Councillors told about partial recovery of pension fund and reserves
SIC councillors were told this morning that the value of the local authority’s pension fund and oil reserves had staged a partial recovery in recent months.
A new-style report designed to give members a six monthly update on the performance of the reserves showed that the pension fund had slumped from £251 million to £231 million in the first six months of the current financial year.
But acting head of finance Hazel Sutherland told members of the executive committee that a better stock market performance in recent months had seen the pension fund and reserves bounce back, as reported in The Shetland Times.
The pension fund stood at £253 million last week. Councillors also heard that if every staff member retired tomorrow, the fund would be able to meet 91 per cent of pensions. That is up from 88 per cent last year.
The oil reserves slipped from £223 million to £185 million in the first six months of 2011/12, of which £20 million resulted from the SIC drawing down cash to support its spending. Again the improved market conditions saw the reserves recover, standing at £196 million last week.
Councillors meet next Thursday to consider proposals to slash between £18 million and £21 million from annual spending in the next two years, on top of £8 million savings already made this year.
Trade unions have warned that the SIC is hacking too much out of its budget too quickly, and needs to step back and examine carefully the potential damage such savage cuts could cause. A detailed study of the Shetland economy will not be completed until the spring.
SIC political leader Josie Simpson claimed the latest figures illustrated the uncertain financial world everyone was now living in.
He said it “strengthens our case that we have a lot to do on 9th February to get our expenditure in check”, adding: “We’re going to have a tough day on the 9th. We have to watch we don’t stifle our local economy [by doing] too much at one time.”
Some councillors queried whether a change of tack on stock market investments would be merited. Allison Duncan wondered whether, in the light of their poor performance, switching from equities to bonds might make sense.
Accountant Colin Bain said equity shares were generally viewed as the safest bet, and Ms Sutherland reminded councillors that while investments fluctuate in good times and bad, the SIC takes a long-term view of the stock market performance.
Councillor Jonathan Wills said that because investors are being paid to track the performance of the stock market rather than picking and choosing companies to invest in, they were not having to manage the SIC’s money day-to-day. He would “like to see those fees slashed and the money used for other things, like neighbourhood support workers, for example”.