Agenda and minutes

To note any changes to the membership.

1.1           There were no changes to the membership.

1.2           The Chair welcomed Serena Simons, the new Employer Representative, to the Pension Board.

To receive declarations of interest by Members and Officers of any pecuniary interest or any significant interest in matters on this agenda.

2.1      There were no declarations of interest, other than the standing declarations already made by Members.

To approve the minutes of the Pension Board meeting held on 18 July 2024

3.1      RESOLVED: That the minutes of the meeting held on 18 July 2024 be approved as an accurate record of proceedings.

Report of the Head of Operational People Services.

4.1      The Board received an update on the Key Performance Indicator (KPI) data from Hampshire Pension Services (HPS) from June 2024 to September 2024, the final queries following the 2024 annual returns and the data benchmarking exercises. The Board heard that the KPIs data provided showed 100% compliance with the agreed KPI standards and that interfund and transfers in and interfund and transfers out were new reporting categories in line with the requirements for the annual report. The Board noted that the most challenging area was Interfund and transfers into the Fund and that HPS would continue to highlight cases where they exceeded 18 months in the workflow.

4.2      The Board heard that there had again been an increase in members signing up to the Members Portal to 46.09% which includes take-up across all areas of the membership.  The Board discussed how this was still a relatively low take up and considered whether it would be beneficial to visit employers to demonstrate the benefits of using the portal and to introduce pension champions within the smaller employers to ‘sell’ them the benefits of having direct access to information regarding their pension.  The Board noted that emails were always sent in September advising members to sign up to look at their annual benefit statement and that they were also encouraged to go onto the portal to look up an estimate and/or retirement benefits. 

4.3      The Board was pleased to hear that all the data work had been completed and that good progress was being made regarding this year’s annual returns.  The Board heard that 15 employers had been identified as having major data quality issues (red rating) which was where employers have 5% or more queries on their active membership numbers.  The Board noted, however, that there had only been 255 queries in 2024 which was a significant reduction from the two previous years, 455 in 2023 and 760 in 2022. 

4.4      The Board considered the entitlement members have if over 55 and made redundant and how a number of schools going through reorganisations had not been aware of the pension costs of making such staff redundant.  The Board noted that work would be carried out to ensure that executive heads and governing bodies were made aware of the consequences of their decisions and that they were able to contact HPS for guidance at any time.

4.5       The Board considered the proposal to look at appointing a new Additional Voluntary Contributions (AVC) provider so that employers could potentially offer a Shared Cost AVC (SCAVC).  They noted that this allowed the member and employer to save on National Insurance (NI) contributions as well as tax and that the more members that do this the bigger the saving for the employer.  The Board considered that it would be beneficial to appoint one provider that could offer both the AVC and the shared SCAVC.

4.6      The Board welcomed the collaboration between the London Funds and considered there was a desire between all political  ...  view the full minutes text for item 4.

Report of the Head of Operational People Services.

5.1      The Board received an update on the various projects and governance activities being undertaken by the Pension and Payroll Team to improve the administration of the COWPF LGPS. 

5.2      The Board discussed how the Guaranteed Minimum Pension Project (GMP) was going to plan, and were pleased that Intellica Ltd had now finished reviewing all the manual cases and that there was no extra work required.  The Board heard that there were 15 members getting a decrease and 9 members receiving an increase and that it was intended that any changes in benefit would occur before the April 2025 Pension increases.  The Board heard how officers were expecting more queries, possibly complaints, in December and January when people suddenly realised they had less money in their banks.  The Board noted details of the three complaints which had been dealt with as Stage 1 Internal Dispute Resolution Procedure (IDRP) cases and that officers were working in collaboration with HPS with each query to track progress.

5.3      The Board was disappointed that the launch of the Pension Website had been delayed due to the lack of resources to help with its content design, creation and curation due to competing priorities.  The Board heard however that an officer from the digital team had now been recruited to start creating the website which would include specific pages so that people in different stages of their career could follow their journey to find out information that was relevant to them. It would also promote the sign up to the members portal. The Board noted a demonstration of the finished product would be given at the next Board meeting and that the Pension Fund Committee had agreed to an extension of the website hosting at Hymans Robertson until March 2025.

5.4      ACTION: That details of the Pension Dashboard and the wrap up of the McLeod project be included in the report to the next Pension Board.

5.5      RESOLVED: That the report be noted.

Report of the Tri-Borough Director of Treasury and Pensions.

6.1      The Board discussed the report which outlined the top five risks for the governance and pensions administration which were set out in the report. 

6.2      The Board heard how the risks had remained the same as there was still significant volatility and unease with risks in global investment markets due to the conflict between Russia and Ukraine and Israel and Gaza.  They also heard how the US election has impacted the price of equities, especially in the US equities market and that Bitcoin was back in favour again. The Board noted that the underperformance against the benchmark continued to potentially be a drag on the net value of the fund over time.

