Agenda item

Consider report by Chief Financial Officer. (Copy attached).

With reference to paragraph 6 of the Minute of 13 September, there had been circulated copies of a report requesting approving of the consultation response from the Pension Fund Committee on the review of the structure of Scottish Local Government Pension Scheme.   The report explained that following a request from Scottish Government the Scheme Advisory Board had launched a consultation process on the future structure of the Scottish Local Government Pension Scheme.  The process had been launched in June 2018 and sought to establish the views of employee and employers’ representatives on four options: (i) To retain the current structure with 11 funds; (ii) To promote cooperation in investing and administration between the 11 funds; (iii) To pool investments between the 11 funds; and, (iv) To merge the 11 funds into one or more funds.  The Pension Fund Committee and Pension Board had received all information available to the Fund and at the joint meeting on 13 September had a full discussion of the options.   A draft response was contained in Appendix 1, to the report which reflected the agreed position of the Committee and the Board.  It had been agreed that a separate response would be submitted by the Pension Board and employers would also be encouraged to submit responses.  It was noted that responses had to be submitted no later than 7 December 2018. 

8.2       The Chief Financial Officer, Mr Robertson, discussed the response in detail, highlighting that the objective of the Fund was to build up assets in order to meet all future pension fund liabilities.   The 2017 Triennial Valuation had determined a funding level of 114%, and over the past 10 years the fund had delivered a strong performance, with net assets increasing over that period by 133% to stand at £684m at the end of March 2018.  The Fund was well diversified across a range of asset classes and is now  positioned to better withstand future fluctuations in financial markets and any change could have a detrimental impact on performance and membership.  Mr Robertson advised that one of the drivers for change was to encourage investment in infrastructure.  However, through collaboration with Lothian Pension Fund, the fund already invested in infrastructure.  Mr Robertson concluded that there was no reliable, empirical case to support change and further work was required to evaluate the benefits and risks associated with change before this could be supported as being in the best interests of the fund.   Mr O’Hara added that he had reviewed the document, and considered it a clear response in terms of the views of Pension Fund members. However, it was agreed to delegate responsibility to the Chief Financial Officer, Pension Investment Manager and the Investment Advisor to finalise the response and submit on behalf of the Pension Fund Committee.  In response to questions, Mr O’Hara advised that aggregating  investments between funds could deliver economies of scale and a reduction in asset managers’ fees.  However, this would incur significant set up costs and Scottish funds were already benefitting from reduced fees folling pooling in England and Wales.   In response to a question regarding the fund being forced to merge, Mr Robertson advised that changes could be implemented through Ministerial direction. .  

DECISION

(a)        AGREED:

            (i)         To delegate responsibility to the Chief Financial Officer, Pension                                Investment Manager and Investment Advisor – KPMG, to finalise                                the consultation response; and 

            (ii)        That Appendix A attached to the Minute, be submitted as the                                                  response from Scottish Borders Council Pension Fund Committee.

(b)       NOTED that a separate response would be submitted by the Pension Board.