Agenda item

The Committee had before it a report by the External Auditor on the 2019/20 Annual Audit of the North East Scotland Pension Fund.  The report noted that auditors were required to report on specific matters arising from the audit of the financial statements to those charged with governance of a body, prior to the financial statements being approved and certified. 

The key messages from the audit were that in the opinion of External Audit, the North East Scotland Pension Fund’s financial statements gave a true and fair view and were properly prepared.  The management commentary, annual governance statement and governance compliance statement were all consistent with the financial statements and had been properly prepared.  The report noted that the North East Scotland Pension Fund had valued its Level 2 property assets on an appropriate basis using information provided by professional valuers, and drew attention to the impact of Covid-19 on the level of uncertainty over property valuations. The audit opinion had not been modified in respect of that matter.

The annual performance of the Fund was significantly impacted by Covid-19 19.  At 31 December 2019 the value of the main fund’s net assets exceeded £4.8 billion but by the end of March the value fell to £4.383 billion, as a result of Covid-19.   However the report noted that the Fund had appropriate and effective arrangements in place for financial management and systems of internal control had operated appropriately and effectively in 2019/20.  Standards of conduct and arrangements for prevention and detection of fraud and error were appropriate.

There had been negative cash flows from member activity in 2019/20 and the ratio of active fund members to pensioners had fallen.  While this trend was expected to continue, the Fund had appropriate and effective financial planning arrangements in place.  The report further noted that the Fund’s three year funding and investment strategy would be reviewed following the next full triennial valuation, due to be completed by 31 March 2021, and this would determine the level of employer and employee contribution rates from 2021/22 onwards.

It was considered that the Fund had effective governance arrangements that supported scrutiny of decisions made by the Pensions Committee.  Governance  arrangements had changed in March 2020 as a result of the Covid-19 pandemic. Committees were suspended and virtual meetings of the Urgent Business Committee had been held instead to consider items of an urgent nature.  External Audit had concluded that these changes were appropriate and properly disclosed in the Annual Governance Statement.

The impact of Covid-19 on global markets reduced annual returns significantly but investment performance continued to outperform medium and longer term benchmarks.  The Fund had adequate arrangements for monitoring investment performance and scrutinising investment management.  The Fund's investment performance was also subject to regular review and scrutiny by the Pensions Committee.

The Committee heard in detail from Ms Woolman in respect of the report.

The Committee resolved:-

(i)       to thank Ms Woolman and her team for both the clear and informative presentation and report and the work undertaken to ensure the annual report was presented to Committee as expected; and

(ii)       to note the audit report.

The Board resolved:-

to note the decision of the Committee.