Agenda item

Surrey County Council, as administering authority for the Surrey Pension Fund, is responsible for the delivery of benefit promises made to members of the Surrey Pension Fund. It achieves this by setting objectives and goals with varying timeframes. Risks lie in failing to meet the intended goals.

Risks that are established as an issue must be identified and evaluated via a risk register. The risks must be prioritised with existing controls or new controls

implemented to mitigate the risks. This should be recorded in a risk register, which needs monitoring on a quarterly basis.

Declarations of Interest:

None.

Key Points Raised During the Discussion:

1.    The Strategic Manager – Pension Fund & Treasury introduced the item, highlighting the addition of a new column which shows the net risk score after mitigating actions have been taken into account.

2.    The Strategic Manager – Pension Fund & Treasury informed the Board that the “pensioners living longer” risk had been reassessed and now was rated the number one risk to the Pension Fund.  The net risk score also highlighted the negligible impact that mitigating actions could have on this risk.  Officers agreed with the Board that the impact on employers of pensioners living longer should have been 4 rather than 5 as the rating scheme was 1-4.  However, this remained the number one risk.

3.    There was some debate about the ranking of pensioners living longer at the top of the risk register as it was felt by some that there was a clear trend for demographics while markets remain unstable.  While the implications of demographic change could be a strain, mitigating factors such as a later retirement age and increased contribution rates could impact on this.  The Surrey Pension Fund Advisor also mentioned that 2012 was the first year since the Second World War when there was no improvement to longevity.  It may be that the trend of lengthening life spans may have reached its peak.  The Chairman suggested that the issue be brought up with the Actuary and considered at the next meeting.

4.    Officers highlighted the introduction of the new risk “rise in ill health retirements impact employer organisations”.  As no decision on mitigating actions had yet been taken on this, the net risk score was no different to the total risk score.

Ian Perkin joined the meeting.

5.    Some concern was expressed about the potential for complacency where risks have been downgraded to amber following mitigating actions.  However, it was stressed that the Board would continue to look at what further mitigating actions could be taken to address risks.

6.    There was some discussion about the necessity for risk 11 “investments markets to fail to perform in line with expectations” to be included in the register given the presence of other more specific investment risks.  The Mercer representative suggested that risk 11 related to the triennial full actuarial valuation.

7.    It was suggested by a Member that the financial risk range would be valuable information.  The Mercer representative agreed that this could be easily calculated for certain risks and would be done as part of the actuarial process.  The Chairman asked that the financial risk range be represented for the residual red risks.  The Vice-Chairman suggested that risks could be quantified in monetary terms during discussions.  The Chief Finance Officer suggested that the benefit of presenting such information would be to enable Members to consider the cost of mitigating actions against the financial risk to the Council.

8.    It was suggested that the risk of increases to employer contributions following the actuarial valuation be included in the register.  The Strategic Manager – Pension Fund & Treasury informed the Board that the full actuarial valuation would come to the Board in February 2014.  The risk of increases to employer contributions could be included within the risk register.

9.    There was a discussion about Risk 3 “failure to take difficult decisions inhibits effective Fund management”.  It was felt that the Board was not likely to shy away from making difficult decisions, particularly at this point in the election cycle.  However, it was accepted that the risk may increase as the next Council elections approach.  The Chairman agreed that the Board does have significant checks and balances, with excellent officer support, consultancy advice and varied Member experience.  However, it was also stated that humans are able to make errors and that the Board should be wary of optimism bias.

Actions/Further Information to be Provided:

      i.        To further discuss the risk of pensioners living longer at the next meeting of the Surrey Pension Fund Board (Action Review ref: A9/13).

     ii.        The financial risk range to be represented for the residual red risks (Action Review ref: A10/13).

    iii.        The risk of increases to employer contributions following the actuarial valuation to be included in the risk register (Action Review ref: A11/13).

Resolved:

That the Risk Register be NOTED, and the suggested amendments/additions be considered by officers.

Next Steps:

The Risk Register will be reported to the Board on a quarterly basis.