Pension Committee


MINUTES of a meeting of the Pension Committee held at Council Chamber, County Hall, Lewes on 24 February 2022.





Councillors Gerard Fox (Chair) Councillors Penny di Cara, Julia Hilton, Ian Hollidge and David Tutt




Ian Gutsell, Chief Finance Officer

Sian Kunert, Head of Pensions

Michael Burton, Pensions Manager - Governance and Compliance

Tim Hillman, Pensions Manager - Employer Engagement

Paul Punter, Head of Pensions Administration

Russell Wood, Pensions Manager: Investment and Accounting

Danny Simpson, Principal Auditor

William Bourne, Independent Adviser to the Pension Committee

Andrew Singh, Isio

Paul Linfield, Pensions Communications Manager

Mya Khine, ESPF Accountant

Dillon Piggott, CIPFA Trainee


Councillor Nick Bennett

Councillor Paul Redstone




67.         Minutes


67.1     Councillor Hilton asked for clarification on two points in the minutes. The Head of Pensions advised that an email clarifying what is meant by ‘agency costs’ in the Pension Fund accounts had been sent and the email will be resent (minute 57.3). It was clarified that an update on the ACCESS Pool voting policy was expected in March after the next ACCESS Pool Joint Committee meeting.

67.2     The Committee RESOLVED to agree the minutes of the meeting held on 25 November 2021 as a correct record.




68.         Apologies for absence


68.1     Apologies for absence were received from Councillor Paul Redstone (Councillor Penny di Cara substituted for Councillor Redstone).




69.         Disclosure of Interests


69.1     Councillor Tutt declared a personal, non-prejudicial interest under Item 10, Internal Audit reports as he is a non-executive Director of iESE. Cllr Hollidge declared a personal, non-prejudicial interest under Item 9, Additional Voluntary Contribution (AVC) Review as he has invested with Prudential and has an AVC with Prudential.




70.         Urgent items


70.1     Councillor Tutt raised the issue of an email received by all councillors from Larry Holden about investments the Fund has in the Office of the UN High Commissioner for Human Rights (OHCHR) list of companies involved in Israel. It was agreed to discuss this matter under the Investment report item on the agenda.




71.         Pension Board Minutes


71.1     The Committee RESOLVED to note the minutes.




72.         Governance Report


72.1     The Committee considered a report providing an update on various governance workstreams and changes affecting Local Government Pension Schemes (LGPS) and the East Sussex Pension Fund (ESPF or the Fund).

72.2.    The Committee’s discussion included the following issues:

72.3     The Committee RESOLVED to:

1) Note the change to normal minimum pension age and state pension age;

2) Note the possible additional requirement for dealing with transfer requests involving Additional Voluntary Contribution (AVC) benefits;

3) Note the change to audit deadlines;

4) Note the Government Actuary’s Department (GAD) report on the 2019 Valuation across the LGPS;

5) Note the ongoing steps being taken to fill the Pension Board vacancy;

6) Consider a possible approach which may improve member representation in the ACCESS Pool;

7) Not to make use of Hymans Robertson’s LGPS Learning Academy training videos; and

8) Agree that the Chair write a letter to the ACCESS Pool Joint Committee outlining the Committee’s view on member representation on the ACCESS Pool Joint Committee as agreed in paragraph 72.2 above.




73.         Employer and Contributions Report


73.1     The Committee considered a report providing updates on Employer Engagement activities including communications and the collection of Employer contributions.


73.2.    The Committee RESOLVED to note the report.




74.         Pensions Administration report


74.1     The Committee considered a report providing an update on matters relating to Pensions Administration activities.


74.2     The Committee RESOLVED to note the report.




75.         Additional Voluntary Contributions (AVC) Review


75.1     The Committee considered a report on the Additional Voluntary Contributions (AVC) pension scheme provided to members by Prudential. The report was produced in response to a number of concerns about the performance of the AVC provider.

75.2.    The Committee’s discussion included the following issues:


75.3     The Committee RESOLVED to:


1) Agree that the Pension Fund continues to use Prudential as the AVC provider; and

2) Agree to regularly review the performance of the AVC provider though an annual report.





