Agenda item

Report of the Director of Finance.

The Board received a report of the Director of Finance which set out the London Borough of Harrow Pension Fund Annual Report and Financial Statements for the year ended 31 March 2015 and the Report of the Auditor (Deloitte LLP) to the Governance, Audit, Risk Management and Standards Committee.

Following a brief overview of the report, officers responded to Board members’ questions and comments as follows:

·                     the Council’s actuaries were not anxious about the fact that the fund was in deficit and that there was a 50% chance that the Fund would return to full funding in 20 years, and that achieving a fully funded status may require the continued payment of deficit contributions.  For  the Fund to be fully funded in a shorter period could require an employer contribution rate of 34%, which was not currently feasible;

·                     in terms of investment performance league tables for all LGPS funds, the Fund was in the top quartile; for funding it was in the bottom quintile.  An officer undertook to ensure that future reports to the Board would set out clearly areas where the Fund was doing well as well as areas of concern to facilitate the scrutiny process as well as provide a more detailed report on funding and on cash flow projections to a future meeting of the Board;

·                     some Local Authority actuaries tended to be quite conservative and generally attached high values to liabilities.  The Council’s actuaries, Hymans Robertson LLP, had produced a report on Local Authorities, which, when using consistent assumptions, placed Harrow about 50^th nationally.

·                     85% of the Pension Fund’s members were council employees;

·                     the next actuarial valuation would take effect from 2017 and officers would be meeting with the actuaries in 2016 to get the ball rolling;

·                     the Fund’s governance arrangements, when measured in a self-assessment exercise against the principles set out in the statutory guidance were considered by officers to be largely fully compliant in most areas, however, he would provide a more detailed report regarding this to a future meeting of the Board;

·                     comments made by the external auditors (Deloitte’s)regarding the council’s internal control environment and risk management processes related to previous years and all recommendations made by the auditors had since been actioned.  The comment relating to the risk register related to any possible major systems failure leading to a failure in pensions administration and the actuaries had requested that the register include more detail on this;

·                     the auditors routinely carried out sample checks on pensions’ calculations for individuals and the pensions’ payroll staff had been provided with training on calculations under the new arrangements.  All council employees had been issued with benefits statements in August 2015;

·                     all of the Fund’s investments were in pooled funds and none were in segregated funds.  The pooled funds were held by custodians who were listed on the accounts and the Pension Fund Committee (PFC) received a report annually regarding the internal controls and audit of each of the fund managers.  An officer undertook to provide the Board with a report regarding the internal controls and governance procedures of the custodians.

RESOLVED:  That

(1)          the report be noted; and

(2)          the Board’s comments be forwarded to the Pension Fund Committee.