Minutes:
A.16/15
The Committee received a presentation from Mr Mark Gayler (Assistant County Treasurer, Investments and Treasury Management) of Devon County Council on the Devon Pension Fund Investments and Risk.
The presentation concluded by looking to the future and made reference to:
- The Pension Fund having a long term horizon over which to invest;
- A need to invest in return seeking assets to reduce deficit position;
- The Fund needing to adapt to a changing world and increasing volatility of markets;
- Negative cashflow (contributions less benefits) needing to be factored into investment strategy for future years;
- Greater emphasis on cost savings (proposals for pooled investments / greater collaboration); and
- Long term performance still being the overriding objective.
In discussion, reference was made to:-
(a) the Deficit Recovery Position. The Committee was advised that the County Council was more than happy to open up dialogue with the Council if it wished to consider reducing its deficit recovery period (which currently stood at 27 years (the Devon Pension Fund average was 25 years));
(b) the increase in net pension liability from £32,704 million (at 1 April 2014) to £46,671 million (at 31 March 2015). Whilst acknowledging that this was attributed to a change in actuarial assumptions in 2014/15, Members still wished to express their concern at the substantial increase in total liability. The reduction in the discount rate from 4.4% to 3.3% was the main reason for the increase in the net pension liability and Mr Gayler explained that the discount rate fluctuated on a daily basis and a snapshot was taken on 31 March each year. In response, Mr Gayler informed that the actuary would look in a much more holistic way at this issue during its next actuarial review;
(c) the Council decision to invest £17 million in its pension fund in 2003. Mr Gayler reassured the Committee that this had been a good decision and had resulted in the Council paying considerably less in its annual contribution rates;
(d) the impact of the Transformation Programme. Throughout the Programme, the S151 Officer confirmed that the actuary was kept fully informed of the impact on the pension fund and, as a consequence, the Council had accurately predicted the strain of all employees over the age of 55 leaving the authority and had budgeted accordingly. In the ensuing general discussion, Mr Gayler confirmed that he would let officers know the cost of seeking actuary opinion on the merits of making a future capital payment. In addition, the Committee acknowledged that the age profile of the organisation was now significantly lower and this would also have an impact;
(e) the performance of the Fund. In comparison to other Funds, Mr Gayler informed that the Devon County Council Pension Fund had not performed as well in recent years. However, with the government direction of travel appearing to be to pool pension funds across the South West region, then there was not felt to be any value in changing investment managers at this time.
In conclusion, the Chairman thanked Mr Gayler for his informative presentation and interesting responses to Committee questions.