To submit:
(i)
the
report of the Head of Finance
(ii)
ISA
260 report of the External Auditors
Minutes:
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.
Supporting documents: