Public Employees Contributory Retirement Scheme Membership of the Committee of Management

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A decision made 20 November 2009 regarding: Public Employees Contributory Retirement Scheme Membership of the Committee of Management.

Decision reference: MD-C-2009-0089
Decision Summary Title :	Public Employees Contributory Retirement Scheme Membership of the Committee of Management		Date of Decision Summary:	19 November 2009
Decision Summary Author:	Senior Human Resources Manager		Decision Summary: Public or Exempt? (State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:	N/A
Written Report Title :	Public Employees Contributory Retirement Scheme Membership of the Committee of Management		Date of Written Report:	30/10/09
Written Report Author:	Senior Human Resources Manager		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Public Employees Contributory Retirement Scheme (PECRS) Membership of the Committee of Management
Decision(s): The Chief Minister – (a) approved the Employer nominees to the PECRS Committee of Management for the period 1st January 2010 to 31st December 2012, and (b) approved the report and proposition entitled, ‘Public Employees Contributory Retirement Scheme Committee of Management: Membership’ and requested that it be lodged ‘au Greffe’ forthwith and with a view to securing the earliest practical date for debate.
Reason(s) for Decision: Previous three year period of appointment complete on 31st December 2009.
Resource Implications:
Action required: Senior Human Resources Manager is requested to arrange with the States Greffe for the Report to be lodged ‘au Greffe’ as soon as possible for consideration on the next available date.
Signature:		Position:
Date Signed:		Date of Decision (If different from Date Signed):

Public Employees Contributory Retirement Scheme Membership of the Committee of Management

PROPOSITION

PUBLIC EMPLOYEES CONTRIBUTORY RETIREMENT SCHEME COMMITTEE OF MANAGEMENT: MEMBERSHIP

THE STATES are asked to decide whether they are of opinion -

to approve, in accordance with Regulation 3(2) of the Public Employees (Contributory Retirement Scheme) (General) (Jersey) Regulations 1989, the appointment of the Committee of Management, for a period of three years commencing 1st January 2010 as follows -

Employer Representatives

Mr Ian Black, Treasurer of the States

Mr M J Pinel, Head of Employee Relations

Mr S M Patidar

Mr J Rosser

Ms L Dennis

Employee Representatives

Mr G Birbeck

Mr J H Lees

Mr J T Noel

Mr M D Orbell

Mr A Tadier

Miss B Ward

Mr M Johnson

CHIEF MINISTER

REPORT

The Regulations provide that a Committee of Management will be established which shall have and exercise all such powers, authorities and discretion as are vested in it by the Regulations governing the scheme.

In previous years two States members were nominated for membership of the Committee of Management, however, the Chief Minister recently asked the Comptroller and Auditor General whether it is wise to appoint members of the States Assembly to serve as members of the Committee of Management of PECRS.

In response the Comptroller and Auditor General published a short report (available on the Comptroller and Auditor General’s website), namely Public Employees Contributory retirement Scheme, Composition of the Committee of Management, 2009.

The report includes the following statements:-

“In practice, I understand that it has been normal practice for the people nominated by the Council of Ministers and the Treasury & Resources Department as “employer” nominees to include two members of the States Assembly.

Whether it is appropriate for members of the States Assembly to be nominated in this way as members of the Committee of Management must in large part depend upon whether the responsibilities of members of the States Assembly are in some way in conflict with responsibilities of members of the Committee of Management of PECRS.

In the late 1990s some question arose over the status of the Committee of Management. Whilst it is clear that the fund of PECRS was, and remains, a fund of the States, members of the Committee of Management were concerned about the status of the Committee and their obligations and liabilities of members of the Committee. Consequently, legal advice was sought from Olsen Backhurst Dorey. Advocates, legal advisers to PECRS, and the advice concluded in the following way:-

“We have reached the conclusion that, were the Royal Court ever to be the arbiter of the question of the Committee’s legal status, it would hold that the Committee is in effect a Board of Trustees.”

The implication of this analysis is that, with the support of the 1997 advice, members of the Committee of Management properly regard themselves as being in the position of trustees of PECRS.

As such, it is there obligation under trust law to ensure that the affairs of PECRS are managed in accordance with the terms of the Trust (i.e. the scheme and regulations) in the interests of the beneficiaries (i.e. the members of the scheme).

This analysis of the responsibilities of members of the Committee of Management suggests that there may well be a conflict between the responsibilities of the members of the States Assembly and the duties of a member of the Committee of Management.

I presume that members of the States Assembly have a duty to oversee the affairs of the States and make decisions according to their view of the interests of the people of the Island at large. This includes oversight of the decisions made by the States as employer in managing their relationship with employees and also oversight of the costs of employing people.

Prime facie this responsibility will conflict with the duty of a member of the Committee of Management to act according to the terms of the Trust in the interests of all the beneficiaries. Further, this conflict is direct and fundamental potentially affecting all the business of the Committee of Management.

In the particular circumstances of the PECRS Committee of Management, it is apparent that members of the States Assembly who are nominated to serve as members would face a conflict between their duties as members of the Assembly and their duties as members of the Committee of Management.

In my view it would be wise to avoid creating that conflict. In other words, it would be wise to regard members of the Assembly as ineligible for nomination as members of the PECRS Committee of Management.”

Consequently, the Chief Minister has taken the decision to no longer nominate members of the States Assembly to the PECRS Committee of Management.

A similar question was asked of the Comptroller and Auditor General in relation to the Treasurer of the States. His response is as below:-

“The growing practice in pension funds on the mainland is for the Finance Director of the sponsoring employer to be regarded as inappropriately conflicted for him to be a trustee of a pension fund. The reason is that the Financial Director has responsibility for the financial affairs of the employer which may well conflict with the interests of the trust and scheme members. This has become more important in recent years as the significance of scheme under-funding and its materiality to sponsoring employers has grown.

In the case of the States and PECRS, the question is more complicated.

PECRS is a fund of the States (i.e. not independent of the Stares) and is in this sense a part of the Treasurer’s responsibility. This would lead one to accept the Treasurer as a member of the Committee of Management.

However, I think it is clear that the Treasurer’s responsibility for the financial affairs of the States could well be at odds with the duty of members of the Committee of Management to act as quasi-trustees in managing the fund. For example, I think it is easy to see circumstances in which the States may take a view of investment policy which is inappropriate for the fund (e.g. the States may want a riskier investment policy to maximise the chance of long term capital growth while trustees may want to adopt a more cautious approach.

On this basis, I would be inclined to doubt the wisdom of the Treasurer being a member of the Committee of Management.”

As a consequence of this advice, the Treasurer of the States has decided to stay on the Committee of Management for one more year only, until the Treasury and Resources Minister can recommend a replacement.

Under the Regulations the membership comprises six employer representatives and six member representatives or such greater equal number as may be determined from time to time by agreement between the Chief Minister and the representative associations. However, the proposed membership is to be five on the employer side and seven on the employee side.

Two of the employer representatives are chosen by the Chief Minister and these are:-

Mr M J Pinel, Head of Employee Relations
Ms L Dennis

The remaining three of the employer representatives are chosen by the Minister for Treasury & Resources and these are:-

Mr Ian Black, Treasurer of the States
Mr S M Patidar
Mr J Rosser

The member representative nominations have been submitted by the Public Employees Pension Scheme Joint Negotiating Group.