Agenda and minutes

To receive any apologies for absence.

Mr P Turner has given his apologies for this meeting.

Apologies for absence were received from Mr S Collins, Mr S Haraldsen, , Mr P Thornton and Mr P Turner.

To note the Terms of Reference of the Committee and any changes to membership.

Mrs H Carrick will substitute for Mr P Turner at this meeting.

The Committee’s Terms of Reference and membership were noted.

Mrs H Carrick replaced Mr P Turner as a member of the Committee for this meeting only.

Members are invited to disclose any disclosable pecuniary interest they have in any item on the agenda which comprises

1          Details of any employment, office, trade, profession or vocation carried on for       profit or gain.

2          Details of any payment or provision of any other financial benefit (other than from the authority) made or provided within the relevant period in respect of any expenses incurred by you in carrying out duties as a member, or towards your election expenses.  (This includes any payment or financial benefit from a trade union within the meaning of the Trade Union and Labour Relations (Consolidation) Act 1992).

3          Details of any contract which is made between you (or a body in which you have a beneficial interest) and the authority

(a)       Under which goods or services are to be provided or works are to be           executed; and

            (b)       Which has not been fully discharged.

4          Details of any beneficial interest in land which is within the area of the authority. 

5          Details of any licence (alone or jointly with others) to occupy land in the area of the authority for a month or longer. 

6          Details of any tenancy where (to your knowledge)

            (a)       The landlord is the authority; and

            (b)       The tenant is a body in which you have a beneficial                                                     interest.

7          Details of any beneficial interest in securities of a body where

(a)       That body (to your knowledge) has a place of business or land in the          area of the authority; and

(b)       Either –

(i)      The total nominal value of the securities exceeds £25,000 or one        hundredth of the total issued share capital of that body; or

(ii)     If that share capital of that body is of more than one class, the total nominal value of the shares of any one class in which the relevant person has a beneficial interest exceeds one hundredth of the total issued share capital of that class.

In addition, you must also disclose other non-pecuniary interests set out in the Code of Conduct where these have not already been registered.

Note

A “disclosable pecuniary interest” is an interest of a councillor or their partner (which means spouse or civil partner, a person with whom they are living as husband or wife, or a person with whom they are living as if they are civil partners).

There were no disclosures of interest made at the meeting.

RESOLVED,     that the press and public be excluded from the meeting during consideration of the following reports as they contain exempt information relating to the financial or business affairs of any particular person (including the authority holding that information) by virtue of Paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972:-

Item 15 – Verbal Update on Border to Coast Pensions Partnership

Item 16 – Half Year Update of the Pensions Fund Budget 2021/22 (Part 2)

Item 17 - Monitoring Report for the Quarter ended 30 September 2021 (Part 2)

Item 18 - Cumbria LGPS Investment Sub Group Activity Report to November 2021

Item 19 – Verbal Update – Emerging Issues

Item 20 – Closing Comments

To confirm as a correct record the minutes of the Cumbria Pensions Committee held on 21 September 2021

RESOLVED that, the Minutes of the meeting held on 21 September 2021 be approved as a correct record.

This is a standing item.  To receive concerns, queries and comments from non-County Council employers and individual members of the Cumbria Local Government Pension Scheme

There were no representations made at this meeting of Cumbria Pensions Committee.

To receive for information a schedule of future meetings of the Cumbria Pensions Committee

The schedule of future meetings that had been published with the Agenda was noted.

A short discussion took place on the Committee holding its September meeting in Edinburgh. A member questioned whether the meeting should take place in Edinburgh given the Local Government Review (LGR) process. The Chair hoped that LGR would not impact upon the Pension Fund and advised that officers would be dealing with the matter of the Edinburgh meeting. The Director of Finance (S151 Officer) advised that the September 2022 meeting would still involve this Committee rather than the Shadow Authority. Discussions progressed to suggest that this meeting may be better placed in Leeds where the Fund’s investment pool is based.

To receive the minutes of the BCPP Annual General Meeting held on 20 July 2021 and the Joint Committee Meeting held on 30 September 2021

The Minutes of the BCPP Annual General Meeting held on 20 July 2021 and the Joint Committee meeting held on 30 September 2021 were presented to the Committee.

The Chair advised that he had attended the 20 July 2021 meeting and all resolutions had been agreed unanimously. As he had not been present at the 30 September 2021 meeting, the Senior Manager - Pensions and Financial Services reported back to the Committee. Mrs D Burnet was congratulated on her re-election onto the Joint Committee.

