31 August 2017: Pensions Committee and Board

 
A joint meeting of the Pensions Committee and Pension Board will take place in the Chamber, Council Headquarters, Glenurquhart Road, Inverness on Thursday 31 August 2017 at 10.30 a.m.

You are invited to attend the meeting and a note of the business to be considered is attached.

Webcast Notice: This meeting will be filmed and broadcast over the internet on the Highland Council website and will be archived and available for viewing for 12 months thereafter.

Yours faithfully

MICHELLE MORRIS
DEPUTE CHIEF EXECUTIVE/
DIRECTOR OF CORPORATE DEVELOPMENT

        
1. Appointment of Chair of Pensions Committee
    Suidheachadh Dreuchd Cathraiche Comataidh nam Peinnseanan

The Committee is invited to appoint a Chairman.    
        
2. Apologies for Absence
    Leisgeulan    
        
3. Declarations of Interest
    Foillseachaidhean Com-pàirt

Members are asked to consider whether they have an interest to declare in relation to any item on the agenda for this meeting.   Any Member making a declaration of interest should indicate whether it is a financial or non-financial interest and include some information on the nature of the interest.   Advice may be sought from Officers prior to the meeting taking place.    
        
4. Recess Powers 
    Cumhachdan Fosaidh

The Committee is asked to note that the Recess Powers granted by the Council at its meeting on 29 June 2017 have not been used in respect of this Committee.    
        
5. Governance Policy Statement  2017/18
    Aithris Poileasaidh Riaghlaidh 2017/18

There is circulated Report No. PC/05/17 dated 23 August 2017 by the Director of Finance.

The Committee is asked to approve the updated Highland Council Pension Fund Governance Policy Statement.    
        
6. Training Policy and Training Plan 2017/18
    Poileasaidh Trèanaidh agus Plana Trèanaidh 2017/18

There is circulated Report No. PC/06/17 dated 21 August 2017 by the Director of Finance.

The Committee is asked to consider the report and:-

i.   note 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);
ii.  note the adoption of the CIPFA Local Pensions Boards Technical Knowledge and Skills framework (section 6), including the self-assessment matrix (section 8 and Appendix 2);
iii. note the training delivered to date on pension fund matters (Appendix 3); and
iv. agree the training policy and programme for 2017/18 set out within the report (section 10).
        
7.  Internal Audit
     In-Sgrùdaidh    
        
7.a Internal Audit Report 2016/17
     Aithris air In-Ùghdarras 2016/17

There is circulated Report No. PC/07/17 dated 21 August 2017 by the Corporate Audit Manager.

The Committee is invited to consider the content of the report and the audit opinion provided, and to raise any relevant points with the Audit and Risk Manager.  
        
7.b Internal Audit Annual Plan 2017/18
     Agus Plana In-Sgrùdaidh 2017/18

There is circulated Report No. PC/08/17 dated 21 August 2017 by the Corporate Audit Manager.

The Committee is invited to approve the 2017/18 Audit Plan.    
        
8. External Annual Audit
    Aithisg In-sgrùdaidh    
        
8.a External Annual Audit Report to Members of the Pensions Committee and the Controller of Audit
     Aithisg In-sgrùdaidh Bhliadhnail do Bhuill de Chomataidh nam Peinnsean agus Rianadair an Sgrùdaidh

There is circulated Report No. PC/09/17 by the External Auditor, Grant Thornton.

The Committee is invited to note the report.    

8.b Letter of Representation 2016/17
     Litir Riochdachaidh 2016/17

There is circulated a copy of the annual audit letter of representation 2016/17.

The Committee is asked to agree that the letter be signed on behalf of the Highland Council.
    
8.c Audited Accounts 2016/17
     Cunntasan Sgrùdaichte 2016/17

The Audited Statement of Accounts (Report No. PC/10/17) for the financial year 2016/17 are available for viewing at the following weblink:-

 https://www.highland.gov.uk/downloads/download/714/pension_fund_accounts

The Director of Finance will respond to any matters arising.