6.3      The key themes that emerged from the Committee discussion were:

·       how the markets had rallied after the US elections and the potential impact on the UK economy and tariffs creating global trade risk in the portfolios.

·       the vulnerability of global markets and managing the risk in an open Pension Fund with an exceptionally long term membership/beneficiary horizon. 

·       the importance of asset diversification and to understand what risk appetite there was and address it through the strategic asset allocation.

·       the growth in the Fund, despite market volatility over the past 3 to 4 years, which indicated that the asset allocation was performing well.

·       the importance of closely monitoring the performance of the sustainability of funds.

·       the importance of constantly monitoring investments and being aware of the role and contribution to the overall performance of the Fund.

·       how passive funds had been performing well.

·       Whether it had been a good idea to reduce the equity holding by 5%.

·       the risks with continuously trying to outperform the markets, especially within the fast moving technology sector, versus investing in the lowest risk investments as the returns have proven to be steady.

·       the potential implications of the recommendations of the Taskforce on Climate Related Financial Disclosures (TCFD) on portfolios.

6.4      The Board considered that it was about taking an appropriate risk and not necessarily the lowest risk because the risk needed to match the profile of the liabilities to ensure that there was matching with liabilities.   The Board then heard that it was appropriate to take some of the higher risk assets out and move them into income generating assets to help with the cash flow issues as pensions increase with inflation,

6.5      The Board emphasised that the Fund should never forget that its primary function was to pay the retirees’ pensions.

6.6      RESOLVED:

           1)        That the top five risks for the Pension Fund be noted.

2)       That the cashflow position for the pension fund bank account and cash held at custody, the rolling twelve-month forecast and the three-year forecast be noted.

Report of the Tri-Borough Director of Treasury and Pensions.

7.1      The Board received a report setting out the performance of the Pension Fund’s investments to 30 June 2024, together with an update on the London Collective Investment Vehicle (LCIV). The Board discussed that the Fund had returned 1.4% net of fees over the quarter to 30 June 2024, underperforming the benchmark by 1.0% which had been attributed to the relative under exposure to technology stocks in two of the LCIV’s Global funds, and how the Fund had just outperformed the benchmark in November for the first time in a long while.  The Board noted that this emphasised the volatility within the market. The Board noted that over three years the underperformance was 2.4% net of fees.

7.2      The Board heard that at the Pension Fund Committee meeting on 17 October 2024, the Committee elected to rebalance the portfolio to bring the holdings in line with the strategic asset allocation. The Board noted the top 10 holdings within the equity mandate all of which were performing well.

7.3      The Board discussed that it was part of the government’s agenda to enable Funds to invest in infrastructure projects (such as airports and the redevelopment of Canary Wharf) in the same way that some Australian and Canadian Superannuation Funds had done. The Board considered that this type of diversification would be a risky step and should be left to more specialist financiers.  They emphasised the importance of investing in passive equity funds as the primary function of the Pension Fund was to maintain a steady income to pay for pensions.

 7.4     Terry Neville specifically raised the issue of the poor recruitment and retention of senior staff, particularly Chief Investment Officers within the London CIV which he and other board members considered strongly indicated some weakness within the organisation and its senior management team.  Officers agreed that the London CIV had struggled to retain a long term CIO throughout its history. However, it was widely accepted that the LCIV’s recent direction and focus were more positive.  It was suggested that the new Chief Executive be invited to attend the next Pension Board meeting to give the Board an opportunity to express its concerns. 

7.5      The Board expressed concern regarding specific investments (Aberdeen and Bailey Gifford) that had not performed well for a while.

7.6      ACTION: That the Chief Executive of the London CIV attends a Pension Board meeting in 2025. 

7.7      RESOLVED: That the under-performance of the investments, and the updated funding levels to 31 March 2024 be noted.

Report of the Tri-Borough Director of Treasury and Pensions.

8.1      The Board received the Pension Fund Account Report and Statement of Accounts 2023/24 and heard that there were no additional questions from the external auditor which put the Pension Fund in a particularly good position for the council’s closure process. 

8.2      The Board discussed the Pension Fund’s appetite for risk and how it was expected that there would be volatility in the markets but that, in the long term, investment performance would trend upwards.  This was the reason that only after a sufficient timespan regarding poor performance by a specific manager would questions be asked about a specific investment portfolio.  The Board noted that long-term performance of the Fund was key.  

8.3      The Board congratulated all the officers on their hard work and the good relationship that they had built up and had with Hampshire Pension Service.

8.4      RESOLVED: That the Board noted the Pension Fund Annual Report and Accounts for 2023/24.

8.1      It was noted that the next meeting will be held on the 30 January 2025.

9.        TERMINATION OF MEETING

9.1      The meeting ended at 8.24pm.