.
 
5. Governance Policy Statement 2018/19
    Poileasaidh Riaghlaidh 2018/19
 
There was circulated Report No. PC/10/18 by the Depute Chief Executive/Director of Corporate Resources.
 
The Committee APPROVED the Highland Council Pension Fund Governance Policy Statement.
 
6. Pension Fund Contributions and Administration
    Tabhartasan agus Rianachd Maoin Peinnsein
 
There was circulated Report No. PC/11/18 by the Head of Corporate Finance & Commercialism.
 
The Committee NOTED the details of the report.
 
7. Highland Council Pension Fund: Monitoring of Retirements
    Maoin Peinnsein Chomhairle na Gàidhealtachd: Sgrùdadh Cluaineis
 
There was circulated Report No. PC/12/18 by the Depute Chief Executive/Director of Corporate Resources.
 
It was noted that there had been 20 cases of ill health retirement within The Highland Council for the period 1 April 2017 to 31 March 2018 at an average cost to the Pension Fund of £81,500 per ill health retirement which was a substantial cost.  It was queried if death in service costs were included in this figure or were they accounted for elsewhere.   It was explained that death in service would result in a payment from the Pension Fund but that this was not a retirement cost and was a separate cost to the Fund.  
 
Further, ill health retirement was a benefit of the Fund and depending on the severity of the illness, the payment to the scheme member could be enhanced and this could be a considerable cost to the Fund.  There was an option of taking out an Insurance Policy to protect the Fund from ill health retirement costs, and although this Policy could also be expensive, an undertaking was given to consider this option.
 
It was noted that the percentage of ill health retirements in the Development and Infrastructure Service was high compared to some other Services.  It was queried what the Council was doing to reduce ill health retirements in certain areas.  It was explained that in the recent departmental restructure, Development and Infrastructure had taken on a large group of staff and this would partly explain the increase, but a definitive answer would be investigated for Councillor A Jarvie. 
 
The Committee:-
 
i.   NOTED the content of the report;
ii.  AGREED to investigate the option of an Insurance Policy to protect the Pension Fund from ill health retirement costs; and
iii. NOTED that information would be provided to Councillor A Jarvie on the actions being taken to reduce ill health retirements in some areas of the Council, such as Development & Infrastructure, where the number of ill health retirements was significantly high.  
 
8. Risk Management Update
    Fios às Ùr mu Rianachd Chunnairt
 
There was circulated Report No. PC/13/18 dated 25 July 2018 by the Depute Chief Executive/Director of Corporate Resources.
 
The Committee:-
 
i.  NOTED the updated risk register extract and compliance with the Pension Fund Regulator requirements; and
ii. APPROVED the updated risk management strategy and policy.
 
9.  Training Policy and Training Plan 2018/19
     Poileasaidh Trèanaidh agus Plana Trèanaidh 2018/19
 
There was circulated Report No. PC/14/18 by the Depute Chief Executive/Director of Corporate Resources.
 
The Committee:-
 
i.   NOTED the assessment and training resources provided by The Pensions Regulator and the requirement for newly appointed Board and Committee Members to complete induction training (section 5 and section 7 of the report);
ii.  NOTED the adoption of the CIPFA Local Pensions Boards Technical Knowledge and Skills framework (section 6 of the report), including the self-assessment matrix and the recently published guide for local pension boards issued by CIPFA (section 8 and Appendix 2 of the report); 
iii. NOTED the training delivered to date on pension fund matters (Appendix 3 of the report); and 
iv  AGREED the training policy and programme for 2018/19 set out within the report (section 10 of the report).
 
10. Consultation on the Review of the Structure of the Scottish Local Government Pension Fund
      Co-chomhairle mun Ath-sgrùdadh air Structar Maoin Pheinnsein Riaghaltas Ionadail na h-Alba
 
There was circulated Report No. PC/15/18 by the Head of Corporate Finance & Commercialism.
 
In commenting on the consultation on the review of the structure of the Scottish Local Government Pension Fund and the four options for the future structure, it was stressed that the Trustees of the fund were responsible for acting in the best interests of the scheme members.  It was highlighted that the fund had been managed extremely successfully with exceptional performance resulting in the scheme being in the very strong and unique position of being 101% funded.  Therefore, there was no reason to change from these current arrangements.  
 
Concern was expressed that the consultation was heavily weighted towards the proposal that funds should be merged for the main purpose of increasing investment in infrastructure across Scotland.  However, the long term objective of the fund was to achieve a rate of return on investments and it was difficult to understand how investment in infrastructure would achieve this.  Therefore, it was felt that this approach would limit investments and could contravene fiduciary duties, i.e. to aim to achieve the best financial position for the fund and ensure it could support future scheme obligations. In addition, pursing either option of pooling investments or merging to a single fund would result in the Fund’s solvency level, currently at 101%, being reduced and would have a detrimental impact on the members of the fund.  It was further highlighted that merging or pooling the funds would result in a loss of control and would also involve long-term set up costs.
 
Therefore, in view of the fact that there was no advantage to the Fund in respect of the two remaining options, i.e. pool investment between the 11 Funds and merging the 11 Funds into one or more new funds, the Committee was of the strong opinion that there should be no change to the current pension fund management arrangements.  It was stressed that this was in the best interest of the fund members and that the existing fund arrangements enabled control to be retained locally which was in line with the localism agenda and it was requested that these views should be reflected in the consultation response.
 
The Committee also indicated that it would cautiously consider collaborating with other funds but only on the proviso that it demonstrated that it would generate a return on investment and be beneficial to the fund.
 
Thereafter, the Committee AGREED the option – ‘the current structure with 11 funds to the Local Government Pension Scheme’ and that a full draft response on the consultation from the Highland Council Pension Fund be circulated to the Pensions Committee for review, and the final response would be agreed in consultation with the Pensions Committee Chair prior to submission.
 
11. Investment Sub Committee: Minutes of Meeting
      Fo-chomataidh Tasgaidh: Geàrr-chunntas na Coinneimh
 
The Minutes of meeting of the Investment Sub-Committee held on 1 March 2018 and 7 June 2018 were circulated for confirmation and APPROVED.
 
The Committee also NOTED that information would be provided to Councillor A Jarvie on which way the Fund Managers’ voted on Elon Musk’s recent share deal with Tesla.
 
At this point the meeting was adjourned for a short break and it resumed at 11.10 a.m.
 
12. External Annual Audit
      Sgrùdadh Bliadhnail on Taobh A-muigh
 
12.a External Annual Audit Report to Members of the Pensions Committee and the Controller of Audit
        Aithisg In-sgrùdaidh Bhliadhnail on Taobh A-muigh do Bhuill de Chomataidh nam Peinnsean agus Rianadair an Sgrùdaidh
 
There was circulated Report No. PC/16/18 by the External Auditor, Grant Thornton.
 
The Committee NOTED the report.
 
12.b Letter of Representation 2017/18
        Litir Riochdachaidh 2017/18
 
There was circulated (Report No. PC/17/18) a copy of the annual audit letter of representation 2017/18.
 
The Committee AGREED that the letter be signed on behalf of the Highland Council.
 
12.c Audited Accounts 2017/18
        Cunntasan Sgrùdaichte 2017/18
 
The Audited Statement of Accounts (Report No. PC/18/18) for the financial year 2017/18 were available for viewing at the following weblink:-
 
http://www.highlandpensionfund.org/media/4075/2017_18_pf-annual-report- and-annual-accounts-_final-to-be-approved-at-pc.pdf
 
The Committee APPROVED the accounts.
 
 
The meeting ended at 11.15 a.m.