MINUTES of a meeting of the Pension Committee held at Council Chamber, County Hall, Lewes on 19 June 2024.
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PRESENT |
Councillors Gerard Fox (Chair) Councillors Ian Hollidge, Paul Redstone, David Tutt and Georgia Taylor |
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ALSO PRESENT |
Ian Gutsell, Chief Finance Officer Sian Kunert, Head of Pensions Russell Wood, Pensions Manager: Investment and Accounting Danny Simpson, Internal Audit Andrew Singh, ISIO William Bourne, Independent Adviser Paul Punter, Head of Pensions Administration Michael Burton, Pensions Manager: Governance and Compliance Mya Khine, Pensions Accountant Paula Jenner, Employer Engagement Officer Dave Kellond, Compliance and Local Improvement Partner James Sweeney, Pensions Investment Officer Bekki Freeman, Solicitor Councillor Nick Bennett, Neil Simpson, Pension Board Ray Martin, Pension Board Georgina Seligmann, Governance and Democracy Manager
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1. Minutes
1.1 The
Committee RESOLVED to agree the minutes of the meeting held on 22
February 2024 as a correct record.
2. Apologies for absence
2.1 None were
received.
3. Disclosure of Interests
3.1 There were no interest to
disclose.
3.2 Councillor Tutt requested that his membership of the Governance Committee and his role as the Director of the Cyber Centre of Excellence be recorded for transparency purposes in relation to items 7 and 12 of the agenda.
4. Urgent items
4.1 There were no urgent items.
5. Pension Board Minutes
5.1 The
Committee RESOLVED to note the minutes of the Pension Board meeting
held on 05 June 2024.
6. Governance Report
6.1 The Committee considered an update report on the Governance of the East Sussex Pension Fund, introduced by Michael Burton who drew the Committee’s attention to the following:
1) The LGA McCloud guidance was issued this week and will be reviewed by officers.
2) The Economic Activity of Public Bodies (Overseas Matters) Bill was not concluded in the Parliamentary wash up pre-election and would need to be restarted by the new government if this is to be taken forward. This will be kept under review and if it is progressed then training will be organised accordingly.
3) The Fund received a letter from the Minister for Local Government dated 15 May 2024 requesting submission. The Fund should be providing a response to the Civil Service and the Minister for Pensions will review once appointed.
4) Tim Oliver has left
his role at Brighton University and has stepped down from the
Pension Board. A report will be taken to the Governance Committee
meeting of 25 June 2024 with a recommendation for a new
member.
6.2 The Committee RESOLVED to:
1) Approve the revised Training Policy (Appendix 2)
2) Approve the Governance and Compliance Statement (Appendix 5)
3) Approve the amended Exit Credit Policy (Appendix 6)
7. Report of the Pension Board 2024
7.1
The Committee considered a report on the work of the Pension Board
introduced by Sian Kunert and Ray Martin Chair of Pension
Board.
7.2
The Committee noted the work of the Board over the last 12 months
including training completed, membership and attendance, actions
taken and planned work for next year.
7.3 The Committee agreed and noted that maintaining membership and attendance has been challenging on occasion, Board meetings require regular attendance in order for members become familiar and comfortable with the subject.
7.4 The Committee RESOLVED to note the report.
8. Pensions Administration report
8.1 The Committee considered a
report introduced by Paul Punter who drew the Committee’s
attention to the following points:
KPIs:
1)
There have been some
improvements in the numbers since the last meeting in the last
quarter (82.50% compared to 78.99% last quarter), the team has
benefitted from increased resource and some projects came to an end
in March.
2)
Aggregation is included
in the figures with the intention of the report and the
appendices is to be as transparent as possible. If Aggregation were excluded, then
the quarterly performance to 31 March 24 would have been
96.57%.
3)
Appendix B provides 5
years of performance, the recent disruption to workload is evident
but it is beginning to improve.
4)
Appendix C gives a list
of tasks pending at the start of March 2024 and what has been
achieved activity wise and what remains outstanding split by total
(including reply due) and the work that can actively be worked
upon. This table includes all tasks the team is processing to, over
time, give the Committee an insight into what is outstanding
providing an early indicator of a possible drag on future
performance.
5)
The Committee were happy
with the additional information presented and would welcome
information about the prioritisation of work of the team and this
will be reflected in future reports.
Staffing:
6) Helpdesk is now appropriately resourced. The Pensions Administration Team is carrying one vacancy. The Fund has new robots which will carry out some lower-level less complex tasks.
