Agenda and minutes

Apologies for absence were received from Councillor Laura Janes.

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.

There were no declarations of interest.

To approve the open and exempt minutes of the meeting held on 24 January 2023 as an accurate record.

Discussion of the contents of the exempt minutes will require passing the proposed resolution at the end of the agenda to exclude members of the public and press.

RESOLVED

The minutes of the meeting held on 24 January 2023 were approved as accurate records of meeting.

Marian George (Independent Advisor) requested that all future minutes be proposed for approval only at regular meetings, not extraordinary ones.

ACTION: Committee Coordinator

CHANGE OF AGENDA ORDER 

The Chair proposed, and it was unanimously agreed, to bring Items 7, 6 and 8 forward on the agenda, in this respective order.  

This item presents the Triennial Valuation Results for information and the Funding Strategy Statement for approval.

NOTE: The triennial valuation papers were added to the supplementary agenda on 27/02/2023

The final versions of the triennial valuation report and funding strategy statement were uploaded for reference on 28/04/2023

Sian Cogley (Pension Fund Manager) introduced the report presenting the draft Funding Strategy Statement (FSS) produced by the Fund’s actuary (Hymans Robertson), following the 2022 triennial Actuarial Valuation.

The purpose of the FSS was to establish a clear and transparent fund-specific strategy that would identify how employers’ pension liabilities were best met going forward and take a prudent, longer-term view of funding those liabilities.

The FSS incorporated the funding approach of the admitted and scheduled bodies, including admissions, new academies, bulk transfers and cessations. The strategy also took into consideration the impact which the McCloud case judgement might have on the pension liabilities. All of the Fund’s employers had now received their schedules of future contribution rates with only two queries received from two employers, which had been addressed and resolved.

Steven Scott, FFA (Fund Actuary, Hymans Robertson LLP) stated that the improvement in the funding position was driven by strong investment returns over the past three years. He reported that the Fund was in a very healthy position.

Michael Adam (Co-opted member) asked that, based on the updated funding level at the end of the year and the potential decrease in the inflation level, what were the predictions for the new financial year and the rates the Council would need to pay into the Pensions Fund. He added that if a reduction on the contribution rates was not possible at this time, this Committee should have a discussion about it in the near future.

Steven Scott replied that it was expected that the inflation level would fall. The Pension Fund funding level had improved significantly since the Valuation, largely because higher investment returns were expected in the future than the level assumed at the date of the 2022 Valuation. However, at the same time, the value of the assets had fallen over that period and there were lots of uncertainties in the investment markets over the coming years. They would not recommend any changes to contribution rates due to short-term changes as they were funding for the long-term. In addition, they followed the guidance from an advisory board stating that contribution rates were not expected to be reduced as a result of relatively small improvements in funding levels. However, if there was a clear justification in the future, the contributions could be reduced.

Councillor Adam Peter Lang noted that higher inflation had led to higher primary contributions, leading to an expected additional cost to the Council of £3.6m per annum and, as a result, the primary employer contribution rate had risen to 20.6%. He asked how that would be monitored going forward and how that would affect employee contributions.

Steven Scott replied that employee contribution rates were set by legislation from the Central Government and were based on a salary level basis. He added that changes in the inflation rate and in the level of interest rates that reflected on future investment returns were monitored on a quarterly basis.

In answer to a question from Councillor Florian Chevoppe-Verdier, Sian  ...  view the full minutes text for item 4.

This paper introduces the draft Investment Strategy Statement for the London Borough of Hammersmith and Fulham Pension Fund.

This item includes an appendix that contains exempt information. Discussion of the appendix will require passing the proposed resolution at the end of the agenda to exclude members of the public and press.

Sian Cogley introduced the draft Investment Strategy Statement (ISS) for 2023, which reviewed the LBHF Fund’s investment strategy in terms of the current asset allocation and funding position and highlighted some key areas the Committee should consider for the short and medium-term outlook of the Fund. The document was prepared by the Fund’s investment adviser, Deloitte. It identified ways to further reduce risks within the portfolio.

RESOLVED

The Committee agreed:

1.    To reallocate 5% from equity to bonds.

2.    To invest Aviva proceeds with another infrastructure manager and to rebalance the asset allocation.

3.    To increase the strategic Alpha Real Capital Ground Rents allocation to 7.5%, with the additional 2.5% funded from Ruffer, and make an additional subscription to the fund.

This paper provides a summary of:

·       The pension fund’s overall performance for the quarter ended 31 December 2022

·       The pension fund’s cashflow update and forecast

·       Risks and actions taken to mitigate them

This item includes appendices that contain exempt information. Discussion of the appendices will require passing the proposed resolution at the end of the agenda to exclude members of the public and press.

Sian Cogley presented the report which provideda summary of the Pension Fund’s overall performance for the quarter ended on 31 December 2022, the cashflow update and forecast, and assessment of risks and actions taken to mitigate these.

The overview of the Fund’s performance was provided in Appendix 1 with a scorecard and included administrative investment and cash management performance for the quarter.

Exempt Appendix 2 contained information about the Investment Performance. The highlight over the quarter was that the market value of the assets had increased by £4.3 million.

Appendix 3 contained the Cashflow Monitoring Report which provided the cashflow forecast for the last quarter as well as cashflow forecast to September 2023.

Appendix 4 contained the Pension Fund Risk Registers with no risks added to the register or changes in scores. There had been three changes in trend: Risk 19 regarding inflation risk, Risk 28 regarding liabilities and Risk 31 regarding strain on smaller employers. Their trend came down to neutral as a result of the triennial valuation.

