East Riding Council's pension fund drops in value

East Riding Council’s pension fund dropped in value by £293.1m to around £4.76bn by March as councillors heard the financial year’s end coincided with coronavirus’ “worst impact point” on markets.

East Riding Council’s Pensions Committee heard the impact of coronavirus on sectors including retail had had a “significant” effect on the fund’s value.

The £293.1m fall is equivalent to a drop of around 5.8 per cent in the value of the fund which has 38,761 members paying into it.

The council’s head of investments Tom Morrison told the committee the pandemic had “accelerated” shifts from high street to online retail and other economic trends, increasing financial risk.

He added officers were keeping a “close eye” on movements in property markets as well as on investments linked to companies with office space as more people work from home.

A total of 317 organisations are active members of the fund, including 255 schools, academies and town and parish councils.

There are also 57 ‘admission bodies’ with interests including the Humber Teaching NHS Foundation Trust, The Deep and Hull and Goole Port Health Authority.

The NHS trust provides mental health, learning disability, community, children’s and primary care services and employs around 3,000 staff.

Mr Morrison said a near halt in market trading in March when the full extent of coronavirus was becoming clear meant valuing some investments proved more difficult.

Mr Morrison said:

“Transaction activity dried up in March, meaning there was very little for valuers to base evidence on.

“Markets have since recovered to some extent, but the issue we had with year end accounting was that it came at the worst impact point of coronavirus on trading.

“It’s become a little clearer more recently, but there are still challenges in retail investments for instance for obvious reasons.

“Clearly over the last few years we’ve seen shifts away from retail, coronavirus has accelerated this.

“There’s a lot of people working from home and companies are re-evaluating their office space.

“There’s a significant risk for funds that have stakes in companies concerned with office space because of changes in property values.

“We’re forward looking in our investments but it’s been a very difficult time over the last few months and we can’t change the structure of our portfolio quickly.

“Also sites such as retail warehousing and others more suited to online shopping are in high demand, they’re becoming more expensive.

“It’s something we’re keeping a very close eye on.”

Committee Chair Cllr Jane Evison said:

“There’s a number of significant issues here in what is a very volatile market.”

A report submitted to the committee stated that despite challenges from coronavirus, the fund continued to be managed in a “cost effective” way, with running costs equalling 0.17 per cent of its value.

The report stated:

“The key challenge for the fund in the year ahead is to maintain the strong investment performance in an increasingly volatile market.”

The average pension paid out by the fund by the end of March was £4,547.70, or £87.22 a week.

The fund paid out a total of £192.6m in the financial year from March 2019 to March this year.