Projects:
7) GMP: reconciliation work is mostly completed with over 2,000 pensioners in scope. Approximately 1,400 pensioners under the GMP age have had their records updated to show the new GMP and non-GMP split of pension in payment. Changes for pensioners over GMP age result in over and underpayments being materialised. Overpayments to date have been written off and pensioners were given three months’ notice of the new lower payments being implemented in June. A small number of cases were held back for further investigation and will be adjusted as required and allowing notice of change where appropriate. The team have received five complaints as a result of the GMP rectification- these complaints have been responded to, however the Fund may receive further concerns when payments start to reduce.
8)
Only 10 of the 140 employers were
required to complete the end of year process and data has been
received for all but one. All other employers are now submitting
monthly data via i-Connect and these have been received up to March
2024 for all except one. Two statements will be produced this year:
one in the previous template format and another through
using the new MSS template. Officers expect to onboard the
employers submitting manual returns by the end of the financial
year so that all submissions can be returned via i-Connect for next
year’s statements.
9)
The Member Self-Service
(MSS) project to improve functionality and increase security of the
system is in progress with testing well underway. The Fund
aims to pilot the service with ESCC members on 27 June which should
highlight any issues with the system not identified through testing
before launching to all members planned for 17 July.
8.2 The Committee RESOLVED to note the report.
9. Quarterly budget report
9.1 The
Committee considered a report on the Quarter 4 Financial outturn of
the East Sussex Pension Fund (ESPF) for the 2023/24 financial year,
introduced by Russell Wood who drew the Committee’s attention
to the following points:
1) All outstanding audits
are now closed and the 2023/24 accounts have been published on the
website.
2) The final outturn position of 2023/24 is £4.082m, this is a decrease from the last projected position of £0.297m and also reflects an underspend against the approved budget of £0.381m.
3) The underspend mostly relates to a
reduction in overhead costs which are recharged from ESCC as some
items had been accounted for twice, lower than expected IT systems
costs due to negotiations in fee’s by paying costs for
licenses upfront and lower inflation assumptions and some projects
did not commence before 31 March 2024. The Fund received confirmation that it would receive
a Local Audit Grant for the 2023/24 audit in February, which has
resulted in the reduction in Audit costs for the year by
£8,000.
4) The
budget requirements for 2023/24 were set at £4.463m
(£4.269m 2022/23 excluding manager fees) to support the
Business Plan activities and administration of the Fund.
9.2 The Committee RESOLVED to note the FINAL 2023/24 outturn position.
10. Internal Audit reports
10.1 The Committee
considered the audit report presented by Danny Simpson (DS) and
noted the following points:
1) The audit of
the Pension Fund Cash Management received an opinion of Substantial
Assurance.
2) The audit of
Administration of Pension Benefits received an opinion of
Reasonable Assurance.
3) Neither audit
resulted in any high or medium risks. It was noted that some minor
risks in the administration of benefits to be inevitable due to the
volume of work undertaken and the proposed actions have been
completed.
10.2 Cllr Fox asked
for clarity on the approval of payment from the Pension Fund.
Officers confirmed that practices have been updated so that only
pension fund officers can authorise payments which gives greater
control.
10.3 The Committee
RESOLVED to note the:
1) Pension Fund
Cash Management Audit report and;
2) Administration of Pension Benefits Audit report.
11. Risk Register
11.1 The Committee considered a report introduced by Sian Kunert who drew the Committee’s attention to the following risks:
1) Risk I3
– Regulatory Risk, has been increased to amber from green due
to the likelihood of additional investment regulation that is
anticipated with the implications not yet known. The Committee
discussed that in relation to this risk, there are increased
pressures on LGPS funds to invest in specific areas which would
make it very challenging to manage the asset allocation.
Items under close review, without a change to the
rating:
2) Risk G3 – Cyber Security, is deemed the highest
risk for the Council and Fund, as a result will continue to be
closely monitored. Training has been provided to both Board and
Committee members with further testing of internal policies and
procedures being planned.
3) Risk I5 – High Inflation impact on Funding
level, will be monitored closely ahead of next quarter due to the
recent changes in inflation, however other factors to be tracked
may keep this risk at its current level.
4) Risk I8 – Liquidity, is being more closely
monitored whilst the Fund transitions to a cashflow negative
position from member activities with increases in benefits paid out
following recent high inflation and the reduction in contribution
rates following the last valuation. Work is being carried out to
identify whether more income will be required from investments to
bridge this gap or if the investment strategy is sufficient. The
Pension Committee will receive further guidance on liquidity as
part of their strategy day.
5) Risk I9 – Money Purchase Additional Voluntary
Contributions is currently under active review by the Fund’s
advisors. Officers will be considering a number of points discussed
at the February Committee and Board meetings on the suitability of
the default investment option available, in order to identify any
weaknesses in the current offering and ensure appropriate
recommendations are made to ensure these are resolved. The risk
register will be updated to reflect any findings or actions from
this work. Following the work already carried out on this area,
Barnett Waddingham will support the Fund work to ensure that the
best AVC offering is available. The risk will be updated if
required.
