Agenda item

Consider review of the governance of Scottish Borders Council’s Pension Fund by Clare Scott, Independent Advisor.  (Copy attached.)

8.1       There had been circulated copies of a report by Clare Scott, an Independent advisor who had undertaken a review of the Governance of the Scottish Borders Council Pension Fund during October and November 2023.  The Acting Chief Executive explained that Ms Scott had been unable to attend the meeting due to another client meeting, and presented the key findings of the review.  A briefing session had been held to allow members to scrutinise the review and recommendations.   The analysis of the Fund was based on a desk-top review of pension fund documentation, observations of meetings and conversations with individuals involved in the Fund’s governance.  It was prompted by the increased scrutiny of Local Government Pension Scheme funds and increasing standards of governance introduced by legislation and the Pensions Regulator.   The key findings of the report included that the Fund had a number of good practices in place including that the duties of the Pension Fund Committee were solely for the Pension Fund, and membership of the Committee had been relatively stable.   The report highlighted that the Pension Board met separately, directly after the Committee to consider whether the Board wished to raise any concerns with the Committee. A significant amount of time was spent by the Committee and Sub-Committee on pension matters in comparison with other LGPS funds.  For a relatively small fund, the investment arrangements were very complex. The Fund had a rigorous approach to training for members of the Committee and Board.  Officers were proactive in forecasting agendas for Committee meetings and the meeting agendas included a wide range of pension matters.   The Fund’s annual report was comprehensive and the risk register was reviewed quarterly by the Committee and Board.  Comprehensive policies and strategies were in place for most functions of the pension fund, including a business plan and budget. 

8.2       The report outlined a number of recommendations which Ms Scott had made which concerned matters related to Governance Structure and Decision Making; Objectives and Planning; Outcomes and Oversight; and Risk Management and Audit.  The Acting Chief Executive highlighted the Governance Structure and Decision Making recommendations, which included that the Fund should ensure that the roles of the Committee and Board members were distinct to avoid potential conflicts of interest; that the Pension Board’s constitution should be reviewed and updated; the remit of the Committee should include the assessment of the effectiveness of the Fund’s systems of control, including agreeing internal audit plans and reviewing the outcome of internal audits; that the Fund should review the make-up and business of the Investment Sub-Committee; the approach to training could be more specific to the needs of members; resource requirements should be assessed to ensure functions were efficient and effective; and the Fund should consider the appointment of a single officer who had line management responsibility for all pension functions and spent the majority of their time on pension matters. The Acting Chief Executive highlighted that the appointment of a single officer could present a challenge due to the structure of the Council and its level of integration.  Regarding Objectives and Planning, the Fund should put in place new policies for the management of conflicts of interests and reporting of breaches; the Pensions Administration Strategy should be expanded to include standards for internal services provided to pension fund members to ensure performance was monitored; a data improvement plan was suggested; and the Fund should regularly review the risks and resources of maintaining two systems for pensioner payroll.   In the context of Outcomes and Oversight, Ms Scott had recommended that benchmarking of administration and investment should be undertaken on a regular basis, including cost and performance, with results reported to the Committee; and a large number of investment managers/mandates should be consolidated to a smaller number of asset classes.  Risk Management and Audit recommendations included the Fund documenting how it complied with the Pensions Regulator Codes, and included the risk of non-compliance on the risk register; and the Fund’s internal audit should be expanded to cover the Fund’s specific risks.  The Acting Chief Executive suggested that Officers undertake work to produce an action plan to address the recommendations suggested by Ms Scott and report back with formal recommendations to the Committee at a future meeting.  Members agreed to that approach.  The Chief Officer, Audit and Risk explained that some actions would require officers to assess the recommendations and outcomes in the short term, and proposed that actions were linked to risks to ensure that the added value of implementing mitigations actions were realised.   Ms Stacey was happy to consider additional assurance related to the Pension Fund as part of the work related to the Action Plan.   The annual internal audit plan would be brought to the March meeting of the Committee as planned.  Internal discussions would take place on resourcing internal audit services.  The Acting Chief Executive highlighted that no major, unexpected concerns had been brought to light by the report, highlighted that the picture in the report as it related to the number of mandates did not necessarily reflect the operation of the Fund, and undertook to include timescales within the Action Plan.  Members highlighted that the positives in the report should be emphasised

DECISION

AGREED to note the report and the course of action proposed by Officers.