Agenda item

1.1.        The Board considered an update on the activities undertaken by the ACCESS group. 

1.2.        The Chair informed the Board that he had emailed the chairs of the other 11 pension boards in the ACCESS Group with the intention of agreeing what regular information the boards will request from ACCESS. This is to avoid placing excessive demands on ACCESS to produce different sets of data on an ad hoc basis for each board. He was of the understanding that the Pensions Regulator did not intend to mandate a pension board for Local Government Pension Scheme (LGPS) pooled groups, so it would be up to local authorities to develop their own arrangements. 

1.3.        The Chair asked for clarity about when ACCESS will be able to deliver the projected annual £30m savings. OO said that individual funds will begin to transfer liquid assets to the pooled fund from 1 April 2018. This process will take 2-3 years and the savings should be realised at the end of this process. OO added that the £5.2m annual saving from pooling passive funds to a single pool managed by UBS has reduced the management fees for passive investments for the ESPF from £1.2m to £600k.

1.4.        OO said that the Operator has been shortlisted to three potential organisations.  A decision will be made by the ACCESS Joint Governance Committee (JGC) on 13 December 2017 to select an Operator. The Pension Committee will consider the issue further at their 27 November meeting.

1.5.        OO explained that only 1% of ESPF’s assets are allocated to infrastructure and the Pension Committee will be asked to agree to the principal of increasing them to 4% to meet the aspirations of the ACCESS Group.

1.6.        Angie Embury (AE) observed that the pooling groups had been set up in the first place to help fund national infrastructure. The Chair wondered whether pooled groups will be directed by government to invest in infrastructure, whether this would include affordable housing, and what effect this would have on return on investment.

1.7.        OO explained that investment in specific infrastructure will not be straightforward as current infrastructure investments will take up to 15 years to mature before they can be moved elsewhere. The definition of infrastructure is also unclear, with LGPS defining it as utilities, roads etc. and not housing. Investment also needs to reduce a pension fund’s deficit and the burden on its employer representatives; this may not be achieved investing in certain infrastructure.

1.8.        AE asked whether there will be union representation on the JGC. OO said that there was not at the current time as the composition of the JGC includes a single representative of each of the 11 members who is nominated from the local authority’s pension committee. The JGC is, however, due to consider the matter of its composition in the future. OO added that the JGC will be responsible primarily with the hiring and firing of investment managers but the rest of the functions will remain with local pension committees, who will be assisted by pension boards and will be able to influence the JGC. This means there will still be union representation to the decision making process for the ESPF.

1.9.        The Chair observed that the ACCESS arrangements are likely to be tested once they are up and running, for example, how member organisations respond when investment managers’ performance is below the expectations of some member LGPSs and above the expectations of others. He also expected employers may take a keen interest if lower returns start to impact their burden of contributions to their funds.

1.10.      The Board RESOLVED to note the report.