Agenda and draft minutes

Pension Fund Sub-Committee - Tuesday, 29th September, 2020 6.30 pm

Venue: Online - Virtual Meeting. View directions

Contact: Amrita Gill  Email: amrita.gill@lbhf.gov.uk

Link: View live stream on YouTube

Items
No. Item

1.

Minutes of the previous meeting pdf icon PDF 313 KB

To approve the minutes of the meetings held on 23rd June and 31st July 2020.

 

 

Additional documents:

Minutes:

The minutes of the meetings held on the 23rd of June and the 31st of July 2020 were agreed as an accurate record.

 

2.

Apologies for absence

Minutes:

Apologies for absence were received from Councillor Rebecca Harvey.

 

3.

Roll Call and Declarations of interest

To confirm attendance, the Chair will perform a roll call. Members will also have the opportunity to declare any interests.

 

If a Councillor has a disclosable pecuniary interest in a particular item, whether or not it is entered in the Authority’s register of interests, or any other significant interest which they consider should be declared in the public interest, they should declare the existence and, unless it is a sensitive interest as defined in the Member Code of Conduct, the nature of the interest at the commencement of the consideration of that item or as soon as it becomes apparent.

 

At meetings where members of the public are allowed to be in attendance and speak, any Councillor with a disclosable pecuniary interest or other significant interest may also make representations, give evidence or answer questions about the matter.  The Councillor must then withdraw immediately from the meeting before the matter is discussed and any vote taken.

 

Where Members of the public are not allowed to be in attendance and speak, then the Councillor with a disclosable pecuniary interest should withdraw from the meeting whilst the matter is under consideration. Councillors who have declared other significant interests should also withdraw from the meeting if they consider their continued participation in the matter would not be reasonable in the circumstances and may give rise to a perception of a conflict of interest.

 

Councillors are not obliged to withdraw from the meeting where a dispensation to that effect has been obtained from the Standards Committee.

Minutes:

The Chair carried out a roll call to confirm attendance. Attendance is listed above. There were no declarations of interest. 

 

NOTE: The Chair agreed to reorder the agenda. Items 11, 12, and 13 were given priority. 

 

 

4.

Exclusion of the Public and Press

The Committee is invited to resolve, under Section 100A (4) of the Local Government Act 1972, that the public and press be excluded from the meeting during the consideration of the following items of business, on the grounds that they contain the likely disclosure of exempt information, as defined in paragraph 3 of Schedule 12A of the said Act, and that the public interest in maintaining the exemption currently outweighs the public interest in disclosing the information.

Minutes:

The Sub-Committee agreed, under Section 100A (4) of the Local Government Act 1972, that the public and press be excluded from the meeting during the consideration of Items 12 and 13, on the grounds that they contain the likely disclosure of exempt information, as defined in paragraph 3 of Schedule 12A of the said Act, and that the public interest in maintaining the exemption currently outweighs the public interest in disclosing the information.

5.

Exempt Minutes of the Previous Meeting

To approve the exempt minutes of the meeting held on 31st July 2020.

 

Minutes:

The exempt minutes of the meeting held on the 31st of July 2020 were agreed as an accurate record.

 

6.

Pensions Administration Update

This report provides an update on the LGPS Pensions Administration Service.

Minutes:

David Hughes (Director of Audit, Fraud, Risk and Insurance) presented the report and gave a summary of the key points. Members discussed the report.

 

RESOLVED

That the Sub-Committee noted the report.

 

7.

Quarterly Update pdf icon PDF 247 KB

This paper provides the Pension Fund Sub-Committee with summary of the Pension Fund’s overall performance for the quarter ended 30 June 2020.

 

Additional documents:

Minutes:

Tim Mpofu (Pension Fund Manager) presented the report and gave a summary of the key points.

 

Michael Adam asked if officers had any indication of what the yield on the cash balances would be. Tim Mpofu said there was in the region of £5 to £10m in cash at any one time so the yield would be around £50k.

 

Michael Adam asked if another £40-50k a year was worth it given the counter-party risk. Tim Mpofu said it was low risk and only for short periods (with daily dealing).

 

Michael Adam asked for a breakdown of where the fund was currently invested. Tim Mpofu said he could share the fact sheet but generally it was in Triple A rated, lowest risk bond funds.

 

The Chair asked if the committee approved the recommendation to move cash balances. The sub-committee agreed moving cash balances to Northern Trust’s Conservative Ultra Short Fund.

 

RESOLVED

1.    That the Sub-Committee noted the update.

2.    That the Sub-Committee approved moving cash balances to Northern Trust’s Conservative Ultra Short Fund

8.

Annual Report pdf icon PDF 132 KB

This report presents the draft Pension Fund Annual Report and Statement of Accounts for the year ended 31 March 2020.

Additional documents:

Minutes:

Matt Hopson (Strategic Investment Manager) presented the report and gave a summary of the key points. He noted that the annual report was still draft because the preparation of the final set of accounts had been delayed by the Covid-19 pandemic.

