Agenda and draft minutes

Pension Fund Committee - Tuesday, 26th November, 2024 7.00 pm

Venue: Ground Floor - Clockwork Building, 45 Beavor Lane, London W6 9AR - Clockworks Building. View directions

Contact: Amrita White 

Link: Watch the meeting on YouTube

Items
No. Item

1.

Apologies for absence

Minutes:

There were no apologies for absence.

 

Apologies of lateness were received from Councillor Laura Janes

 

2.

Declarations of interest

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:

Adrain Pascu-Tulbure declared a non-pecuniary interest in relation to item 9 (Defence Company Stocks Discussion Paper)

 

3.

Minutes of the previous meeting pdf icon PDF 261 KB

To approve the open and exempt minutes of the meeting held on 10th September and 15th October.

 

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.

Additional documents:

Minutes:

RESOLVED

That the open and exempt minutes of the meetings held on 10th September and 15th October 2024 were approved.

 

4.

Aviva Investors Representation pdf icon PDF 191 KB

This item provides the Pension Fund Committee with an opportunity to discuss the outcome of the redemption process of the London Borough of Hammersmith and Fulham Pension Fund’s allocation to Aviva’s Infrastructure Income portfolio with representatives of the company. 

 

Minutes:

Phil Triggs (Tri Borough Director of Treasury and Pensions) introduced the item and noted that Aviva had agreed to join today’s meeting to present to the Committee. He explained that final redemption payments totalling £13.9m were made in September 2024, circa £3.4m or 15% lower than the estimated figure of £22.7m (excluding redemption charge) if the full redemption had been received on time at the intended date of 31 December 2023. Taking income into account, this amounted to circa £2.5m for the LBHF fund.

 

Aviva had reimbursed the management fees on 25th November, covering the period starting 1st January to 30th September 2024. However, due to the delayed redemption, the Fund experienced a net loss of approx. £2.5mil from 1st January 2024. This loss was primarily driven by a decline in market value since 31st December 2023 to the date the final funds were received.

 

Jill Barber (Aviva) thanked the Committee for the opportunity to attend the Pension Fund meeting and acknowledged communication could have been improved, offering her apologies for this.

 

The Chair asked whether Aviva accepted the analysis provided by officers, that the Fund had incurred a net loss of £2.5 mil. Daniel McHugh (Aviva) noted that the Fund’s asset value would fluctuate over time. From a private markets perspective infrastructure assets had experienced rising capital values over the last 10 years, up until 2023, due to a low-interest rate environment. However, the subsequent increase in interest rates, negatively impacted private market value, particularly infrastructure assets, supressing their capital values.

 

It was highlighted that for assets such as private markets and infrastructure, selling them in a structured manner to achieve the best market price often required time. This process involved marketing the assets, negotiating contracts and finalising disposals. During this period price movements could pose a risk. In 2023 significant price volatility was observed with investment volumes in private markets declining by at least 15% compared to previous years. Aviva felt that the estimated loss figure provided was noted to be unrelated to the Fund’s ability to generate cash proceeds necessary to meet the redemption requirements.

 

Phil Triggs (Tri Borough Director of Treasury and Pensions) provided further information on the calculation of the loss. He explained that advice was sought from Isio (the Fund’s investment consultant), who provided a definitive market valuation as of 31st December 2023. Based on this valuation, it was determined that if the funds had been received on time, the Fund would have realised an additional £2.5mil. The loss of £2.5mil occurred between 1st January and September 2024, the date when the final redemption payment was made.

 

Additionally, he noted that no assets were sold, nor were any proceeds generated by 31st December 2023, which contributed to the 9-month delay extending into 2024. He emphasised this as a key factor in the timeline for the redemption process.

 

The Chair requested Aviva to further clarify whether it accepted that the losses incurred were due to its shortcomings,  ...  view the full minutes text for item 4.

5.

Key Performance Indicators pdf icon PDF 112 KB

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

Additional documents:

Minutes:

Eleanor Dennis (Head of Pensions) introduced the report which covered the performance of the Council’s administration partner LPPA over Q2 for the pension fund scheme year 2024/25. This covered the period July to September 2024 inclusive. During the period LPPA processed 1582 SLA cases, which was an increase of 117 cases from Q1. Performance above target was achieved in all case types in Q2. The key improvements appeared in retirement and bereavement cases.

 

Councillor Florian Chevoppe-Verdier thanked Eleanor Dennis and her team for their hard work and notable achievements. He enquired about the level of support her team continued to provide to LPPA. In response Eleanor Dennis explained that her team was still actively offering support, including addressing a few key cases during this period that required intervention and solutions. She acknowledged that LPPA had not yet fully reached the desired level of quality.

 

Councillor Florian Chevoppe-Verdier felt that while LPPA appeared to be fulfilling their role to some extent, their reliance on support from Eleanor and her team suggested that they might not be fully meeting their targets. This raised concerns around the accuracy of the reporting. He questioned whether LPPA would still be able to meet their SLA’s if all the support currently provided by Eleanor’s team, was withdrawn. Eleanor Dennis acknowledged the validity of this point, noting that the impact of such reliance would likely be reflected in qualitative data, particularly in member satisfaction scores. These scores were most evident in key areas such as retirement and bereavement. In addition, she noted that LPPA were committed to providing the best service to all of their clients.

