MINUTES of a meeting of the Pension Committee held at Council Chamber, County Hall, Lewes on 21 November 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 Susan Greenwood, Deputy Head of Pensions George Norval, Interim Deputy Head of Pensions Russell Wood, Pensions Manager: Investment and Accounting Andrew Singh, ISIO William Bourne, Independent Adviser Paul Punter, Head of Pensions Administration Paul Linfield, Pensions Communications Manager Mya Khine, Pensions Accountant Dave Kellond, Compliance and Local Improvement Partner James Sweeney, Pensions Investment Officer Steph Fernando, Pensions Employer Engagement Officer Bekki Freeman, Solicitor Neil Simpson, Pension Board Cllr Andrew Wilson, Pension Board Trevor Redmond, Pension Board Georgina Seligmann, Governance and Democracy Manager
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39. Minutes of the meeting of 25 September 2024
39.1 The Committee RESOLVED to agree the minutes of the meeting held on 25 September 2024 as a correct record.
39.2 Willaim Boyd clarified that the comments he made at the conclusion of the discussion of the Divestment motions were on the basis of fact; the Fund’s investment decisions taken 3.5 years ago have resulted in the Fund making less of a return that if it had not made any changes to its strategy at that time. The decision was not necessarily wrong, but the timing could have been managed more effectively.
40. Apologies for absence
40.1 None were received from the Committee.
40.2 The Chair of the Committee thanked Sian Kunert for all her hard work and highlighted the number of awards achieved under her management and the success the Fund has achieved under her managed.
41. Disclosure of Interests
41.1 Councillor Tutt and Councillor Taylor declared a personal interest in respect of the Chair of the Pension Board’s referral to the Regulator which is set out in the exempt Governance report.
42. Urgent items
42.1 There were no urgent items.
43. Pension Board Minutes
43.1 The Committee RESOLVED to note the minutes of the Pension Board meeting held on 7 November 2024.
44. Governance Report
44.1 The Board
considered a report providing an update on various governance
workstreams completed and changes affecting the LGPS and the ESPF
introduced by Sian Kunert (SK) who drew the Committee’s
attention to the following:
1) Following the Mansion House speech of 14 November officers were able to confirm that a consultation was announced on 15 November with significant detail provided.
2) With regards to the LGPS the Government will legislate to consolidate the LGPS administering Authorities into 8 pools which was expected. Four key documents were provided with the consultation: the investment review interim report, a defined contribution consultation and an LGPS consultation and a paper on investment in the UK economy.
3) The LGPS
consultation covers: reforming the asset pools, strengthening
governance and boosting investment in regional areas. There would
be a requirement that the LGPS administering authorities fully
delegate implementation of investment strategies to the pool and
take principle strategic advice from the Pool. All of the Pools
would have to be FCA regulated (5 of 8 currently) and the
administering authorities would be required to transfer legacy
assets to the management of the Pools.
4) An
indicative timeframe to move to that model is by March 2026 which
is a very short timeframe particularly for non FCA regulated Pools.
ACCESS is not FCA regulated so it would be challenging for them to
meet the proposed deadline.
5) In relation to boosting LGPS regional investment in the UK, the Committee would be required to include a target range of allocations to regional growth plans as part of the investment strategy. The Pool would be responsible for the due diligence of any local investment opportunity but the Committee would decide the target range of the investment. The expectation is that the investment opportunities would be within the Pool’s region and the Committee would have to set out the Fund’s local investment impact within its annual report.
6) In
relation to strengthening governance the information set out was as
expected and there are no significant concerns at this time and no
material changes would be required as the strategies and policies
required are already in place, although a few of these would
instead be consolidated into a single policy document. The Fund is
in a very good position to respond. An independent two-yearly
review would be undertaken to ensure that good governance practices
are in place.
7) The Pool
board would be required to include a representative of their
shareholders and improve transparency; at present ACCESS is not
structured as a standalone built company and does not have a
Board.
8) The
deadline to respond to the consultation is 16 January 2025 which is
before the next Committee meeting and therefore delegated authority to the Chief Finance Officer to
submit a return on the Committee’s behalf is
sought.
9) The asset
pools have been asked to work with the administering authority
clients to submit a separate proposal for how they will meet the
compliance requirements and complete the transfer of legacy assets
by March 2026. This response is required by 1 March 2025.
10) Merging pools is encouraged but not a requirement within the
consultation however each pool would have to set out why a merger
would not be more cost effective and set out the corresponding
analysis. There is nothing to suggest at the moment that ESPF would
cease to exist in its current form and the existing team structure
is not expected to require significant changes.