 

RESOLVED

1.    That the Sub-Committee approved the Pension Fund Annual Report for 2019/20, subject to any necessary final alterations made by the Director for Treasury and Pensions in consultation with the Chair.

2.    That the Sub-Committee noted the draft Pension Fund Accounts for 2019/20 and PIRC Universe Overview.

 

9.

Responsible Investment Statement pdf icon PDF 134 KB

The Sub-Committee is requested to comment and approve the updated Responsible Investment Statement.

Additional documents:

Minutes:

Tim Mpofu (Pension Fund Manager) presented the report and gave a summary of the key points.

 

The Chair said he was really impressed with the progress in this area and thanked officers for their hard work. Councillor PJ Murphy agreed and said it would be useful for the committee to understand both the quick wins and the challenges moving forward. Tim Mpofu said officers would look into this and feedback to the committee.

 

ACTION: Tim Mpofu

 

Michael Adam asked if this would be expanded in future with more granular comments from fund managers – including how they measured and implemented ESG. He also suggested fixed income could also be incorporated in future.

 

Tim Mpofu said it would be expanded – and while the impact of fixed income was difficult to measure it could potentially be included in future. This report was the ‘start of the journey’.

 

RESOLVED

That the Sub-Committee approved the updated Responsible Investment Statement.

 

10.

Transition Report pdf icon PDF 132 KB

The Sub-Committee is requested to note the transition completed on 21st August 2020.

Additional documents:

Minutes:

 

Matt Hopson (Strategic Investment Manager) presented the report and gave a summary of the key points. He noted that the transition had been successfully completed and the overall cost was in line with expectations.

 

RESOLVED

That the Sub-Committee noted the report.

 

11.

Supreme Court Decision pdf icon PDF 160 KB

The purpose of this report is to provide a briefing of the recent Supreme Court ruling on the Local Government Pension Scheme Investment Guidance and provide details of potential implications for LGPS Funds.

 

Minutes:

Phil Triggs (Director of Treasury and Pensions) presented the report and gave a summary of the key points.

 

The Chair asked if the decision would have an impact on pooling. Phil Triggs said it might – the decision suggested local authorities could exercise more sovereign power, but that may change in future if the Government passed additional legislation.

 

RESOLVED

That the Sub-Committee noted the report.

 

12.

McCloud Consultation pdf icon PDF 286 KB

The Sub-Committee is requested to note the report and the anticipation that further staff resources will be required in due course, with progress updates brought to future meetings.

Additional documents:

Minutes:

Phil Triggs (Director of Treasury and Pensions) presented the report and gave a summary of the key points.

 

Councillor PJ Murphy asked if this meant each beneficiary would get a statement with two valuations and be asked to choose between them. Phil Triggs agreed but said the detail of any administrative changes would be down to the Head of Pensions Administration.

 

Michael Adam asked if the Government had set out a timeframe for implementation. He also asked if there was an indication of the impact on liabilities. Phil Triggs said the actuary was prudent when anticipating this decision and made allowance for extra liability and made consideration in their calculations. The contribution rates from the 1st of April took extra liability into consideration.

 

The Chair asked for regular updates at future meetings.

 

RESOLVED

That the Sub-Committee noted the report and requested progress updates at future meetings.

 

13.

Investment Strategy Review pdf icon PDF 145 KB

This paper and associated appendix provides the Sub-Committee with more detailed information on three asset classes that are being closely monitored by the Pension Fund’s advisors.

Additional documents:

Minutes:

 

Kevin Humpherson (Deloitte) presented the report and gave a summary of the key points.

 

Councillor Matt Thorley asked if purchasing ground rents meant residential or commercial ground rents. Kevin Humpherson clarified that it was commercial only.

 

Councillor PJ Murphy asked if purchasing ground rents would overlap with the current property fund. Kevin Humpherson said ground rents were less exposed to property market price – default on a ground rent was very unlikely. But there was a degree of overlap because the underlying market was the same.

 

Councillor Murphy asked if a property needed a tenant for ground rent to come in. Kevin Humpherson said the level of collateralisation gave protection.

 

The Chair noted the mention of reputational risk around leasehold and freehold issues and asked if that could affect the commercial sector given the Governments upcoming planning reforms. Kevin Humpherson said the commercial sector was completely different to the residential sector and he would be surprised to see changes.

 

The Chair asked what the next steps were. Matt Hopson (Strategic Investment Manager) said officers would bring back a definitive strategy for a ground rent fund with a social supported housing fund – and provide a shortlist of suggested managers at the next meeting. Officers noted that interviews with managers may have to take place outside of the arranged schedule of meetings. The Chair agreed.

 

RESOLVED

1.    That the Sub-Committee noted the report and agreed that asset allocations should be taken to the next stage as a part replacement for the Fund’s Inflation Protection portfolio with M&G.

2.    That the Sub-Committee agreed an allocation to the LCIV Absolute Return Ruffer fund.