Agenda item

5.1

Mr Hall presented the report. He said that the group accounts had been circulated at the meeting because they had not been ready for distribution with the agenda.  Members were invited to raise any queries with officers in advance of the next meeting of this Panel.

5.2

Mr Lambeth drew members’ attention to three points. Firstly the format had changed because it did not have the comparative figures of last year. Secondly, there was an extra requirement that heritage assets be included in the accounts. Finally, the Housing Revenue Account (HRA) was to be self financing from April 2012. A significant proportion of the outstanding HRA debt had been repaid by the government on 28 March 2012; this was shown in the accounts and had an effect on the borrowing figures.

Pension Fund

5.3

The Chair said that the Actuary has assumed that the Fund’s assets will generate a return of 6.1% per annum Mr Hall said that this was a reasonable long term assumption. It was difficult to predict how commodities would perform in volatile markets and the current uncertainty in the Eurozone would have an impact on global equity markets. However, he said that the prediction was consistent with asset performance. The Chair then asked at what point the predictions of the actuaries would be considered. Mr Hall said that officers and members do not always actively accept what actuaries are predicting. The Council have fund advisers in Hyman Robertson who offer advice, performance of fund managers is scrutinised and the performance of Lewisham’s fund is compared with other similar local authority pension funds.  Recently, Lewisham withdrew money from a manager because of underperformance.

5.4

The Chair asked why the pensions liabilities had increased over the year ending 2011/12 by 10%. He asked whether it was due to early retirement.  Mr Lambeth agreed and said that there were comparative figures at page 77 of the accounts. He said that other differences were the past service costs adjustment and technical changes, but there was not one major cause. The Chair said that a 10% increase was large and he asked that a breakdown of this increase be submitted to the next meeting of this Panel so that members can have an understanding of the reasons for the increase.                                                                        

ED R& R

5.5

The Chair asked about investment analysis in paragraph 5. He asked officers to send members details of how global securities are diversified.

5.6

The Chair asked why the decision had been taken to change from an active to a passive fund management. Mr Hall said that the Pensions Investment Committee had been considering moving to passive management over the last 18 months. A high proportion of the portfolio is in equities. The active fund management requires higher returns and so entails higher risks. Active management comes with higher transaction costs and higher fees. A passive fund is less risky and the fees are substantially lower. Active funds require more officer time because performance must be managed closely, passive funds require less scrutiny. The decision to move to a passive fund was reasonable and made with the support of legal officers and Hyman Robertson.

RESOLVED

that the report and the appendices be noted.