11.2 The Committee RESOLVED to note the Pension Fund Risk Register.
12. Investment Report
12.1 The Committee
considered a report introduced by Russell Wood and Andrew Singh who
drew the Committees attention to the following points:
1) The
stewardship report will be submitted for the October
deadline.
2) There was
a positive absolute return over the quarter in Fund performance but
underperformance against the multiple benchmarks for the
period.
3) Quarter
one resulted in a strong set of returns for pension schemes which
is reflected in the report data; yield values have risen over the
quarter and bond prices have gone down. Expectations of rate cuts
have changed and a slower pace of reduction is expected. The US
economy performed well and the markets saw enthusiasm for tech and
AI stocks.
4) The UK
performed well in equity markets whilst bond markets were
mixed.
5) The yield
on UK corporate bonds are an important change this quarter to
consider from a strategic perspective and the transition to multi
asset credit will be considered in more detail in future
meetings.
6) A
benchmark figure of 3.9% was achieved overall by
Fund’s managers. Osmosis and Storebrand performed as
expected however Wheb and Wellington under performed. The Committee
now have 3 years of performance data for these impact investment
managers which provides an opportunity to review.
Habourvest’s performance moderated slightly, the long-term
numbers are very strong but performance will be kept under review
to monitor how Private Equity valuations move against the public
market.
7) Newton is
positioned against technology which is reflected in their
underperformance.
8) The multi
asset credit allocation has been made to Bluebay.
9) M&G Alpha Opps fund held a very small Thames water allocation but the high profile default on the debt resulted in a negative impact on the Fund. There are concerns over continuity with Schroders with the general move of LGPS assets to pool options.
10) ACCESS JC met on 10 June 2024 where the outturn report was presented which saw a slight overspend. It was also noted the ACCESS pool received good assurance on their Internal Audit which is the auditors highest rating.
11) Ruffer:
Committee noted the underperformance by Ruffer and that there have
been organisational changes over the years the Fund has been
invested. Officers advised that Ruffer have a different strategy
and strong conviction and that it is advantageous to the Fund to
have diversity and that this can be difficult to achieve. ISIO have
met with the manager in response to the muted performance and are
satisfied that team changes have not had a negative impact. It was
agreed that ISIO would address concerns with Ruffer as the data now
provides a good review opportunity. The Committee noted that the
benchmarks are challenging and that the actual return figures are
positive. Officers advised the committee that Ruffer’s
portfolio does not include the big 7 tech funds.
12) Future reports will
reflect Construction as a sector invested in the Performance
report appendix 1 for Market Background on Global equity and the
Committee noted it is for managers to make investment decisions as
to sector allocation.
12.2 The Committee RESOLVED to note the investment report.
13. Work programme
13.1 The Committee considered its work
programme, introduced by Sian Kunnert, and noted the following
points:
1) That the next meeting is the Strategy Day in July and Officers are finalising the agenda.
2) The annual accounts report will be received by November
3)
The Carbon Footprint report will be received in September.
13.2 The Committee
RESOLVED to agree the work programme.
14. Exclusion of the public and press
The Committee RESOLVE to exclude the public and press from the meeting for the remaining agenda item on the grounds that if the public and press were present there would be disclosure to them of exempt information as specified in paragraph 3 of Part 1 Schedule 12A of the Local Government Act 1972 (as amended), namely information relating to the financial or business affairs of any particular person (including the authority holding that information).
15. Investment Report - exempt information
15.1 The Committee considered the exempt
Investment report.
15.2 A summary of the discussion is set
out in an exempt minute.
1) The Committee RESOLVED to note the report.
2) Agree to sign up to the 2024 Global Investor Statement to
Governments on the Climate Crisis.
16. Governance Report - exempt information
16.1The Committee considered the exempt risk register.
16.2A summary of the discussion is set out in an exempt minute.
16.3
The Committee REOLVED to note the report.
17. Breaches Log
17.1 The Committee considered a report providing an update on the Breaches Log and outstanding or new Internal Dispute Resolution Procedure (IDRP) cases.
17.2 A Summary of the discussion is set out in the exempt minute.
17.3 The Committee RESOLVED to:
1) Note the breaches of law and steps being taken; and
2) Note that no new IDRP complaints have been raised in the relevant period.
18. Employer Admissions and Cessations
18.1 The Committee considered a report providing an update on the latest admissions and cessations of employers within the Fund.
18.2 The Committee RESOLVED to:
1) Note the ongoing proceedings for the admission of admitted bodies to the Fund; and
2) Note the ongoing proceedings for the cessation of employers from the Fund.
Finish time 12.20
Councillor Gerard Fox (Chair)