76.         Internal Audit reports


76.1     The Committee considered a report which outlines the results of three internal audits which have been completed since the last meeting. The Committee also considered the Internal Audit Strategy and Annual Plan for the Pension Fund for 2022/23, which had been prepared in consultation with the Chairs of the Pension Board and Pension Committee, together with the Pension Fund managers.


76.2     The Committee discussed the issue of cyber security and how this is reflected in the Internal Audit work. As part of the discussion the following points were made:



76.3     The Committee RESOLVED to:


1) Note the following Internal Audit reports:

·         Pension Fund Governance 2021/22 (Appendix 1);

·         Pension Fund Compliance with Regulatory Requirements 2021/22 (Appendix 2); and

·         The Implementation of Altair (Appendix 3);


2) Approve the 2022/23 Internal Audit Strategy for Pensions and Annual Plan (Appendix 4).





77.         East Sussex Pension Fund Business Plan and Budget 2022/23


77.1     The Committee considered a report on the quarter 3 budget update for 2021/22 and the forecast Business Plan and Budget for 2022/23. The Head of Pensions outlined the main budget variations for quarter 3 of the current financial year.


77.2     The Committee discussed the report and made the following points:

·         The Fund staff costs currently show an underspend but will increase next year provided it is possible to recruit to the vacant posts. The Head of Pensions outlined that the estimate for next year is reasonable and assumes that it will be possible to fill all the currently vacant posts. The budget forecast includes upgrading and filling all the posts, but there may be some underspend if vacancies arise during the year.

·         It was clarified that the underspend in investment manager fees in the current financial year is due to a change from client billing to fees being deducted at source. The Fund does receive quarterly updates from investment managers on their fees, so there is transparency in the fees that are being charged.

·         The charge for the Environment, Social, and Governance (ESG) was explained further, the Head of Pensions will re-label this in the budget report.


77.3     The Committee RESOLVED to:


1) Note the forecast 2021/22 Quarter 3 outturn position for the East Sussex Pension Fund; and

2) Agree the Business Plan and Budget for 2022/23 contained in Appendix 1 of the report.




78.         Risk Register


78.1     The Committee considered a report on the Risk Register for the Pension Fund. The Head of Pensions outlined the main changes to the Risk Register since the last meeting.


78.2     The Committee noted that the Climate Change risk rating has moved from a score of 12 to a score of 4 following the implementation of a number of mitigation measures. The Committee asked for an update on the timescales for these actions. The Head of Pensions outlined that ongoing work is being undertaken to understand the climate risk through scenario modelling and a discussion is taking place to establish how further work will be done (e.g. through top down strategic asset allocation measures and bottom up from investment activity).


78.3     The Committee REOLVED to:


1) Agree the change to risk A4 to cover wider separation from Orbis rather than Pension Administration;

2) Note the addition of Ransomware to the existing Cyber Security risk; and

3) Agree the addition of risk A7, covering East Sussex County Council’s (ESCC’s) Modernising

Back Office Systems (MBOS) project.




79.         Work programme


79.1     The Committee considered a report on the Committee’s work programme which includes working groups and training as well as future agenda items. The Head of Pension noted that the agenda of the next meeting in June is quite full and suggested moving the report on carbon foot printing to the July meeting. It was agreed that the July strategy meeting of the Committee will consider the review of the Investment Strategy and the carbon foot printing report.


79.2     The Committee discussed the provision of training for the Committee. Councillor Hilton suggested that it would be good to hear from Dr Ellen Quigley from the Centre for the Study of Existential Risk on the mitigation of climate change through investment policies such as engagement and divestment, and would also like to hear from other Pension Funds on how they are working to align their funds to the 1.5 degree climate change target.