The Committee is invited to approve the accounts.    
        
9. Implementation of the “Markets in Financial Instruments Directive” (MiFID II)  
   Buileachadh “Riaghailt Mhargaidhean ann an Ionnsramaidean Ionmhasail”

There is circulated Report No. PC/11/17 dated 22 August 2017 by the Director of Finance.

The Committee is asked to:-

i.  note the potential impact on investment strategy of becoming a retail client with effect from 3 January 2018; and
ii. agree to the immediate commencement of applications for elected professional client status with all relevant institutions in order to ensure it can continue to implement an effective investment strategy. 
        
10. Pension Fund Administration 
     Rianachd Maoin Peinnsein

There is circulated Report No. PC/12/17 dated 22 August 2017 by the Director of Finance.

The Committee is invited to consider the details of the report.    
        
11. Highland Council Pension Fund: Monitoring of Retirements
      Maoin Peinnsein Chomhairle na Gàidhealtachd: Sgrùdadh Cluaineis

There is circulated Report No. PC/13/17 dated 22 August 2017 by the Director of Finance.

The Committee is asked to consider the report.    
        
12. Risk Management Update 
     Fios às Ùr mu Rianachd Chunnairt

There is circulated Report No. PC/14/17 dated 22 August 2017 by the Director of Finance.

The Committee is asked to note the updated risk register extract and compliance with the Pension Fund Regulator requirements. 
        
13. Membership of Investment Sub-Committee
     Ballrachd na Fo-Chomataidh Tasgaidh

The Committee is invited to approve the membership of the Investment Sub-Committee as follows:-

• Investment Sub-Committee (7 Highland Council Members (voting); 
• One representative Comhairle nan Eilean Siar, (non-voting); and
• One representative for the trade unions (non-voting);

The Groups have been asked for their nominations which will be tabled at the meeting for approval.    
        
14. Investment Sub Committee: Minutes of Meeting
     Fo-chomataidh Tasgaidh: Geàrr-chunntas na Coinneimh

The Minutes of meeting of the Investment Sub-Committee held on 3 March 2017 are circulated for confirmation.    
        
        
        
        

Minutes of Meeting of the Pensions Committee and Pension Board held in the Council Chamber, Council Headquarters, Glenurquhart Road, Inverness on Thursday 31 August 2017 at 10.30 am.

Present:

Pensions Committee/Pension Board

Mr R Bremner (by VC),Mrs H Carmichael,Mr C Fraser,Mr R Gale,Mr A Jarvie,Mr B Lobban,Mr D Louden,Mr A MacKinnon,Ms L Munro (substitute)

Mr P Saggers, Mr L Fraser (substitute),Mrs C Caddick, Highland Council, Mr R Mackay, Comhairle nan Eilean Siar

Ms L Leonard, representative for the other Employers, Ms L MacKay, Unison, Mr D Macdonald, Unison

Officials in attendance:

Mr D Yule, Director of Finance

Mr E Foster, Head of Corporate Finance, Finance Service

Mr S Fraser, Joint Secretary (Employers Side)

Mr C MacCallum, Payroll & Pensions Manager, Finance Service

Ms C Stachan, Accountant, Finance Service

Ms D Sutherland, Corporate Audit Manager, Finance Service

Mrs L Dunn, Principal Administrator, Corporate Development Service 

Mr A MacInnes, Administrative Assistant, Corporate Development Service

Also in attendance:-

Ms J Brown, Engagement Leader, Grant Thornton (External Auditor)

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. Appointment of Chair/ Cathraiche Eadar-amail

The Clerk invited Members of the Pensions Committee to appoint a Chair.

Thereafter, it was AGREED to appoint Mr R Gale as Chair of the Committee.

2. Apologies for Absence/ Leisgeulan

Apologies for absence were intimated on behalf of Mr B Thompson of the Pensions Committee and Mr E Macniven of the Pension Board.

3. Declarations of Interest/ Foillseachaidhean Com-pàirt

There were no declarations of interest.

