Agenda item

Report FSD14076

Report FSD14076provided details of investment performance for Bromley’s Pension Fund in the 2nd quarter of 2014/15. More detail was provided in an appended report from the Fund’s Investment Adviser including commentary on developments in financial markets, their impact on the Council’s Fund, and future outlook.

Information on general financial and membership trends of the Pension Fund was also outlined along with summarised information on early retirements. Financial information included historic data on the fund’s value, previous allocations to fund managers, distributions of surplus revenue fund cash to fund managers, and movements in the value of the FTSE 100 index. Baillie Gifford also provided commentary on their performance and a view on economic outlook. Baillie Gifford representatives attended to discuss performance, economic outlook/prospects, and other matters concerning the portfolios under Baillie Gifford management.

Quarterly reports from all fund managers had been circulated to Sub-Committee Members with the meeting agenda.

At 30^th September 2014 the fund value stood at £655.9m (and by 19^th November 2014 this had risen to £688.8m). Overall, the fund returned +3.0% in the second quarter matching the benchmark return. This performance was in the 7^th percentile of the local authority average.

Medium and long-term, the fund’s returns have remained particularly strong,  achieving overall local authority average rankings in the 29^th percentile for 2013/14 and the 4^th percentile for 2012/13 (the fund being subject to transition and change in both years).

In noting the fund’s value, it was suggested the fund was not performing significantly better than the FTSE 100 Index. However, returns were helping to reduce the funding gap and passive investments would provide the necessary income. Returns were fed into the Pension Fund Revenue Account and amounts outstanding after funding liabilities were directed back into the Fund for investment. As such it was not possible to identify specific details of such returns as they are automatically re-invested and the need for a separate Pension Fund a/c to hold the re-investment sums was not considered necessary. There were also costs related to establishing a separate account. The actuarial target for overall returns to meet fund liabilities stood at 5.6% and the current level of returns should help reduce the fund deficit. It was also suggested that equivalent figures be provided for previous years to show a trend (seasonal comparisons). 

It was also noted there would be fewer employees in the future and a reduced level of contributions. It would not be possible to take the same level of risk for the future as in previous years, the fund now technically having a negative cash flow, excluding returns from equities (these returns being re-invested back into the fund). It was also possible for employees to take pension benefits at age 55 and a cash flow problem could arise should there be a significant demand for early pensions. It might be necessary in future to merge with another pension fund having a positive cash flow to help meet liabilities. The level of employee contributions had also decreased in accordance with Government regulation. 

RESOLVED that the report be noted.