11) The most significant impact would be on the way the Committee
currently works, in that the Committee would only be responsible
for agreeing a very high-level strategic asset allocation alongside
their Investment objectives and risk parameters. The Committee will
no longer be able to decide which managers or available sub-funds
to invest in.
12) The Committee will continue with its agreed investment strategy
and continue to be active stewards of the Fund through the
consultation process and until there is certainty of change of
responsibilities through the introduction of statutory guidance or
legislation.
13) The consultation documents will be shared with the Committee following the meeting.
14) The consultation acknowledges that savings and efficiencies
have been achieved but that non-FCA regulated external companies
lack the in-house expertise, capacity and resilience to provide
services on a non-profit basis.
15) In relation to investment in the UK the consultation does not
specify a compulsion to invest a set percentage in UK investments;
this may be due to the extent of the research carried out by
Government leading into the Pensions review through roundtables and
calls for evidence ahead of the consultation which will have
highlighted that the LGPS funds have significant exposure to UK
investments.
16) Officers advised that there could be potential savings which will be made by the Fund as investment consultancy contracts will be different, the independent advisor role will change and costs relating to investment advice; whilst noting that internal staffing costs are unlikely to be impacted as the work carried out internally relates to the administration governance and financial controls of the Fund, not in implementing investment strategy. Pooling has focused on reducing costs and manager fees have been successfully brought down over the last 8-9 years, so many savings have already been realised. There would be costs involved to form the pools and transfer legacy assets however the returns generated at the end point would be advantageous.
17) Regarding the changes to inheritance tax relating to death grants, officers confirmed that there is a consultation planned which the Fund will respond to. Officers will communicate with members appropriately closer to the time, but this is not expected within the next 12 months. It would require a change in process if it becomes law and the Fund will await details on implementation and requirements. These changes could result in time delays in settling estates and issuing benefits.
18) The Committee noted that not all assets are best pooled and
that there are good opportunities within UK investment, but they
can be limited in terms of capacity. The Fund’s duty to
members will remain so any investments must be in that context, and
this could create issues in future. Advisors agreed that due
diligence for these investments could be challenging, and the work
required often does not match the scale of investment.
44.2 The Committee RESOLVED to:
1) Note the
report; and
2) Delegate authority to the Chief Finance Officer to submit a return to the Local Governance Pension Scheme consultation on behalf of the Fund in consultation with the Chair of the Pension Committee.
45. Pensions Administration report
45.1 The Committee considered a report introduced by Paul Punter who drew the Committee’s attention to the following points:
Projects
1) McCloud:
officers have inputted the data into the system for active members
which has driven up the numbers of queries however officers are
confident they can be resolved in bulk. BHCC data has been received
and progress is being made in processing this. Non active member
data has been received.
2) Take up of
Member self-service has been disappointing and increasing
registration numbers will be an area of focus for officers
throughout 2025.
3) Pensions
Dashboard: The LGPS are required to connect to the Pensions
Dashboard by October 2025 and officers are working closely with
Heywoods to ensure this is achieved. More information and a
training session will be provided to the Board/Committee next
year.
4) Mortality
checks for 600 overseas pensioners is complete with only six
pensioners having their pension suspended.
5) 23/24 Annual Allowance: Everything was completed on time, with only one individual liable for extra tax.
Helpdesk
6) The Fund aims to achieve a gold standard service provision for the Pensions Helpdesk and the results are included in Appendix 5. From April 2024 the Helpdesk has been delivered by an in-house team within PAT. Due to the transition the reportable information relating to service delivery has reduced. The roll out of the telephony upgrade is awaited and then new statistics will be available to the Committee.
KPIs
7) The volume of tasks received are extraordinarily high compared to the historical position and the KPI’s are below the level that officers would wish to achieve. There are several factors impacting this which includes:
- The change of approach to monthly data collection allows PAT to receive member leaving data much quicker and we are finding that late pay (e.g. overtime/holiday pay) is resulting in recalculation of pension entitlement
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Most of the i-Connect employers have been
giving late annual pay awards and these are resulting in thousands
of recalculations for all types of leavers. Previously employers
did not provide this.
8)
BHCC data has been received in bulk for
the last two years; the result is thousands of member movements
being requested at once rather than being spread over the
year. The Pensions Administration
Team is fully resourced and includes interim support for the BHCC
work, now supplemented by a small number of robotic routines. PAT
are working tirelessly to try to keep up with a growing backlog.