4. Recess Powers/ Cumhachdan Fosaidh

The Committee NOTED that the Recess Powers granted by the Council at its meeting on 29 June 2017 had not been used in respect of this Committee.

5. Governance Policy Statement  2017/18/ Aithris Poileasaidh Riaghlaidh 2017/18

There had been circulated Report No. PC/05/17 dated 23 August 2017 by the Director of Finance.

The Committee APPROVED the updated Highland Council Pension Fund Governance Policy Statement.

6. Training Policy and Training Plan 2017/18/ Poileasaidh Trèanaidh agus Plana Trèanaidh 2017/18

There had been circulated Report No. PC/06/17 dated 21 August 2017 by the Director of Finance.

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);

ii.  NOTED the adoption of the CIPFA Local Pensions Boards Technical Knowledge and Skills framework (section 6), including the self-assessment matrix (section 8 and Appendix 2);

iii. NOTED the training delivered to date on pension fund matters (Appendix 3); and

iv.  AGREED the training policy and programme for 2017/18 set out within the report (section 10).

7. Internal Audit/ In-Sgrùdaidh

7.a Internal Audit Report 2016/17/ Aithris air In-Ùghdarras 2016/17

There had been circulated Report No. PC/07/17 dated 21 August 2017 by the Corporate Audit Manager.

With reference to the terms ‘Substantial and Reasonable assurance’ given in audit opinions, 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 applies to a snapshot in time.  In addition, all individual audit reports contain an audit opinion ranging from full to no assurance.

The Committee NOTED the content of the report and the audit opinion provided.

7.b Internal Audit Annual Plan 2017/18/ Agus Plana In-Sgrùdaidh 2017/18

There had been circulated Report No. PC/08/17 dated 21 August 2017 by the Corporate Audit Manager.

The Committee APPROVED the 2017/18 Audit Plan.

In accordance with Standing Order 18, with the consent of the meeting, item 9 on the agenda was taken at this point.

9. Implementation of the “Markets in Financial Instruments Directive” (MiFID II)/ Buileachadh “Riaghailt Mhargaidhean ann an Ionnsramaidean Ionmhasail”

There had been circulated Report No. PC/11/17 dated 22 August 2017 by the Director of Finance.

In discussion, the following points were made:-

• it was queried what other institutions, apart from Local Authorities, could apply to be treated as professional clients.  Information on this would be provided to Councillor C Caddick; and

• It was queried what were the quantitative and qualitative qualifications that the Council had to meet to be treated as a professional client, and assurance was sought that Officials were confident that the Council could meet these qualifications for all the financial institutions working with the Fund. Also, there were 31 other Employers who were admitted bodies in the Pension Fund and it was queried if they had to meet the qualifications to gain professional client status.  It was confirmed that the Highland Council as Administering Authority for the Pension Fund, acted on behalf of all the admitted bodies in the Fund.  It was advised that applications for elected professional client status would be shared with Members of the Committee and Officials were confident that these applications would be made within the deadline. 

Thereafter, the Committee:-

i.  NOTED the potential impact on investment strategy of becoming a retail client with effect from 3 January 2018; and

ii. AGREED to the immediate commencement of applications for elected professional client status with all relevant institutions in order to ensure it could continue to implement an effective investment strategy.

8. External Annual Audit/ Aithisg In-sgrùdaidh

8.a External Annual Audit Report to Members of the Pensions Committee and the Controller of Audit/ Aithisg In-sgrùdaidh Bhliadhnail do Bhuill de Chomataidh nam Peinnsean agus Rianadair an Sgrùdaidh

There had been circulated Report No. PC/09/17 by the External Auditor, Grant Thornton.

In discussion, the following points were raised:-

• It was explained that the figures as at 31 March 2017 for Present Value of Promised Retirement Benefits, net assets and liabilities would be different to the figures in the triennial actuarial valuation which was currently being carried out and would be reported to Committee in February 2018. It was the figures in the actuarial valuation that would be used to define how well the Pension Fund was funded against its liabilities as the valuation would take into account future potential returns from pension fund investments; and

• In relation to the significant increase in Investment Purchases and Investment Sales between 2015/16 and 2016/17, it was advised that this was due to a change in investment strategy.

