Agenda and draft minutes

35.1     The Committee RESOLVED to agree the minutes of the meeting held on 19 September 2023 as a correct record.

36.1     Cllr David Tutt sent his apologies.

36.2     Cllr Colin Swansborough substituted for Cllr David Tutt.

Disclosures by all Members present of personal interests in matters on the agenda, the nature of any interest and whether the Members regard the interest as prejudicial under the terms of the Code of Conduct.

37.1        The Committee considered an update report on the Governance of the East Sussex Pension Fund.

37.2        The Pension Committee RESOLVED to note the report.

Notification of items which the Chair considers to be urgent and proposes to take at the appropriate part of the agenda.

38.1     There were no urgent items.

39.1     The Committee RESOLVED to note the minutes of the Pension Board meeting held on 02 November 2023.

40.1        The Committee considered an update report on the Governance of the East Sussex Pension Fund.

40.2        The Pension Committee RESOLVED to note the report.

41.1     The Committee considered a report introduced by Colin Bibb who drew the Committee’s attention to the following points:

KPIs:

1)    PAT performance numbers are 88% which is lower that the target at 95% with the impact of completing the B&H CC work now being felt, however performance is high and targets are stretching. Lower performance figures are expected for the next quarter with various projects requiring resources including GMP and McCloud but expecting to be back on track in the new year.

2)    The printing and postage project went live in September and has been progressing well.

3)    The team had to process over 2000 new starters following a large volume of data from one employer in August and there is still some way to go to process these. The prioritisation of tasks is key to ensure queries are responded to and issues addressed appropriately.

4)    The self-service portal for members has been identified as requiring some attention, there is a new version being launched by the software supplier and officer will look to implement in 2024,  the change in system will improve the login process to be more secure in order to strengthen data protection.

5)    Information regarding AVCs will be available at the next meeting as the data requires verification.

6)    Staffing is much more settled with key vacancies filled which should support the work of the team in addition to overtime being taken up.

7)    Just over 400 ABS queries to resolve mainly relating to Brighton and Hove and University of Brighton.

8)    Additional Contributions take up and 50/50 membership over last few years was included in the report following the Pension Board request for an update on the position.

41.2     The Committee RESOLVED to note the updates.

42.1     The Committee considered a report containing a draft Annual Report and Accounts 2022/23 for approval introduced by Sian Kunnert Head of Pensions, who thanked the team for the hard work on the report and drew the Committee’s attention to the following points:

1)   The annual report will be published on 1 December 2023 subject to the Committee’s approval and will include the policies when published.

2)   The Audit was positive for the team and officers have not been made aware of any concerns at this stage. The Audit Committee will receive the final audit report at their meeting of 24 November 2023. Auditing is a commissioned service, the dedicated Pensions team added value to this year’s process.

3)   The level 3 investments valuations as described as highly subjective which is the appropriate terminology.

4)   The TCFD data in the report included the scenario work required for the triennial valuation and Committee members noted that the parameters are not set by the Fund and that the scenarios were consistent across all Actuaries. Officers advised that it is not mandatory to include the data but that it could be next year and in future the Fund would consider commissioning a Stewardship expert to help provide information required when DLUHC buts in place the Climate reporting statutory guidance.

42.2     The Committee RESOLVED to:

1)         note the draft Independent Auditor’s (Grant Thornton – GT) report to those charged with governance on Pension Fund Accounts 2022/23;

2)         approve the draft Pension Fund Annual Report and Accounts 2022/23.

43.1        The Committee considered a report providing an update on the 2022/23 Quarter 2 Forecast Outturn Position and 2023/24 Outturn.

43.2        The Committee RESOLVED to note the report.

44.1        The Committee considered the Internal Audit Report of the outcome of the Pension Fund - Collection of Contributions audit.

44.2        The Committee RESOLVED to note the report.

45.1     The Committee considered a report providing an update on training needs, opportunities undertaken and planned events introduced by Michael Burton and noted the following points:

1)         The majority of Board and Committee members have completed the self-assessment and officers have analysed results and the training undertaken this year. The diverse training offer reflects the survey outcome.

2)         Procurement and Admissions and Cessations training will be undertaken in December.

3)         Officers are in discussion with IT to develop a unique training offer for committee members and officers to address the Business Continuity and Cyber Security risks.

4)         The Committee discussed the benefits of asking regular committee substitutes to undertake training though noted the challenge of widening the training offer to all Councillors. Officers agreed to consider the points raised and to bring a short report back to a future meeting.

45.2     The Committee RESOLVED to:

1)              Note the outcome of the self-assessment knowledge and survey skills;

2)         Note the training made available in the past year;

3)         Note the type if events planned for the year ahead;

4)         Identify areas Committee members would like training on as a priority and produce a report around the governance of substitutes for the committee.