There have been historical issues with PAT not properly pausing
tasks when data/information is required from third parties. Human
errors still occur but are much diminished.
9) To aid visibility of the work being undertaken by the PAT team Appendix 4 provides a high-level view of performance achieved (as presented to Board/Committee) over a number of years. Officers will consider what KPI reporting targets should look like in future in Spring once the BHCC data issues are resolved.
45.2 Officers were reassured that members are not raising complaints or concerns about service or timely responses but agreed that some consideration may be needed in terms of quality measures in the New Year. Officers confirmed that resource levels are appropriate and that whilst the Pension Dashboard will mean that there will be some extra work generated, some tasks will be better spread out in future and will be more manageable as a result.
45.3 The Committee agreed that it would be beneficial for the issues with the BHCC data to be resolved, the progress of which will be reported to the Pensions Administration working group, before taking a view on the levels at which the KPIs are set and agreed with the view of the Pension Board that they do not consider that there has been a drop in performance and recognised the work completed by officers and the improved reporting.
45.4The Committee RESOLVED to note the report.
46. Quarterly budget report
46.1 The Committee considered the Quarterly Budget report for the East Sussex Pension Committee.
46.2 The Committee RESOLVED to note the report.
47. Annual Report and Accounts
47.1 The Committee
considered the draft Annual Report presented by Russell Wood (RW)
and noted the following points:
1) Annual
Report Requirements - Local authorities are responsible for
administering a pension fund (acting as scheme manager) and forming
part of the Local Government Pension Scheme (LGPS). Each LA is
required by the LGPS Regulations to publish a pension fund annual
report. The publication of the annual report is separate from the
authorities’ own statutory accounts which also contains
financials statements in respect of the Pension Fund. Authorities
are required to publish the annual report by 1 December. The format
has changed slightly following guidance issued in March 2024.
2)
The Committee considered the draft report
and draft opinion from Grant Thornton which is positive. The Audit
Committee will receive the final audit report at their meeting of
22 November 2024. The auditors are nearing completion of their
audit and subject to outstanding queries being resolved, it is
anticipated the Fund will be issued with an unqualified audit
opinion. There was asmall change which was
non-material on level 3 investments which was a result of a timing
difference in what is in the accounts and the information of what
the auditors can see.
3) The Committee queried the note on page 26 of the Annual report for Pension Overpayments. Officers confirmed that the note advising of the mortality screening gap related to a decision made at the time of transitioning Pensions Administration in-house.
The Committee RESOLVED to:
1) Approve the Pension Fund Accounts 2023/24;
2) Approve the publication of the draft Pension Fund Annual Report and Accounts 2023/24 prior to the deadline of 1 December 2024; and
3) Note the East Sussex Pension Fund Audit Findings Report provided by Grant Thornton.
48. Annual Training Plan
48.1 The Committee
considered a report on the annual training plan introduced by Paul
Linfield (PL) who highlighted the following points:
1) The self-assessment
responses indicated improvement in knowledge and understanding for
Board and Committee members.
2) Officers conducted an
anonymous survey which requested training feedback from Board and
Committee Members. Seven out of twelve members responded; the
training provided has been positively received and officers are
keen to continue to improve this and would therefore welcome candid
feedback.
3) The Committee noted the training planned for the year ahead and that officers can facilitate individual training requests as required.
The Pension
Committee RESOLVED to:
1) Note the
outcome of the self-assessment knowledge and skills survey;
2) Note the
training made available in the past year;
3) Note the
type of events planned for the year ahead; and
4) Identify
areas Committee members would like training on as a priority
49. Risk Register
49.1 The Committee considered a report on the East Sussex Pension Fund Risk Register.
49.2 The Committee RESOLVED to note the Pension Fund Risk Register.
50. Investment Report
50.1 The Committee
considered a report introduced by Russell Wood and Andrew Singh who
drew the Committees attention to the following points:
1) The investment work plan is likely change following the consultation announcement.
3) Global equities ended the quarter strongly, despite experiencing a sell-off in August 2024 driven by weak US jobs data and an unanticipated interest rate rise in Japan. Central bank rhetoric quickly eased concerns, with the US recovering strongly. Emerging Markets were buoyed by Chinese stimulus measures announced in September 2024 to reverse the region’s recent slowdown.
4) Fixed income markets benefitted from central
banks beginning to cut interest rates, with risk-on sentiment
further benefitting valuations as credit spreads marginally
tightened.