Thereafter, the Committee NOTED the report.

8.b Letter of Representation 2016/17/ Litir Riochdachaidh 2016/17

There had been circulated a copy of the annual audit letter of representation 2016/17.

The Committee AGREED that the letter be signed on behalf of the Highland Council.

8.c Audited Accounts 2016/17/ Cunntasan Sgrùdaichte 2016/17

The Audited Statement of Accounts (Report No. PC/10/17) for the financial year 2016/17 were available for viewing at the following weblink:-

https://www.highland.gov.uk/downloads/download/714/pension_fund_accounts 

Having heard the Head of Corporate Finance highlight key items in the Audited Accounts, the Committee APPROVED the accounts.

10. Pension Fund Administration/ Rianachd Maoin Peinnsein

There had been circulated Report No. PC/12/17 dated 22 August 2017 by the Director of Finance.

In discussion, the following points were raised:-

• It was requested that a forecast of pension costs to date and for the financial year also be included in the pension cost table shown in paragraph 7.1 of the report;

• In relation to how the termination value was calculated for Employers leaving the pension fund, it was explained that this was determined by the Fund’s Actuaries and was assessed by determining the benefits accrued by the scheme members of the Employer, compared against the amount of contributions paid in.   The difference between the two figures was the termination value and any deficit would require to be paid back by the Employer;

• In terms of the eligibility of bodies to the Fund, it was explained that there was legislation to protect employees who were previously in the pension scheme, but their jobs were outsourced to another Employer.  The new Employer was required to provide a pension scheme comparable to the Council’s scheme or seek admitted body status to the Council’s scheme.  There were also safeguards in place to protect the pension fund before an Employer was allowed entry; and

• It was noted that Annual Benefit Statements were now available online to scheme members resulting in a significant saving.  It was queried what arrangements were in place to ensure that those who did not have access to electronic devices could also obtain this information. It was confirmed that arrangements were in place by telephone and the issue of paper statements to scheme members who could not access the benefit statements online.

Thereafter, the Committee NOTED:-

i.  the details of the report; and 

ii. that a forecast of pension costs to date and for the financial year would be included in future reports.

11. Highland Council Pension Fund: Monitoring of Retirements/ Maoin Peinnsein Chomhairle na Gàidhealtachd: Sgrùdadh Cluaineis

There had been circulated Report No. PC/13/17 dated 22 August 2017 by the Director of Finance.

The Committee NOTED the report.

12. Risk Management Update/ Fios às Ùr mu Rianachd Chunnairt

There had been circulated Report No. PC/14/17 dated 22 August 2017 by the Director of Finance.  

In terms of whether there was any Member input into the Risk Register, it was confirmed that in future reports Members would be invited to comment and consider any changes to the Risk Register.

The Committee NOTED the updated risk register extract and compliance with the Pension Fund Regulator requirements.

13. Membership of Investment Sub-Committee/ Ballrachd na Fo-Chomataidh Tasgaidh

The Committee APPROVED the membership of the Investment Sub-Committee as follows:-

• Investment Sub-Committee (7 Highland Council Members (voting):

  Mr B Lobban, Mrs H Carmichael, Mr B Thompson, Mr R Bremner, Mr C Fraser, Mr D Louden, Mr P Saggers

• One representative Comhairle nan Eilean Siar, (non-voting) - Mr R Mackay

• One representative for the trade unions (non-voting) - Mr E Macniven

14. Investment Sub Committee: Minutes of Meeting/ Fo-chomataidh Tasgaidh: Geàrr-chunntas na Coinneimh

There had been circulated Minutes of Meeting of the Investment Sub-Committee held on 3 March 2017 - the terms of which were APPROVED.

The meeting ended at 11.25am.