46.1     The Committee considered a report introduced by Sian Kunert who drew the Committee’s attention to the following risks:

1) Risk G3: Cyber security risk has been heightened to a red risk post mitigation. This is to ensure the Pension Fund reporting is aligned to the wider Council. The National Cyber Security Centre (NCSC) has highlighted the substantial risk to British web infrastructure, with elevated levels of Cyber Crime being reported against all areas of government, particularly in light of the current Ukrainian situation. Cyber attacks are growing more frequent, sophisticated, and damaging when they succeed. The risk mitigation commentary has also been updated to reflect the findings of an extensive review of the systems used by the Pension Team. No material weaknesses were identified with some minor suggestions on improvements that can be made and these recommendations are being acted upon. A standalone meeting on this matter is recommended for the Committee and Board.

2)  Risks G2 and G4: these risks have been reduced in their severity, these risks relate to Governance. In February 2023 the risk scores were increased due to the uncertainty caused by a significant number of expected vacancies on the Pension Board. As these positions are now filled it is recommended the risk levels be returned to previous levels.

3) Risk I4 – Officers recommended the risk level be reduced to an amber risk. There has been progress in relation to ACCESS pool and an Operator has now been put in place.

46.2        The Committee RESOLVED to review and note the Pension Fund Risk Register.

47.1     The Committee considered a report introduced by Sian Kunert and Andrew Singh who drew the Committees attention to the following points:

1)    The Investment work plan sets out plan for next 12 months

2)    Due to the timing of the November meeting the usual Quarterly Performance Report for Q3 2023 is not ready. Isio have provided a summarised version of the report for Pension Committee attached as Appendix 2 of the report.

3)    The Quarterly performance report was disappointing and the response and plans covered in the report.

4)    Interest rates have been rising, the last two chances to increase have been held and inflation is reducing however the Bank of England will keep interest rates high to support this and markets have now accepted this.

5)    The various credit mandates posted mixed results in both absolute and relative terms as UK Gilt yields rose and spreads widened by varying degrees across credit sectors.

6)    A number of the benchmarks are linked to interest rates and inflation so benchmarks are structurally higher and returns haven’t kept pace

7)    The longer term returns at Fund level remain robust, with private equity assets adding significant value.

8)    The private equity mandates have delivered very strong performance over the 3 and 5 year periods, however the performance has been largely negative over the last 12 months, however we saw an upturn in the most recent quarter.

9)    UK equities performed well, largely driven by the energy market, with the sector benefitting from a rise in the oil price.

10)An allocation to private credit needs to be implemented and more information will come to the Committee.

11)UBS Infrastructure is of concern given the very weak performance which was driven by one particular investment, Archmore Fund I. Osmosis and Storebrand showed an unusual level of underperformance and more detail will be provided in the next report to Committee.

12)Sustainable mandates have underperformed but this is common, WHEB and Wellington are both high conviction and therefore can be impacted by the performance of one holding.

13)The benchmark of the current asset allocation of the Fund has now been updated following the strategy day.            

14)More recent acquisitions are judged against a different benchmark which makes it hard judge performance consistently. Some funds are thematic which makes it hard to measure them against traditional benchmarks the consultants were asked to look into suitable benchmarks for performance monitoring.

15)There are a variety of ESG mandates on the market with more expected, driven by assumption that this will be the default way to invest. If ESG is well managed then it has the ability to add value.

16)This is a diversified portfolio so not everything will do well at the same time; the focus is on good long term performance e.g. Baillie Gifford have now recovered from a challenging period. Rational is that asset allocation is key as this dictates performance.

17)The Carbon Foot printing data was previously produced by  ...  view the full minutes text for item 47.

48.1     The Committee considered its work programme, introduced by Sian Kunnert.

48.2     The Committee noted that the Pension Board now receive a summary of the meetings to increase their oversight of the governance framework and that training items are included and members should inform officers of any training attended.

48.3     The Committee RESOLVED to agree the work programme.

To consider excluding 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).

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).

50.1  The Committee considered the exempt Investment report.

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

50.3  The Committee RESOLVED to note the report.

51.1  The Committee considered the exempt risk register.

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

51.3  The Committee REOLVED to:

   1)            Note the report; and

   2)           Approve the revised Death Grant Policy.

52.1     The Committee considered a report providing an update on the Breaches Log andoutstanding or new Internal Dispute Resolution Procedure (IDRP) cases.

52.2     A Summary of the discussion is set out in the exempt minute.

52.3     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.

53.1     The Committee considered a report providing an update on the latest admissions and cessations of employers within the Fund.

53.2     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