79.3     The Chair and other Committee members commented that the Committee would normally only take advice from qualified investment advisers, and it would appear that Dr Quigley is an academic rather than a professional investment adviser. The Chair asked Cllr Hilton to provide more information to officers on Dr Quigley’s qualification and experience as an investment adviser so they can advise if this training fits in with the Committee’s fiduciary duties. The work involved with the Task Force on Climate-Related Financial Disclosures (TCFD) and the UK Stewardship Code will focus on the alignment to 1.5 degrees. The Head of Pensions commented that the Fund is going to have to set a target for TCFD and have action plans. However, this is made more difficult if the Fund is invested in pooled products. Some LGPS funds have made a commitment to be net zero, but not many have put in place an action plan to support it. Therefore, it may be difficult to find examples of how funds are aligning to the 1.5 degree target, but if there are any examples available, they can be made available to the Committee.


79.4     William Bourne, Independent Adviser to the Pension Committee commented that underlying companies are going to have to change in order get to 1.5 degrees, so engagement and not divestment will be important. In general equities have underperformed and if the Fund chooses not to invest in fossil fuels and mining companies there is some risk involved.


79.5     The Chief Finance Officer commented that officers can comment on the suitability of the suggested training for climate change risk, but the Committee should bear in mind that this is one element of risk the Fund has to consider. It is important to have enough training in a range of issues that helps the Committee meet its fiduciary duties.


79.6     The Head of Pensions outlined that the quarter 4 engagement reports will be sent to the Committee, so they are aware of what the investment managers are doing. The Stewardship Code will also be brought to the Committee so it can see how sustainability criteria are being applied.


79.7     The Committee RESOLVED to:

1) Note the work programme;

2) Move the carbon foot printing report to the July meeting; and

3) Agree to ask officers to consider the training suggestions made during the discussion.





80.         Investment Report


80.1     The Committee considered a report providing an update on the investment activities undertaken by the ESPF. The Head of Pensions introduced the report which includes items relating to the investment workplan and implementing the Investment Strategy. Consideration of the Principles for Responsible Investment PRI submission will be deferred until next year as no submissions are possible in 2022 and the Stewardship Code will be reviewed in June or July.


80.2     The Committee’s discussion included the following key issues:


Investment Performance


Asset Allocation


Correlation Analysis


Investment Strategy recap


Israel/Palestinian Investments (raised under Urgent Items)


Inflation Report


ACCESS Pool update


External Assurance reports update


Department for Levelling Up, Housing and Communities announcement


Beyond Oil and Gas Alliance (BOGA)


80.3     The Committee RESOLVED to:


1) Note the Investment Workplan (appendix 1);

2) Note the Quarterly Investment Report from the Investment Advisor, Isio (appendix 2);

3) Note the Investment Correlation report (appendix 3);

4) Note the investment strategy recap (appendix 4);

5) Note the Inflation Report (appendix 5) and agreed that the Investment Working Group will examine this issue and report back to the Committee;

6) Note the ACCESS update and approve the nomination of Councillor Paul Redstone as a substitute representative of the County Council at the ACCESS Joint committee meetings;

7) Note the update on the external assurance reports;

8) Note the update on the announcement by the Department of Levelling Up, Housing

and Communities;

9) Agree to write to the IIGCC for their views on policy regarding the Beyond Oil and Gas Alliance; and

10) Agree to have a detailed look Longview’s performance and to get update from WHEB and Wellington as to how their impact funds are going to perform in a volatile environment.




81.         Exclusion of the public and press


81.1     The Committee RESOLVED 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 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).




82.         Investment Report


82.1     The Committee considered a report providing an update on the investment activities undertaken by the Fund.

82.2     A summary of the discussion is set out in an exempt minute.

82.3     The Committee RESOLVED to agree actions which are set out in an exempt minute.




83.         Breaches Log


83.1     The Committee considered a report providing an update on the Fund’s Breaches Log.

83.2     The Committee RESOLVED to agree the recommendations as set out in the report.




84.         Employer Admissions and Cessations


84.1       The Committee considered an update on the latest admissions and cessations of employers within the Fund.

84.2The Committee RESOLVED to note the report.





The meeting ended at 2.50 pm.





Councillor Gerard Fox (Chair)