RESOLVED that, the minutes of the BCPP Annual General Meeting held on 20 July 2021 and the Joint Committee Meeting held on 30 September 2021 be noted.

To receive a report from the Director of Finance (Section 151 Officer)

A report was considered from the Director of Finance (S151 Officer) regarding an update from the Cumbria LGPS Local Pension Board. The report summarised matters discussed, issues arising from and any recommendations made by the Cumbria LGPS Local Pension Board at its recent quarterly meeting, held on 14 October 2021.

The Chair of the Board presented the report. She advised that the Board was waiting for the outcome of a number of consultations and that it was monitoring the new software system being introduced at LPPA which had been outlined by its Operations Director at the Board meeting.

Discussion ensued on the programmed meeting dates of the Board and the Pensions Committee. The Chair of the Board considered that the Board would be better informed if they saw officer reports prior to the Committee seeing them. The Chair referred the matter to officers. The Director of Finance (Section 151 Officer) explained the role of the Board was to have oversight of matters noted by and decisions made by the Pensions Committee and therefore it is appropriate that the Board meetings should follow each Pensions Committee meeting. It was also noted that the Board may be tasked with additional ad-hoc tasks/issues to look into on behalf of the Committee.

The Chair proposed acceptance of the recommendations as set out in the report to the Committee. It was,

RESOLVED that, the update from the Cumbria Local Pension Board be noted.

To receive a report from the Director of Finance (Section 151 Officer)

A report was considered from the Director of Finance (S151 Officer) which gave an update on training and future planned training. The report advised on the good progress made to date against the training plan agreed at Committee in March 2021 as part of the Business Plan.

The Finance Manager - Pensions Investments and Governance presented the report. She highlighted the impact that the COVID 19 pandemic had upon member training and acknowledged that whilst online training suited some topics as it may assist in maximising, attendance it was important to acknowledge that face to face options may better suit more complex or lengthy topics. Members’ attention was drawn to the good progress made on all the topics in the 2021/22 Training Plan.

Members were asked to return their training needs assessment questionnaires to the Finance Manager - Pensions Investments and Governance by 20 December 2021 so that topics highlighted as training needs could be factored into the training plan for 2022/23.

The Chair proposed acceptance of the recommendation as set out in the report to the Committee. It was,

RESOLVED, that progress towards the delivery of the 2021/22 Training Plan be noted.

To receive a report from the Director of Finance (Section 151 Officer)

A report was considered from the Director of Finance (S151 Officer) regarding the Half-Year update of the Pension Fund Business Plan and Administration Budget 2021/22. The report advised Members of the progress towards the delivery of the 2021/22 Business Plan and the projected 2021/22 budget outturn for the Cumbria LGPS including variances against the budget.

The Senior Manager - Pensions and Financial Services presented the report. She commented positively on the progress made against the Business Plan. Members’ attention was drawn to the anticipated increased volume of work facing officers and the impact that it is likely to have on the work of the Committee: this may result in larger Agendas for the Committee in future. Details about the significant amount of work undertaken on the Stewardship Code (2020) was reported. The Finance Manager - Pensions Investments and Governance and the Technical Finance Officer - Pensions were thanked for their work on this which was in addition to their current workload.

In terms of the Budget, members noted the £0.429m overspend projected for administering the Cumbria LGPS, this was due in the main to increased Investment Manager fees. In addition, a small overspend was forecast on the staffing budget due to the expected pay award and the £0.054m overspend on legal fees related to a proposed investment manager activity.

There were no questions on this report.

Ms Scott, the Investment Advisor talked to members about the costs associated with Local Government Review (LGR) and it was confirmed that costs incurred by the Fund would not be passed to the Employers but would be covered by the LGR reserve.

The Chair proposed acceptance of the recommendations as set out in the report to the Committee. It was,

RESOLVED, that members note the following:

1     The progress against the approved Business Plan.

2     The 2021/22 half year projected outturn position against budget for the Cumbria LGPS and forecast overspend of £0.429m (6.6% of the approved budget).

To receive a report from the Director of Finance (Section 151 Officer)

A report was considered from the Director of Finance (S151 Officer) regarding the Monitoring Report for the Quarter ended 30 September 2021 - Part 1. The report advised Members of any material risk, administration, investment performance, governance, and policy issues of the Fund for the quarter ending 30 September 2021. The report also identified any current governance issues, national regulatory changes and outlined the performance of the whole portfolio and movement on liabilities over the quarter to 30 September 2021.

