Scottish Borders Council

Agenda item

Review of the Structure of Scottish Local Government Pension Scheme - Consultation Response

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

Minutes:

With reference to paragraph 2 of the Minute of 13 September, there had been circulated copies of a report by the Chief Financial Officer seeking approval of the consultation response to the review of the structure of the 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 all the options had been fully discussed, with the majority of  Pension Board members being supportive of Option (ii) above.   The Pension Board had agreed to submit a separate response to the consultation and a draft response had been circulated with the agenda, for approval. It was noted that responses had to be submitted no later than 7 December 2018.

 

4.2       The Chief Financial Officer, Mr Robertson, discussed the response in detail, highlighting the relatively recent establishment of the Board, in 2015, which had significantly enhanced the governance and scrutiny of the Fund’s activities and provided a voice for local employer and employee representatives.   The response also referred to the Board’s conclusion that there was no compelling empirical case for reform, and that any change could have a significantly detrimental effect on member confidence, investment performance and funding levels.  However, the Board had accepted that more collaboration between funds could have the potential to deliver cost benefits, upgrading of systems and sharing of best practice.  Following discussion, it was agreed that the response also make reference to a concern that a  merger of funds could have an impact on smaller employers in terms of future liabilities and higher contribution rates which could affect jobs.

 

4.3       In response to questions, Mr Robertson advised that one of drivers for reform was a political desire for pension funds to invest in infrastructure.  Scottish Borders Council’s Pension Fund, through collaboration with Lothian Pension Fund, already invested in infrastructure as part of a balanced approach to investment.  Mr Robertson further advised that the only circumstance in which the Fund should be expected to merge would be if there was evidence of failure around governance or if the Fund was unable to meet future liabilities.  Regarding the opinions of other pension funds in Scotland, Mr Robertson advised that from  responses submitted to date, Lothian and Falkirk favoured a merger; the other 11 funds, including the largest - Strathclyde Pension fund - favoured option 2; with Cosla also supportive of Option 2.   The Board agreed that the consultation response be submitted, as amended; and thanked officers and managers for their contribution to the effective governance and the advice given to the Pension Board.

 

DECISION

AGREED:

(i)         That the response to the consultation include reference to the detrimental    impact full merger could have on smaller employers in terms of future      liabilities and higher contribution rates; and

 

(ii)        To submit the amended response from Scottish Borders Council Pension    Board, attached as Appendix A to the Minute.  

 

 

Supporting documents:

 

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