5) UK gilt yields fell over
the period amid hopes of economic growth and stability under the
new Labour government, coupled with the expectation of further
near-term rate cuts. However, the most recent inflation figures
released on 20 November 2024 were slightly higher than expected and
therefore interest rates may not drop at the previously predicted
pace.
6) The US election had a muted
effect on the markets, though the US market reacted positively, and
WHEB was impacted by concerns around the result.
7) Most of the public equity managers posted positive absolute and relative returns with Wellington performing the strongest, whilst WHEB produced negative absolute and relative performance over the quarter, continuing their current underperformance. Baillie Gifford also performed better than previously.
8) The private equity
mandates have continued to struggle relative to their benchmarks
over the last 12 months, with Adams Street the standout
detractor.
9) The infrastructure mandates
have returned relatively negative performance over the quarter with
UBS’s performance the standout detractor. Of the managers
that have been in place for the longer term, M&G infrastructure
and UBS infrastructure have most significantly underperformed
benchmark.
ACCESS
11) The Fund is working with the pool on
Private Credit and other asset classes to increase the investments
that are pooled across more illiquid asset classes and more will be
known after the next Access meeting.
12) Officers confirmed that ACCESS has
its own Responsible Investment guidelines which managers have to
vote in line with. Most of the Fund’s votable assets
are pooled so managers have to comply or explain with the ACCESS
guidelines. A revised voting policy was agreed in September
2024 at ACCESS which contains much more detail than the previous
version. It is expected to be implemented by investment managers by
end of January 2025 and will be specific to wider ESG
focuses.
50.2 Officers noted that the Committee considered there to be an emerging challenge on the balance between Fund income and expenditure resulting in a need to explore increasing investments in cash generating assets; a report setting out some options will be brought to the February 2025 meeting if possible, subject to the impact of the pensions review consultation and investment consultant procurement.
50.3 In regards to the Carbon foot printing information the Committee noted that it is produced as part of the annual report and is now benchmarked to the MSCI all World index. There is some scenario analysis within the Northern Trust report and officers are working through this to better understand the data and results.
50.4 The Committee discussed the analysis provided by ISIO following the questions raised in the debate about divestment at the September 2024 meeting. The independent advisor confirmed that their view was that the strategy agreed previously was correct, but that the timing and pace of the investments could have been better. The Committee agreed that the Fund is appropriately diversified and that different asset classes will perform and underperform.
50.5 The Committee noted that Officers will provide information following the new SAB Counsel Opinion on the legal implications associated with investment in occupied territories.
50.6 The Committee
RESOLVED to note the investment report.
51. Work programme
51.1 The
Committee considered its work programme, introduced by Sian
Kunnert, and noted the following points:
1) There will
be work around the triennial valuation and a range of training on
this.
2) The Fit
for the Future Consultation response will be the focus for the next
few months with appropriate actions required along with a possible
need to reframe the strategy.
3) The
Pension Board has requested a review of the risk register and this
will take place in 2025.
51.2 The Committee
RESOLVED to agree the work programme.
52. 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).
53. Investment Report - exempt information
53.1The Committee considered the exempt Investment report.
53.2A summary of the discussion is set out in an exempt minute.
53.3 The Committee REOLVED
to agree the recommendation set out in the exempt report.
54. Breaches Log - exempt information
54.1 The Committee considered a report providing an update on the Breaches Log and outstanding or new Internal Dispute Resolution Procedure (IDRP) cases.
54.2A Summary of the discussion is set out in the exempt minute.
54.3 The Committee
RESOLVED to:
1)
Note the breaches of law and steps being
taken;
2)
Note the new IDRP complaint raised in the relevant period;
and
3) Note the update on cases being considered by The Pensions Ombudsman.
55. Employer Admissions and Cessations - exempt information
55.1 The Committee
considered a report providing an update on the latest admissions
and cessations of employers within the Fund.
55.2 The Committee RESOLVED
to:
1)
Note the ongoing proceedings for the admission of admitted bodies
to the Fund;
2)
note the ongoing proceedings for the
cessation of employers from the Fund; and
3) Agree the recommendations within the exempt report.
56. Governance Report - exempt information
56.1Committee considered the exempt risk register.
56.2A summary of the discussion is set out in an exempt minute.
56.3 The Committee REOLVED to agree the recommendations within the exempt report.
The meeting ended at 13.29
Councillor Gerard Fox (Chair)