The Group Finance Manager - Pensions Investments and Insurance presented the report. Members were advised that in terms of Risk Management, there were no new risks and none had been removed from the Risk Register but following a review of the risks, the target score for the likelihood of the Information Security Arrangements risk arising had been increased from a score of 2 (“unlikely”) to 3 (“possible”) and the likelihood of the Pensions Administration Process risk arising had been reduced from 3 (“possible”) to 2 (“unlikely”). The reasons for amending the scores were detailed for the Committee. It was noted that the Covid-19 Impact on Pensions Administration risk and the COVID-19 Impact on Investments risk would be reviewed in March 2022 to consider if this can be managed as ‘business as usual’.

The Group Finance Manager - Pensions Investments and Insurance was pleased to report on LPPA’s good performance figures in particular relating to dealing with deaths. It was highlighted that officers were working with LPPA on outstanding leaver forms to resolve a number of issues.

In terms of Investment Management, the Group Finance Manager - Pensions Investments and Insurance was pleased to report on the increased value of the Fund’s assets during the quarter and the continued outperformance over the longer term.

With regard to Policy and Regulation, it was reported that little progress had been made nationally in the quarter on a number of areas such as the McCloud resolution due to the need to await the publication of regulations or guidance. Members were asked to note changes to the BCPP Responsible Investment Policy and Corporate Governance and Voting Guidelines. Members also noted a BCPP Shareholder decision which had been taken under delegated powers by the Director of Finance (Section 151 Officer) and the Chair.

A number of members added their support to the Group Finance Manager - Pensions Investments and Insurance’s earlier suggestion that COVID 19 impact on Pensions Administration could become ‘business as usual’. One member indicated that he thought the risk of ‘COVID 19 impact on investments’ was appropriately rated as markets were far from through the impact of COVID 19. Mrs Scott, the Investment Advisor talked about the impact of COVID 19 on the markets and advised that whilst investments were doing well, overall yields were reducing and this could negatively impact on employer contribution rates. The Senior Manager - Pensions and Financial Services explained the challenges that COVID 19 had posed to the Fund and that the rating would be revisited once the  ...  view the full minutes text for item 29.

To receive a report from the Director of Finance (Section 151 Officer)

A report was considered from the Director of Finance (S151 Officer) regarding Preparations for the 2022 Triennial Valuation. The report set out the key areas of work being undertaken to prepare for the valuation and outlined some of the key decisions that Members would be required to make at future meetings as part of the 2022 valuation.

The Senior Manager - Pensions and Financial Services presented the report. Attention was drawn to the vesting date for Local Government Reorganisation which was the same date as when new employer contribution rates became effective. Officers had been liaising with the Actuary on managing the Valuation process and no issues had arisen to date. She outlined how the Valuation would progress and commented on how investments had performed well following the initial impact of the global pandemic. She advised members on the impact of COVID 19 on investments and guided members through the next steps in the process highlighting key milestones. Officers were working with Scheme Employers to ensure data was robust and clean so reliable figures were available. Members would be kept updated on progress.

A member asked about how Local Government Reorganisation would impact on the 2022 Triennial Valuation’s timetable. The Director of Finance (Section 151 Officer) detailed the new Shadow Authority’s budget setting process in 2023/24 would need to account for the outcome of the Valuation, whilst it would be for the existing Committee to review and approve the valuation. Following a member question on how officers intended to communicate with and update Scheme members, the Director of Finance (Section 151 Officer) explained that LGR was progressing on the principle that the Pension Fund would likely remain as one fund for the whole of Cumbria with one of the new unitary authorities taking the role of the Administrating Authority for the Fund. It was requested by the same member that District Councils be updated on progress.

The Chair proposed acceptance of the recommendations as set out in the report to the Committee. It was,

RESOLVED, that the actions taken to prepare the Fund for the 2022 Triennial Valuation be noted.

To receive a report from the Director of Finance (Section 151 Officer)

A report was considered from the Director of Finance (S151 Officer) regarding Responsible Investment - Future Reporting Requirements. The report provided a brief overview of anticipated future changes to LGPS reporting requirements in relation to Responsible Investment. 

