Agenda and minutes

The agenda and reports associated with this minute can be found at:-

http://committees.aberdeencity.gov.uk/ieListDocuments.aspx?CId=506&MId=3886&Ver=4

Please note that if any changes are made to this minute at the point of approval, these will be outlined in the subsequent minute and this document will not be retrospectively altered.

The Committee was requested to determine that the following items of business, which contained exempt information as described in Schedule 7(A) of the Local Government (Scotland) Act 1973, be taken in private – items 12 (Asset and Investment Manager Performance Report) and 13 (Investment Strategy Update).

The Committee resolved:-

in terms of Section 50(A)(4) of the Local Government (Scotland) Act 1973, to exclude the press and public from the meeting during consideration of items 12 and 13, so as to avoid disclosure of exempt information of the class described in paragraph 6.

The Board resolved:-

to note the decision of the Committee.

The Convener welcomed Colin Morrison of Audit Scotland to the meeting and advised that he was in attendance to observe the meeting on behalf of his colleague Rachel Browne, who had taken over the audit function for the Committee from Anne MacDonald.  He also welcomed Graham Buntain, the new Investment Manager for the North East Scotland Pension Fund to his first meeting of the Committee.

The Committee then heard that the NESPF team had been nominated for two Local Government Chronicle awards on 9 November 2016, for Scheme of the Year and Quality of Service, and had been successful in the latter category.  It was noted that the team had done a great job in terms of service delivery and the quality of information provided to Scheme members, and the Committee agreed that the award was very well-deserved.

The Committee resolved:-

to congratulate the NESPF team on their success in the Local Government Chronicle awards.

The Board resolved:-

to note the decision of the Committee.

The Committee and Board had before them the minutes of the Pension Committee and Board meetings of 24 June and 19 September 2016.

The Committee resolved:-

to approve the minutes as a correct record.

The Board resolved:-

to note the decision of the Committee.

With reference to article 4 of the minute of the meeting of 24 June 2016, the Committee had before it a motions list prepared by the Head of Legal and Democratic Services.  In relation to the motion by Councillor Kiddie requiring a report on ethical investments and the decision of the Committee to defer removal of the item from the motions list until Councillor Kiddie was in attendance, the Committee heard from the Head of Finance that the revised investment strategy would be reported to Committee next year and this would likely cover the terms of Councillor Kiddie’s motion.

The Committee resolved:-

to request that the Head of Finance write to Councillor Kiddie to advise of the content of the revised investment strategy and to request that he therefore give his authority for the motion to be removed from the motions list.

The Board resolved:-

to note the decision of the Committee.

With reference to article 8 of the minute of the meeting of 24 June 2016, the Committee had before it a report by the Pensions Manager which provided an update on any changes to the North East Scotland Pension Fund and the Aberdeen City Council Transport Fund strategies.

The report contained information on the Local Government Pension Scheme Regulation amendment; an update on the restructure of the Pension Fund staff; an update on Internal Audit recommendations; the Corporate Governance and Corporate Social Responsibility Policy; updates made to the Conflicts of Interest Policy and the Reporting Breaches of Law Policy; and system development and the I-Connect renewal.

It was also noted that David Briggs had resigned from the NESPF Pension Board in September and the appointment of the nominated replacement would be confirmed shortly.

Finally, due to a number of staff changes within Aberdeen City Council and the Pension Fund, the report sought approval of a revised authorised signatory list.

In respect of the risk register attached at Appendix X, Councillor Howatson asked when the Committee and Board could expect the report on the first year review of the workings of the Pension Committee and Board.  Ms Colliss advised that this would be brought to Committee in March 2017, noting that the governance arrangements for the Board were currently being reviewed.

Councillor MacGregor referred to the risk around staff being unable to access the workplace, and sought assurance as to what was being done to mitigate the risk around business continuity and any attacks to the system.  The Head of Finance advised that officers worked closely with colleagues in IT in respect of firewalls and security and suggested that he could ask Simon Haston, Head of IT and Transformation, to attend a future meeting to provide further information.  Ms Colliss also advised that the pensions system was internet based and so could be accessed remotely by staff in the event of any issue with access to buildings.

The report recommended:-

that the Committee –

(a)       approve the update to the Pension Fund Signatory List as noted in Appendix IX of the report, namely that Jackie Buchanan, Service Manager Legal Services, and Graham Buntain, Investment Manager, be added;  and

(b)       otherwise note the report.

The Committee resolved:-

(i)        to note that the Head of Finance would ask Simon Haston, Head of IT and Transformation, to attend a future meeting to provide reassurance around IT security arrangements;

(ii)       to note that the report on the first year review of the Pension Committee and Board would be submitted to Committee in March 2017;  and

(iii)      to approve the recommendations.

The Board resolved:-

to note the decision of the Committee.

The Committee had before it a report by the Head of Finance which provided information on the outcome of the Interim Actuarial Valuation for the main fund, commissioned by the Fund as at 31 March 2016.

