Agenda item

Members noted that this report had been written as an introduction to the draft annual report and accounts for the Bromley Pension Fund for year ending 31^st March 2019. Subsequent to scrutiny of the report by the Pensions & Investment Sub-Committee, the report would also be subject to auditing by the Fund’s external auditor. To comply with the Government Pension Scheme Regulations, the Council was required to publish the final version of the Annual Report on its website by 1^st December 2019.

The four separate documents that were required to be incorporated into the report were noted:

·  Governance Policy Statement

·  Funding Strategy Statement

·  Investment Strategy Statement

·  Communications Policy Statement

Members noted and approved the statements. 

The corresponding Governance Compliance Statement (for the Governance Policy Statement) had been presented to the GP&L Committee in July 2008, and was also attached to the meeting papers for Members’ information.

Members were advised that as at 31^st March 2019, the net assets of the Bromley Pension Fund were £1,039m.

The Committee was briefed that the Bromley Pension Fund performance for the last financial year was 7.99% which was slightly below the benchmark target of 8.27%. However, the performance of the fund was still strong and had been over the medium and long term.

Members were briefed that the external auditors (Ernst and Young) had not yet completed their audit of the pension fund accounts, and that the publication deadline for the audit (31st July) would not be met. It was anticipated that the audit of the accounts would be reported back to the GP&L Committee on 19^th September 2019.

Members were updated regarding Risk Management. ‘Risk' in this context was the risk that the funding strategy may fail, and that target funding levels would not be met. The Pension Risk Register was used as a key tool for the management of risk, and this had been incorporated into the agenda for the attention of Members. Further assurance in terms of risk management was provided by the internal control documents produced by both the investment managers and the custodian. These documents identified internal processes and procedures, along with the associated audit testing. Risk was minimised further because the Fund’s independent investment adviser monitored the market and the activities of investment managers.

Regarding financial performance, the Committee was pleased to note that day to day income and expenditure for the Fund showed an overall surplus of £12.1m in 2018/2019. 

The results of the Internal Audit undertaken in 2018/2019 showed that controls were in place and working well and had resulted in a ‘substantial’ audit assurance rating.

Members noted that the regulations required that an actuarial valuation be undertaken every three years and that the Pensions and Investment Sub-Committee (PISC) was responsible for considering the report. The most recent valuation was at 31^st March 2016. Members were pleased to note that the value of the Fund’s assets in the 2016 valuation represented 91% of the value of the liabilities, up from the previous valuation of 82% in 2013.

Members were encouraged to note that the current strategy was to achieve a funding level of 100% by 2028. This would be re-assessed in the next full valuation as at 31^st March 2019. The results of this would be known by the end of 2019/2020. 

The Vice Chairman was concerned to note the problems highlighted in the report because of the methodology adopted by Cushman and Wakefield (C&W) when valuing the Council’s property assets. Because of concerns raised by the External Auditors, the valuation process would have to be re-done. C&W’s process for valuing council property assets had changed nationally, but had not been adopted at Bromley at the time of the valuation. No financial loss had been suffered by the Council. C&W had written a letter of apology to the Council and would provide compensation for officer time. The Director of Finance said that he would share the letter with the Committee. Monitoring of performance of Cushman and Wakefield would be considered by the Executive, Resources and Contracts, Policy Development and Scrutiny Committee. 

It was noted that the External Auditors would not normally sign off the Bromley Pension Accounts until the overall Council audit was completed—the re-valuation of the Council’s property assets had yet to be finalised as well as the ‘McCloud’ impact.

Councillor David Jefferys left the meeting at 9.05pm for another engagement. 

RESOLVED that:

1) The Draft Pension Fund Annual Report 2018/2019 is noted.

2) The Governance Policy Statement, Funding Strategy Statement, Investment Strategy Statement, and Communications Policy Statement are approved.

3) The final Pension Fund Audit Report is reported to the Pensions and Investment Sub-Committee on 27^th August.

4) The final Pension Fund Audit Report would be published to the Bromley Council website on 1^st December 2019.

5) The Director of Finance would disseminate to the Committee the letter that had been received from Cushman and Wakefield regarding the valuation of the Council’s property assets.