The Senior Manager - Pensions and Financial Services presented the report. She did not think that the reporting requirements relating to Responsible Investment would impact on the overarching responsibility of the Fund. Members were informed that reporting requirements were evolving but were similar to regulations introduced for private sector pensions schemes which required reporting on Task Force on Climate Related Financial Disclosure (TCFD) recommendations. The activities that were to be carried out under the TCFD framework were detailed for members. The Senior Manager - Pensions and Financial Services acknowledged the challenges ahead as climate change was an emerging area and data was not yet comprehensive. An increase in workload was anticipated which would have an impact on the budget so further work would be undertaken on costs and resourcing implications.

After being asked by a member how much the exercise would cost, the Senior Manager - Pensions and Financial Services stated that it was, as yet, unknown but officers would liaise with other Funds who had already undertaken the work, to ascertain an approximate figure. BCPP would assist with the work and with securing specialists which would help reduce costs.

A member referred to the importance of succession planning in the Pensions Team. He saw the value in Responsible Investment and the potential benefits in obtaining metrics and setting targets. He thought that although there would be local discretion, there would not be enough to stop it being an expensive and time consuming exercise and agreed that as yet there wasn’t enough reliable data available and that inconsistencies in the data could be exploited to fit certain agendas. He urged that whoever was responsible for setting the guidelines think again as he didn’t think that the expected criteria would generate the best net value.

Mr Sutherland, Investment Advisor expressed his reservations on the ensuing changes, particularly relating to the data, in terms of what would happen to it, what it would be used for and that it should only be used for specific purposes by the right people. He expressed the need for training for all on this issue. Mrs Scott, Investment Advisor concurred and thought that inappropriate inferences could be drawn from incomplete data.

A member wanted to be able to evidence to other organisations what the Fund was doing to address climate change. He had been contacted by a member of the public urging that investment in companies with links to Israel and Palestine did not take place. Mrs Scott acknowledged the members’ concern and stressed the importance of making investment decisions based on accurate and complete data.

The Chair proposed acceptance of the recommendations as set out in the report to the Committee. It was,

RESOLVED, that the report be noted.

There was a ten minute recess at 10.50 am.  ...  view the full minutes text for item 31.

To receive a verbal update on the BCPP

A verbal update and presentation was given on the Border to Coast Pensions Partnership by Ms R Elwell, the Chief Executive Officer at Border to Coast Pensions Partnership Ltd.This covered the progress to date, the Strategic Plan 2022-25 and Responsible Investment.

Ms Elwell thanked the Pensions Team for their support to BCPP. Members were informed of recent personnel changes at BCPP on which the Chair commented positively.

Discussion focussed on ethical investment and the term double materiality which refers to investor’s ability to ‘where possible within the context of fiduciary duty, do no harm’. Ms Elwell commented on the work of BCPP relating to climate change.

Members talked about the identification of risk levels. Ms Elwell advised on how risks were managed and on the work BCPP was doing on the analysis of material risk and reducing the impact of climate change.

A short discussion took place on the investment industry investing in the transition to low carbon technology and the pressure on some companies to be greener. Ms Elwell indicated there are business decisions to be made by companies on the how they transition to low carbon technology.

RESOLVED that, the position be noted.

To receive a report from the Director of Finance (Section 151 Officer)

A report was considered from the Director of Finance (S151 Officer) regarding the Half-Year Update of the Pension Fund Budget 2021/22 (Part 2). The report provided details of the Fund’s investment management fees budget for 2021/22, which, due to their confidential nature, were not reported publicly.

The Senior Manager - Pensions and Financial Services reported on the budget position relating to Investment Managers fees.

The Chair proposed acceptance of the recommendations as set out in the report to the Committee. It was,

RESOLVED, that the 2021/22 half year projected outturn position against budget for investment management fees be noted.

To receive a report from the Director of Finance (Section 151 Officer)

A report was considered from the Director of Finance (S151 Officer) regarding the Monitoring Report for the Quarter Ended 30 September 2021 - Part 2. The report advised Members of any matters that were considered to be Part 2 due to the inclusion of exempt information relating to commercially sensitive matters of third parties and therefore excluded from public disclosure. These arose during the quarter ending 30 September 2021. The matters were generally in regard to either governance or employer issues.

The Finance Manager – Pensions talked members through the report, detailing matters such as new admissions to the Fund and gave a late payment update.

Discussion ensued on the estimation of total fees in the context of global tax claims. The Senior Manager - Pensions and Financial Services advised on the work to be undertaken on this matter.

Members discussed a change to the BCPP Terms of Reference relating to its meeting quorum number. Members identified their preferred quorum number. Ms Ellwood contributed to this discussion commenting on the role of the Committee in question and undertook to report member’s points back to officers at BCPP.

