The fortunes of the Scottish Borders Council Pension Fund with assets now totalling in excess of £700 million are light years away from the local authority's own financial position - outstanding capital debt of £194 million requiring annual interest payments of £11 million.
Annual accounts for the pension fund in 2018/19 show it had another bumper year, achieving a 7.6 per cent return on investments. It means the pension coffers are now bulging with a £80 million surplus.
The extreme good health of the Scottish Borders local government pensions fund can be seen when its 114% ratio of funding is compared with national averages.
A recently compiled nationwide report on the state of public pension funds showed: "Deficits have fallen for most funds, although future service contributions are under pressure. Funding ratios have improved from 79% at the 2013 valuation to 85% three years later. The LGPS (Local Government Pension Scheme) is a high-performing scheme, delivering average returns of 10.7% over the past five years."
The annual report for the SBC scheme has this to say on Investment Assets: "The value of the Pension Fund has continued to increase with strong returns coming from global equities. The Fund has progressed well with the ongoing implementation of the Strategic Asset Allocation approved in September 2018. Overall the Fund grew by 7.6% during 2018/19, marginally under-performing its benchmark by 0.1%. The overall fund value increased to £732.9 million, an increase of £48.3 million."
A management commentary on key highlights for the financial year is equally upbeat. It states: "
£732.9m net
assets, an increase of £48.3 million on 2018/19 Strong performance return of 7.6%
for 2018/19 and 11.3% for the rolling 3 year period Fund continue to meet its
strategic investment return benchmark Continued sound governance of the Fund
and engagement of Members in the training programme 10,961 Members, an
increase of 294 on previous year.
Current
membership of the Fund is 10,961 of which 4,376 are actively contributing and
3,707 are in receipt of pension benefits."
However, there is one cautionary note embedded in the commentary. The report warns: "There has
been a continuing rise in the number of pensioners. Since 2014 the total
membership has increased by 1,111 members (a 12% increase overall).
"During this
period the number of pensioners and their dependants has increased by 28%, and
the number of active contributing members has increased by 0.2%. This presents
a challenge to the Fund to ensure that it manages its future cash flows
effectively as the fund matures. This was included as part of the
considerations when undertaking the full investment review."
Trustees of the fund are also told: "The outcome
of the 2017 valuation was a funding level of 114% an improvement in the
position assessed at 2014 of 101%. The funding position equates to a surplus of
over £80 million and the advice of the actuary is that this surplus be used over time
to offset increases in the primary employer’s contribution rate of 20.6%."
Management expenses of more than £6 million for the year are outlined in the report. These included investment management expenses of £5.848 million, administrative costs of £391,000 and 'oversight and governance costs of £289,000.
Scottish Borders Council's own accounts for 2018/19 will be made public later this month. Councillors who are members of the Opposition group claimed recently the local authority was "maxing on its credit" so far as capital borrowing from the Public Works Loans Board was concerned.
The claim followed confirmation that SBC had borrowed a further £10 million from PWLB to re-schedule other loans. But the council itself said capital borrowing was 'broadly in line with debt levels for Scottish local authorities'.
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