 

RESOLVED

That the Pension Fund Committee noted the update.

 

 

6.

Pension Administration Update pdf icon PDF 356 KB

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

 

Additional documents:

Minutes:

Eleanor Dennis (Head of Pensions) introduced the report which covered a summary of activity in key areas of pension administration for the Council’s Pensions Fund Including good progress on readiness for the pensions dashboard and noting a slightly increased average wait time on the telephone Helpdesk. A paper on the Fund’s compliance to the pension regulators general Code would be presented at a future Committee meeting.

 

Councillor Adrain Pascu-Tulbure requested further clarification on the impact of the reform’s announcement by the Chancellor in the  Mansion House Speech on pension fund administration. Eleanor Dennis confirmed there were no plans in the short and medium term to change pension fund administration.  What is clear is the governments focus on the pooling of LGPS investments. She explained that there was an open HMRC consultation addresses the intended changes to inheritance tax legislation and unused pension benefits and death benefits. Highlighting responsibility shifting to administrators that would need them to calculate the tax liability and ensure it was deducted from any death grant payments before disbursing them to beneficiaries.

 

Phil Triggs noted that in relation to the amalgamation of funds, there had been an expectation of potential fund mergers, particularly in London. However, he pointed out that the Chancellor’s speech and the accompanying consultation document made it clear that no fund mergers were planned. As a result, there would be no need to merge administration processes.

 

RESOLVED

That the Pension Fund Committee noted the update.

 

7.

Draft Annual Report 2023/24 pdf icon PDF 218 KB

This report presents the draft Pension Fund Annual Report and Statement of Accounts for the year ended 31 March 2024.

 

Additional documents:

Minutes:

Sian Cogley (Pension Fund Manager) provided a summary of the key points. The report included the draft Pension Fund Accounts 2023/24 and was a regulatory requirement. This was required to be approved by the Pension Fund Committee. The draft Pension Fund Annual Report for 2023/24 is attached as Appendix 1.

 

Councillor Adrain Pascu-Tulbure offered several suggestions, noting that on page 80, it would be helpful to include the overall investment as a percentage of UK assets. On page 84, adding explanatory paragraphs to provide further clarity on the rise in administration costs would be beneficial. Additionally on page 55, it was recommended to include recognition of the contributions made by the co-opted members on the committee. Sian Cogley commented that the changes would be incorporated into next year’s annual report as part of following the new Pension Fund Annual Report Guidance for Local Government Pension Scheme Funds.

 

Councillor Laura Janes requested that the name be corrected on page 54.

 

Action: Sian Cogley

 

RESOLVED

That the Pension Fund Committee approved the draft Pension Fund Annual Report for 2023/24 and delegated the approval of the final version to the Director of Treasury and Pensions in consultation with the Chair.

 

8.

Section 13 Valuation pdf icon PDF 222 KB

This report and appendices provide the Pension Fund Committee with an update on the Government Actuary’s Department’s (GAD) Section 13 (S13) report on the 2022 LGPS triennial actuarial valuation.

 

Additional documents:

Minutes:

Sian Cogley (Pension Fund Manager) gave a summary of the key points. It was noted that the report and appendices provided the Pension Fund Committee with an update on the Government Actuary’s Department’s Section 13 report on the 2022 LGPS triennial actuarial valuation.

 

RESOLVED

That the Pension Fund Committee noted the Section 13 report for the 2022 triennial valuation.

 

9.

Defence Company Stocks Discussion Paper pdf icon PDF 248 KB

This report provides an overview of the LBHF Pension Fund’s exposure to the weapons sector as at 30 June 2024, following a request from the Chair of the Pension Fund Committee for a discussion paper earlier this year.

 

Additional documents:

Minutes:

Phil Triggs (Tri Borough Director of Treasury and Pensions) provided a summary of the key points. Officers requested information from all investment managers. The information requested covered a list of all current investments made by the pension fund in companies involved in the manufacturing, distribution, or sale of arms and weaponry as of 30 June 2024. Details of any investment policies or guidelines that pertain to investments in the Defence sector, particularly those related to arms and weaponry for the products that the LBHF Pension Fund is invested in. It was noted that the exposure to companies involved in the manufacturing, distribution, or sale of arms and weaponry across the whole portfolio was 3.5%. It was noted that removing that exposure from the fund would present a significant challenge. Additionally, Section 3 outlined the Committee’s fiduciary duty to the fund.

 

 

The Chair thanked officers for their analysis. He observed that this represented a relatively small investment for the Fund, with the majority held indirectly through index-tracker pooled fund assets where the Committee had some influence but very limited control. He highlighted that as the UK navigated an increasingly challenging international climate, the ethical considerations surrounding investments in Defence were evolving. The Committee would undertake a responsible review of these investments and continue to monitor them closely.

