Agenda item

An updated version of the draft accounts was circulated to Members.

The Head of Business, Finance and Pensions presented the report. He said there were two main changes from the earlier draft of the accounts: an additional commitment of $US300m for the pooled infrastructure fund, referred to in note 22, and an actuarial adjustment of £16k found during reconciliation which had not been entered into the accounts. Next year the accounts had to be submitted by 31^st May. The value of the assets was now £3.8bn and had increased by £0.5bn over the year. The unusually high level of transfers in referred to in paragraph 4.2(f) of the report was the result of the merger of several colleges in the area.

A Member expressed concern about investment costs. He noted that the majority of the Fund’s income came in the form of employer and employee contributions, yet it had spent £17.5m on investment costs plus £2m in transaction costs. It seemed therefore that the Fund had spent about £20m to earn an investment income of £28m. The Head of Business, Finance and Pensions suggested that the investment costs might seem to be good value when compared with the £0.5bn increase in the value of its assets that the Fund had achieved over the year. The Member asked how was it possible to be sure that this was the result of the activity of the Fund’s investment managers rather than of a general rise in asset values; manager’s fees rose in line with the value of the assets and not as a result of any work they had done. He noted that manager’s performance fees had actually dropped from £4.9m to £1.8m, which he presumed was because they had not performed as well this year as the previous year. The Head of Business, Finance and Pensions referred to the table at the foot of page 23 of the accounts, which set out the market sensitivity for the various asset classes and said that managers were paid not only to increase returns but also to protect the assets of the Fund. The Member accepted that the expenditure on investment fees would be good value, if there was no alternative means of achieving the same result. He suggested that the Investment Panel should examine investment fees. The Investment Manager said that the performance fees for 2013/14 included performance fees from previous years that had not been disclosed, so overall there had been an increase in transparency.

A Member observed Note 2 to the accounts reported an increase of 21 in pensioners of the Fund, yet the accounts showed an increase in £7m in pension benefits. The Investment Manager said she would report back about this.

A Member asked what was being to trace out-of-touch members who might have a claim on the Fund. The Pension Benefits Manager said that there was an ongoing project to update membership records which had incomplete data. A tracing agency was used to try to trace these members, who were entitled to a refund of contributions. 2100 were outstanding in 2011 when the project started; this had been reduced to about 900. The target completion date for the project was 2016, though staff resources were very tight.

RESOLVED to note the Draft Statement of Accounts for the year to 31 March 2015 for audit.