Members were informed about the work undertaken and the controls put in place relating to admissions agreements for employers, ahead of Local Government Reorganisation.

The Chair proposed acceptance of the recommendations as set out in the report to the Committee. It was,

RESOLVED, that

1            The quarterly monitoring Part 2 items of the Fund for the period to 30 September 2021 be received and noted.

2              Members support the approval by the Section 151 Officer of the application to join the Cumbria Fund from:

·         Caterlink Ltd Thornhill Primary School on the basis that a guarantee is provided by West Lakes Multi Academy Trust.

·         Caterlink Ltd West Lakes Academy on the basis that a guarantee is provided by West Lakes Multi Academy Trust.

·         Caterlink Ltd William Howard on the basis that a guarantee is provided by Cumbria Education Trust.

·         Cumbria Teacher Training on the basis that a guarantee is provided by Cumbria County Council.

3          Members note that it is anticipated that all shareholders in BCPP will be asked to agree to a variation to the terms of reference of the BCPP Joint Committee (as set out in the Agreement to cooperate in the pooling of Local Government Pensions Scheme Investments, known as the “Inter Authority Agreement”) to reduce the quorum for that group; and agree that, should the timing of the decision fall outside the Committee cycle and cannot be reasonably deferred, the decision be delegated to the Director of Finance (s151 Officer) in consultation with the Chair.

To receive a report from the Director of Finance (Section 151 Officer)

A report was considered from the Director of Finance (S151 Officer) regarding the Cumbria LGPS Investment Sub Group Activity Report to November 2021. The report outlined activities of the Investment Sub Group meetings held on 9 November 2021 (special meeting) and 25 November 2021, including any decisions made by the Section 151 Officer and the proposed future work schedule in respect of the Investment Sub Group.

The Senior Manager - Pensions and Financial Services talked members through the report highlighting consideration of adjustments to the regional allocations within public equity and the level of currency hedging.

A short discussion was held on the proportion of UK asset and debt, the performance of assets and the use of global managers.

Members were advised that the Mr Sutherland was leaving his role as Investment Advisor. His last meeting would be 18 March 2022. The Chair and officers thanked Mr Sutherland for his invaluable assistance and support to the Committee over the years.

The Chair proposed acceptance of the recommendations as set out in the report to the Committee. It was,

RESOLVED, that

1          The Committee notes the work undertaken by Officers, Advisors and the ISG on reviewing the composition of the Fund’s 35% holdings in public equities.

2          The Committee agrees that, subject to the delegations set out in the Constitution (whereby the value of an investment or divestment is less than 5% of the portfolio and the assets meet the criteria set out in the Investment Strategy the decision is delegated to the Section 151 Officer with the assistance of the ISG), both the decision to determine the regional allocations within the Fund’s agreed 35% strategic allocation to public equities, and the implementation of those allocations (including the approval of opportunities for investment) be delegated to the s151 Officer with the assistance of the ISG;

3          The Committee agrees to the unwinding of the foreign currency hedge, from 50% of listed equity investments denominated in overseas currencies, to nil, and reflect the change by revisions to the Investment Strategy Statement (ISS) in the Fund Policy Document

4          The Committee asks that the ISG continue implementation of the tactical changes required to achieve the Fund’s Target Investment Strategy, including assisting the Section 151 Officer to approve opportunities for investment.

5          The Committee agrees to the commencement of the appointment process for an Independent Advisor to the Committee.

6          Members delegate the appointment of an Independent Advisor to the Director of Finance (Section 151 Officer) in consultation with the elected members of the Investment Sub Group (Councillors Mel Worth, Nick Marriner and Stan Collins) and supported by advice from the Fund’s Independent Advisors.

7          Members note the progress of the Investment Sub Group from September 2021 to November 2021

8          Members note the performance of the Fund over the quarter

9          The proposed work programme of the Investment Sub Group for the next reporting period, including to continue planning and implementation of the changes required and research of available opportunities for investment to  ...  view the full minutes text for item 35.

To receive a verbal update on emerging issues

A verbal update on emerging issues was given by the Senior Manager - Pensions and Financial Services. This covered the Responsible Investment Strategy and the Exit Payment Cap.

The Director of Finance (Section 151 Officer) gave an update on the impact of Local Government Reorganisation (LGR) on the Pension Fund.

A Member asked a question on the Government’s involvement in the LGR process.

RESOLVED, that the position be noted

To receive closing comments from the Chair

The Chair thanked members and officers for their attendance.