 

Councillor Laura Janes reiterated the point she made at the last Pension Fund Committee about making sure the Committee took some time to review its ethical investment principles and that this was a priority in her view.

 

A member of the public was invited to ask a question. He pointed out that several Council’s in London were divesting from Defence-related investments and suggested that the Council should also consider doing the same in the near future. He felt that exiting pooled funds was not as difficult as it might seem and urged the Council to take a moral stand on this. The Chair responded that the committee would not be making any commitments at this Committee but assured that it would continue to review its ethical principles.

 

Councillor Adam Peter Lang noted that the Committee regularly addressed ethical issues and was not complacent about the wider geopolitical events. He emphasised that the Committee frequently sought advice from its advisors, with ethics being a key consideration for all members.

 

Phil Triggs (Tri borough Director of Treasury and Pensions) confirmed that there was no current exposure to Elbit Systems within the table included in the report.

 

RESOLVED

That the Pension Fund Committee discussed the Fund’s exposure to the weapons sector, shown as Appendix 1.

 

10.

Renewable Infrastructure and Data Centres Managers pdf icon PDF 123 KB

This report presents an overview of the background to the decisions to be made following the Pension Fund committee meeting 10 September 2024.

 

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.

 

 

Additional documents:

Minutes:

Phil Triggs (Tri Borough Director of Treasury and Pensions) explained that following the Chancellor’s Mansion House speech, and the release of the LGPS consultation paper, the planned interviews for data centres had been cancelled in coordination with the Committee Chair. However, interviews with Quinbrook, had been conducted prior to this meeting to assess the Fund’s renewable infrastructure allocation.

 

Michael Adam (Co-opted Member) enquired whether there would be an opportunity to revisit the data centres at a later date. Phil Triggs responded that officers had sought guidance from London colleagues, with whom they met regularly. The consensus was that once control for selection of these assets was transferred to the pool and the 100% asset transition target was reached by 31st March 2026, responsibility for the fund manager selection, including implementation and manager appointments would rest solely with the pool. If data centres were to become part of the London CIV’s offerings, the Committee may then consider them in the future.

 

Councillor Adam Peter Lang expressed his support for the decision made by the Chair to cancel data centres, noting that it was a prudent choice given the circumstances.

 

RESOLVED

The Pension Fund Committee approved the renewable infrastructure allocation to Quinbrook, subject to obtaining further information. Final approval was delegated to the Director of Treasury and Pensions in consultation with the chair.

 

11.

Pension Fund Quarterly Update (end of September 2024) pdf icon PDF 149 KB

This paper provides the Pension Fund Committee with a summary of the Pension Fund’s overall performance for the quarter ended 30 September 2024.

 

 

Additional documents:

Minutes:

Sian Cogley (Pension Fund Manager) provided a summary of the key points for the of the Pension Fund’s performance for the quarter ended 30 September 2024. It was noted that overall, the investment performance report showed that the market value of the assets increased by £3m to £1,374m

 

Jonny Moore (Isio), noted that the Fund had underperformed its benchmark net of fees by 0.4%, delivering an absolute return of 1.23% over the quarter. The total Fund delivered a positive return of 10.29% on a net of fees basis over the year to 30 September 2024. He provided a summary on Darwin management, noting that it had implemented a 23% write down to net asset value and a more comprehensive update could be found in report on page 259. It was advised that the most effective approach was to adopt a wait and see strategy, allowing the fund time to recover while continuing to monitor its progress and keeping the Committee informed.

 

Michael Adam (Co-opted Member) asked whether the discount rate was tied to the base rate rather than gilts. Jonny Moore confirmed that this was correct and noted that a more detailed analysis would be provided outside of the Committee meeting.

Action: Isio

 

Phil Triggs emphasised that, ultimately at some future juncture, an approach would be made by a major leisure body to take over the Darwin leisure portfolio with an offer based on market sale values at that time. Such an offer would reflect the location and profitability of the assets within the Darwin portfolio, which should comfortably exceed the current prudent approach insisted on by the Darwin external auditor. While marked down balance sheet values should be monitored and discussed, it was unlikely that they would influence future sales negotiations when that time comes.

 

Members emphasised the importance of continuing to closely monitor the Darwin investment moving forward and welcomed further analysis on this matter.

 

In response to a member’s question, Phil Triggs provided a summary of the new appointments made at the LCIV, including the Chief Executive. He noted that there was substantial evidence to suggest a promising future for the LCIV.

 

Councillor Adam Peter Lang requested training on the recent Mansion House update and the Fit for the Future consultation. This included guidance on how the outcomes of the consultation would unfold.

 

Action: Phil Triggs

 

Councillor Laura Janes requested additional ESG training focused on ethical principles. Sian Cogley noted that officers had received potential dates from Isio and were working on the most effective way to share this information with members.

Action: Sian Cogley

 

 

RESOLVED

That the Pension Fund Committee noted the update

 

12.

Exclusion of the public and press (If required)

Local Government Act 1972 - Access To Information

Proposed resolution:

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 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 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.