East Riding pension fund recovers but uncertainty remains
The value of East Riding Council’s pension fund has recovered from a £294m hit it took at the onset of the coronavirus pandemic in March but officers said uncertainty remains.
The value of East Riding Council’s pension fund has recovered from a £294m hit it took at the onset of the coronavirus pandemic in March but officers said uncertainty remains.
East Riding Council’s Pensions Committee heard the fund was currently valued at around £5.6bn.
Council finance lead Julian Neilson said the value had recovered from its position at the end of the last financial year in March when it fell to almost £4.8bn.
But the officer added all local authorities all faced uncertainty over their investments going forward given the pandemic’s ongoing impact on financial markets.
It comes as councillors signed off on an annual statement of pension fund accounts and audits today (Friday, December 11).
Mr Neilson said auditors had confirmed statements on accounts were a “true and fair” view of their value.
The authority administers the fund on behalf of its 317 active members which include schools, academies, town and parish councils.
The fund has 38,761 members paying into it and there are also 57 ‘admission bodies’ with interests including The Deep and local NHS trusts.
Equities, or stocks and shares, make up about 55 per cent of the fund, with bonds and cash accounting for 19 per cent and ‘alternatives’ such as property making up 26 per cent.
The council considers equities to be the riskiest investment, with bonds regarded as safer as investors often buy them during economic downturns.
The fund’s value has grown in the last ten years from £2.6bn to the current £5.6bn.
Mr Neilson said:
“The sharp drop in the fund’s value was due to the coronavirus pandemic and it’s impact on financial markets.
“We’re likely to see volatility in markets in the medium term, uncertainty in the markets creates uncertainty in the value of the fund going forward.
“That’s an issue all local authorities are facing at the moment.”
Council head of investments Tom Morrison said the roughly 5.8 per cent drop in the fund’s value came as the government closed down parts of the economy as part of intial coronavirus measures, spooking investors.
He added 2020 was the first time there had been negative returns on investments since the financial crisis of 2008 and subsequent recession.
Mr Morrison said:
“2019 was on track to be a great year before the pandemic hit.
“But government measures in response to coronavirus including closing parts of the economy down left investors very concerned.
“Governments have since taken action to prop up economies by pumping money into financial markets, ours creating the furlough scheme and so on.
“Investors saw that governments and central banks weren’t going to let economies collapse and that gave them a comfort blanket so they could look forward to returns and growth.”