The report advised that as a result of the deteriorating funding position since the triennial valuation in 2014, the Fund had commissioned the scheme actuary to carry out an interim valuation based on the assets and liabilities held within the Fund as at 31 March 2016.  This information would be used to prepare the Fund for the 2017 triennial valuation and would assist with the development of the 2017 funding strategy statement.

The report noted that the funding level as at 31 March 2016 was 97% for the whole fund, and the Fund and scheme actuary would continue to monitor the funding position until March 2017 when the full valuation would be undertaken.

The Committee resolved:-

to note the report.

The Board resolved:-

to note the decision of the Committee.

The Committee had before it a report by the Head of Finance which set out details of the Interim Actuarial Valuation for the transport fund which had been commissioned by the Fund as at 31 March 2016.

The report advised that the funding level as at 31 March 2016 had been calculated as 93% for the Aberdeen City Council transport fund.  The resulting deficit was £6.4 million, which was the same as the previous valuation in 2014.  It was noted that the results would be discussed at a meeting between the Pensions Manager, the Employer Relationship Team and First Bus.

The Committee resolved:-

to note the report.

The Board resolved:-

to note the decision of the Committee.

The Committee had before it a report by the Head of Finance which provided information on the ongoing work undertaken by the Employer Relationship Team to reduce the potential risk to the Fund posed by employers who were unable to meet the financial requirements of participation within the LGPS.

Ms Colliss explained that work was done to engage with any at risk employers at an early stage to try to mitigate that risk.

The Committee resolved:-

to note the report.

The Board resolved:-

to note the decision of the Committee.

The Committee had before it a report by the Head of Finance which provided details of the Management Expenses Budget / Forecast and Projected Spend 2016/17 for the North East Scotland Pension Fund.

It was noted that there was a projected overspend in respect of the staff costs budget for 2016/17 as a result of the new staffing structure being implemented from 1 April 2016.  Ms Colliss advised that due to difficulties in filling vacancies, it had been hard to predict when the additional spend would be required which was why the overspend was predicted.

The report recommended:-

that Committee –

(a)          note the update on the NESPF Management Expenses Budget / Forecast and Projected Spend 2016/17;

(b)          note the update on Pension Fund staff costs resulting from the implementation of the new staffing structure;  and

(c)          note the update on revised guidance on Accounting for Scheme Management Costs.

The Committee resolved:-

to approve the recommendations.

The Board resolved:-

to note the decision of the Committee.

The Committee had before it a report by the Head of Finance which provided an update on the provision of the Annual Benefit Statements to the Fund’s active and deferred members which set out an estimate of the member’s pension position at retirement age, based on data currently held by the Fund.  It was noted that in total, 23,398 benefit statements had been issued to active members which represented 99.62% compliance with the statutory requirement, and the outstanding member records had been identified and were being addressed as part of the post review undertaken by officers.  A revised project plan would be implemented in preparation for the 2016/17 year and it was hoped that 100% compliance could be achieved.

It was therefore noted that as the full 100% compliance had not been achieved, this would be recorded as a breach in the Register in terms of the NESPF Breaches of Law Policy, however as it was not considered to be material significance to the Pensions Regulator, there would be no requirement to report the matter to the Regulator, as steps were being taken to prevent future reoccurrence.

The Committee resolved:-

to note the report.

The Board resolved:-

to note the decision of the Committee.

The Committee heard that meeting dates for 2017 had been set as follows:-

10.30am, Friday 10 March 2017

10.30am Friday 23 June 2017

10.30am, Friday 15 September 2017

10.30am, Friday 1 December 2017

A further date would be arranged for the Pension Board annual meeting for some time in May 2017.

The Committee resolved:-

to note the dates.

The Board resolved:-

to note the decision of the Committee.

In accordance with the decision recorded under article 1 of this minute, the following items were considered with the press and public excluded.

With reference to article 13 of the minute of the meeting of 24 June 2016, the Committee had before it a report by the Head of Finance which provided a review of the North East Scotland Pension Fund and the Aberdeen City Council Transport Fund for the three month period ending 30 September 2016.  The report was supported by the BNY Mellon Fund Analysis and Performance Report and the Fund Managers’ quarterly investment reports.

Members heard that following legal advice, the opportunity investment agreed by Committee at its meeting of 24 June 2016 had not proceeded.

Ms Colliss advised that as a result of recommendations from internal audit, the report also now contained information on the Market Value Reconciliation from BNY Mellon.

The Committee resolved:-

to note the report.

The Board resolved:-

to note the decision of the Committee.

The Committee had before it a report by the Head of Finance which provided an update on the Fund’s investment strategy and proposed actions to secure compliance and adherence to the Fund’s benchmark allocation.

The report recommended:-

that Committee –

(a)       approve an increase headroom in accordance with regulation 14(3) and item 11 of Part 1 of Schedule 1 of the Local Government Pension Scheme (Scotland)(Management and Investment of Funds) Regulations 2010, to allow an increase in the investment to the Aberdeen City Transport fund and stock lending programme to 35%;  and

(b)       note the remainder of the report.

The Committee resolved:-

to approve the recommendations.

The Board resolved:-

to note the decision of the Committee.

-        COUNCILLOR BARNEY CROCKETT, Convener.