The report included a link to the ESG dashboard which was also available on the LBHF website.

RESOLVED

The Committee noted the contents of the report.

This paper sets out a summary of the performance of the Local Pension Partnership Administration in providing a pension administration service to the Hammersmith & Fulham Fund.

Eleanor Dennis introduced the report setting out the key performance indicators in respect of the pension administration service provided by Local Pension Partnership Administration (LPPA) on key cases such as estimates, transfers, deaths and retirements for the period October to December 2022.

During this period LPPA processed 958 cases for the fund. However, in line with the challenges that were stated by the LPPA strategic director , performance for Quarter Three had been disappointing and continued to be below the agreed targets, in particular with deaths and retirements were 34 and 33 cases had fallen outside of the SLA. This was mainly down to challenges in the way that the death cases were processed whereby the clock started ticking before the case was actually being looked at by an administrator, and also whereby they were awaiting information coming through from a beneficiary, such as a probate or documents such as proof of residence.

Councillor Adam Peter Lang asked whether the Committee could provide any further support to Eleanor Dennis’s team to help improve the disappointing performance and if targets could be set for the next quarter.

Eleanor Dennis thanked the offer of help and reiterated that it was disappointing and frustrating to work with LPPA because, despite being a proactive Administrator, they still needed to improve  and meet their core service delivery. Greg Smith (Director of Strategy, LPPA) stressed that they were absolutely focused on getting the service right and were actually going to scale back some of their improvements and ambitions for the future to focus on the core service.

In terms of support she would be willing to bring LPPA back to the Committee to discuss poor performance or to challenge them in a different way. Regarding targets, the Committee could think about a minimum standard by which if LPPA’s performance fell below that the Committee could decide on appropriate action and rather than waiting for their quarterly report, they could request an interim update on  performance.

The Chair replied that he supported both points, an interim report from LPPA as well as holding them into account to achieve the targets they already have. He reinforced that the Committee would support Eleanor Dennis in any way to hold them into account. They could send them a letter on behalf of the Committee listing the particular concerns on performance deficit.

Councillor Adrian Pascu-Tulbure asked if there were other levers to be used to ensure they performed well and noted that in the private sector this poor performance would not be accepted.

Eleanor Dennis replied that when Greg Smith came to this Committee he had said that he would expect to see an improvement on Quarter Four. She challenged him on that and asked for a realistic and achievable target. He later said it would be Quarter One, therefore she thought that this could be a good trigger point. By this time they would have been with LBHF for just over a year and would have had the opportunity to  ...  view the full minutes text for item 7.

This paper provides a summary of activity in key areas of pension administration.

Eleanor Dennis presented the paper setting out the summary of updates on key areas of activity in the pension administration function, the headlines being progressed of the legacy backlog, the increasing wait times on the help desk and, in particular, it requested the approval of the 23/24 budget proposal. The budget would be increasing from £384,000 to £493,000. The main reason behind this significant increase from LPPA was primarily to retain and recruit staff as they had a 32% staff turnover.

They also wanted to establish some new roles to allow them to be compliant in regulatory forthcoming changes and associated with cleansing data. The reality was that the system was not performing as it should be, and it required more resource from their own team. They needed extra funds to bring in expertise resource to get the system performing well, and in the long-term it would provide some cost savings in terms of the cost of the pension service delivery.

Councillor Adrian Pascu-Tulbure noted that in the private sector if a service was failing to deliver to a client they should not ask the client for more money to get more staff to address those failings. He did not understand why LBHF was expected to subsidise failure.

Eleanor Dennis agreed that this would be the case in the private sector. The issue here was that they did not have a contract but had a discharge agreement whereby the costs were shared amongst all clients. As a non-profit organisation there was no option to withhold increasing costs.

Councillor Florian Chevoppe-Verdier noted that the report stated that tackling the backlog began on 9 of January and 198 cases had been tackled in two months. That meant there were 542 left that needed to be tackled in one month. At that current rate they would probably conclude by mid-May, therefore missing on the target.

In terms of the backlog, Eleanor Dennis explained that it was very difficult to quantify the run rate because every case was different and there might be some complex work that needed to be done before completing the case. As Iain Cassidy had mentioned, the change of administrators from Capita to Surrey to LPPA meant there were inherent data issues and some of those legacy issues were not resolved properly by previous administrators and must be fixed before they would be able to complete each case. Therefore it was difficult to predict a realistic run rate because more complicated cases could take a significant amount of time just to get the record right before the actual identified task cold be completed. She had recently heard that the backlog had been restricted further by a resources issue and she would update the committee outside of this meeting on the new timescale. LPPA had said that March was looking unlikely but had not given a realistic timeline.

ACTION: Eleanor Dennis

The Chair asked whether this would be a temporary administration increase with the anticipation that there would be future savings.  ...  view the full minutes text for item 8.

To note the date of the next meeting on 13 June 2023.

The date of the next meeting was noted to be on13 June 2023. However, there were a number of actions to be taken before this date.

Marian George informed that the London CIV Annual Conference (LCIV) would be held on 4 and 5 of September. She urged Members of the Committee to attend as she though it would be interesting. Normally only two people could attend, but if there were higher numbers they should let her know and she would ask LCIV to try to accommodate them.

The Chair asked for the invitation to the London CIV Annual Conference to be sent to all Committee Members when it arrived.

ACTION: Phil Triggs

The Chair requested Mathew Dawson to restore the item on the agenda about the Committee’s training requirements.

ACTION: Mathew Dawson

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.