Agenda item

6.1.        The Board considered a presentation by Richard Warden (RW), the Fund’s Actuary, about an employer asset tracker programme called HEAT.

6.2.        Angie Embury (AE) asked whether HEAT was a reliable piece of software. RW confirmed that it was well developed and reliable and has been used successfully by Local Government Pension Schemes (LGPS) in Manchester, Lothian and Cheshire for several years.  OO added that four of the administering authorities in the ACCESS pool  including East Sussex – were considering purchasing it.

6.3.        Councillor Brian Redman (BR) asked whether the ability of HEAT to create bespoke employer investment strategies and monthly employer asset reports would be used for all 140 employers in the East Sussex Pension Fund (ESPF) and whether this would be difficult to manage. OO said that HEAT would help to map out a bespoke investment strategy for an employer known to be financially risky to the Fund and that the monthly reports would then help to manage the performance of that employer, which would be very difficult to do without the up-to-date account information HEAT provides. This approach, however, would not need to be applied to all 140 employers and most would adopt the Fund’s main investment strategy and receive asset reports at most quarterly. RW added that most funds have no more than three investment strategies for employers. These include the main fund; a sub-fund for cash flow negative employers that contains more income generating assets; and a sub-fund for more financially insecure employers that emphasises protective assets such as bonds.

6.4.        Sue McHugh (SM) asked whether the employer asset reports could help map out an employer’s potential future contribution rates to the ESPF. RW confirmed that HEAT would help to provide this information. Wendy Neller (WN), Pensions Strategy and Governance Manager, added that HEAT can assist in the provision of information for employers, with free and timely funding reports that provide valuations of assets, liabilities etc. that previously could only be provided by costly actuarial reports.

6.5.        AE asked whether HEAT will help to identify employers that are making late monthly contributions. WN explained that there is already a policy in place where if an employer does not pay its contributions on the 19th of the following  month ESPF will write to the employer reminding it of the need to pay and the risk of fines if it does not, but HEAT will complement this process.

6.6.        Diana Pogson (DP) asked whether significant changes will need to be made to the pension administration teams or the data they collect to implement HEAT.  WN confirmed that this would not be the case. OO added that the presentation would not have been brought to the Board for consideration if officers did not feel assured that the system could be implemented.

6.7.        BR asked whether it was feasible to manage difficult employers if they are entitled to be in the fund regardless. RW agreed that – in the main – scheduled bodies cannot be removed from the ESPF but would hopefully see the benefit of a bespoke investment strategy; on the other hand the fund has significantly more control over admitted bodies.

6.8.        The Chair asked whether employers with an alternate investment strategy had ring-fenced assets. RW confirmed that HEAT can either notionally ring-fence ESPF assets to particular sub-funds or can specifically allocate assets to particular employers. DP observed that it would depend on the risk the employer posed to the Fund whether it was worth physically separating its assets.

6.9.        The Board agreed that the fee of £15 per employer per month for HEAT was not insignificant (amounting to around £25,000 per year)  so recommended that officers were first of all clear how the system would be implemented, and clear of the benefits the system would bring to themselves and to employers.

6.10.      The Board RESOLVED to note the report.