Issue - meetings

9.1       The Committee considered the Pension Fund 2017/18 Annual Report.

9.2       The Committee RESOLVED to:

1) ) note the Draft Annual Report, and financial performance of the Pension Fund, which will be submitted for final audit in June 2018;

2) note that the audited Pension Fund Annual Report will be presented to the Pensions Committee for approval at its meeting on 16 July 2018.

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67.1.      The Board considered a draft of the Pension Fund 2017/18 Annual Report.

67.2.      OO explained that the Annual Report was still in draft form and subject to the receipt of data from the East Sussex Pension Fund’s (ESPF) custodian, Northern Trust.  He said that the external auditors, KPMG, will audit the Annual Report prior to it being approved by the Pension Committee at its next meeting on 16^th July 2018.  

67.3.      Councillor Richard Stogdon (RS), Chair of the Pension Committee, asked whether the Fund actuary’s claim that there is a 66% chance the Fund will be fully funded in 20 years was overly pessimistic considering that the most recent triennial evaluation had concluded that it was nearly at full funding already.

67.4.      The Chair said that the funding level can vary depending on how it is calculated, for example, using the Government’s actuary’s figures would give the ESPF a funding rate of 114%.  He also said that the Fund could well be self-funding in 2 years but liabilities could outstrip contributions in the long term so that in 20 years it was no longer self-funding. OO added that the Fund’s actuary (Hymans Robertson) is very prudent and different actuaries may give a different funding figure.

67.5.      Stephen Osborn (SO) observed that the markets were in the midst of the longest ‘bull run’ in history and that when it comes to an end there could be a negative impact on the Fund’s assets.

67.6.      SO asked whether the £3m reduction in investment manager fees from £7.6m in 2017/18 to £4.6m in 2018/19 would be offset by transition costs and other one off fees. OO said that there are some transition costs but taking these into account still results in a net reduction in fees due to ACCESS delivering economies of scale.

67.7.      SO asked why some pension funds in ACCESS are looking at longer time periods before receiving savings through pooling. OO explained that some funds have lot more liquid assets that can be pooled immediately and see a reduction in investment manager costs, for example, the movement of ESPF £1.6bn of passive investments to UBS had seen ESPF costs for passive fund managers halved.  Those funds with greater illiquid assets such as infrastructure and private equity cannot pool them immediately and so will see less benefit in the short term. OO explained that the cost of investment managers would decrease from £7.6m to £4.6m during 2018/19 as a large part of fees would be paid through ACCESS rather than directly to fund managers, along with transition costs and operator costs.

67.8.  ...  view the full minutes text for item 67