Agenda item

To submit:

(i)            the report of the Head of Finance

(ii)           ISA 260 report of the External Auditors

The Head of Finance submitted the statutory financial statements of the Pension Fund for approval by the committee. He expanded upon the content of the Statement of Accounts. He made reference to two of the Fund's key strategies, namely the finance strategy statement and the investment strategy statement. Attention was drawn to an increase of £143 million in the Fund's net assets over the 2018-2019 year, which brought the value of the Fund to over £2 billion.

He noted that the costs of managing investments had been higher during the 2018-19 financial year as it had been a period of high turnover in companies managing equity assets and associated investments, with accompanying costs. He went on to note that this was mainly following the transfer of most assets from the Fund's appointed managers, namely Fidelity and Veritas, to the Wales Pensions Partnership for joint investment. He noted that, in the long term, it was anticipated that the fees would fall and returns, if not improved, would be more robust due to the dispersal of investment risk.

The Deloitte Financial Audit Engagement Leader submitted the ISA 260 audit report. He noted that the Auditor General intended to issue an unqualified audit opinion on the financial statements.

The following main observations were made:

·         In terms of the equalisation of Guaranteed Minimum Pensions (GMPs) in relation to the McCloud case, this was not a material sum when considering the Fund in its entirety.  He was therefore satisfied that there was no need to amend any aspect of the accounts;

·         No misstatements had been corrected in the financial statements;

·         Assurance had been received from the external auditors at Carmarthenshire County Council, the host authority for the Wales Pension Partnership Joint Committee; and there were no matters arising;

·         That most of the recommendations raised in previous years had been addressed;

·         That the accounts were of an excellent standard.

A member drew attention to the fact that the Council as an employer contributed £22.4 million towards the cost of pensions. The member noted that the Fund was healthy and well administered. The member enquired as to whether the triennial actuarial valuation reduced the Council's contributions as an employer, thus reducing the burden on taxpayers. In response, the Head of Finance noted that he was confident that improvements had been seen in terms of investments, it having been a positive three-year period without market decline. He expanded to note that the situation of the triennial actuarial valuation would be confirmed on the day of the annual meeting of the Pensions Fund on 24 October 2019. He noted that there was no way to predict the actuary's findings, but that he was hopeful that the valuation would lead to equal or lower contributions for the Council as an employer.

A member noted that the income of £14 million on the Fund's assets, which was 0.7% of the Fund's value of £2 billion, appeared low at first glance, considering the level of the dividend. In response, the Head of Finance explained the increase in the investments' capital value had to be considered along with the income from dividends. Expanding on the point, he noted that it was possible to invest in vehicles which would yield a high dividend, but that the value of the asset on the stock market might not increase. He noted that the income, along with the increase in the investments' value, meant an increase of £123 million, around 7% of the Fund's value, which was quite acceptable for the year.

In response to further enquiries by the member, the Head of Finance noted that asset managers were not given instructions about the exact investment, but that the intention was to maintain the Fund's value rather than to receive income via dividends for re-investment. He explained that investments of this kind were in keeping with the long term business plan, in which the value of investments would increase over time.

   RESOLVED:

(i)   To approve the Gwynedd Pension Fund Statement of Accounts 2018/19 (post-audit);

(ii)   To accept the Deloitte 'ISA260' audit report on behalf of the Auditor General for Wales;

(iii) To authorise the Head of Finance Department and the Chair of the Committee to sign the “letter of representation” in relation to Gwynedd Pension Fund accounts and submit it to the Auditor General for Wales.