Agenda and minutes

To receive any apologies for absence.

The Committee stood for one minute’s silence following the recent death of the Queen.

Apologies were received from Mr J Mallinson, Mr P Turner and Mr M Wilson.

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

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

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 13                    Border to Coast Pensions Partnership Ltd Shareholder decisions taken at the Annual General Meeting

Item 14                    Review of Cyber Security Arrangements Within Cumbria Pension Fund

Item 15                    Monitoring Report for the Quarter Ended 30 June 2022 – Part 2 Items

Item 16                    BCPP Presentation: Global Equity Alpha Performance/Proposed Changes

Item 17                    Cumbria LGPS Investment Sub Group Activity Report to September 2022

Item 18                    Verbal Update – Emerging Issues

Item 19                    Closing Comments

To confirm as a correct record the minutes of the Cumbria Pensions Committee held on 16 June 2022

RESOLVED that, the Minutes of the meeting held on 16 June 2022 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.

Attention was drawn to the change of the meeting date of Cumbria Pensions Forum.

To receive the minutes of the BCPP Joint Committee meeting held on 20 June 2022

The Minutes of the Border to Coast Pensions Partnership (BCPP) Joint Committee meeting on 20 June 2022 were presented to the Committee.

The Chair advised that due to his attendance at a Cumbria County Council meeting on the same day, he had not attended the Joint Committee meeting.

The Senior Manager - Pensions and Financial Services updated Members on the business conducted at the meeting. This included who had been elected to the positions of Chair and Non-Executive Director. Vice Chair would be considered at its next meeting. An update was given on the ongoing Governance Review and changes to the equity of the pool company. It was anticipated that Members would consider this at a later meeting.

RESOLVED that, the minutes of the Border to Coast Pension Partnership Joint  Committee meeting on 20 June 2022 be noted.

To consider 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 by; issues arising from; and any recommendations made by the Cumbria LGPS Local Pension Board (CLPB) at their recent quarterly meeting, held on 15 July 2022.

The Chair of the Pension Board presented the report. She confirmed that she had fed back the comments made by Pension Committee Members at its June meeting about the remit of the Board in relation to the Committee.

The Chair of the Board referred to the issue of cyber security. AON had provided feedback on the Fund’s current arrangements and they were in line with other funds. She considered that it would be useful for the Scheme Advisory Board to collate information on how other funds dealt with cyber security.

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

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

To consider 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 June 2022 - Part 1 items. The report advised Members of any material risk, administration, investment performance, governance, and policy issues of the Fund for the quarter ending 30 June 2022. It also identified any current governance issues and national regulatory changes and outlined the performance of the whole portfolio and estimated change of liabilities over the quarter to 30 June 2022.

The Group Finance Manager – Pensions, Investments and Insurance presented the report. No risks had been added or removed and scores had not changed on the Risk Register following the recent review. The Investment Advisors were thanked for their contribution on this. New wording had been proposed for the Inflation risk following a recommendation from the Investment Sub Group.

Members were provided with the reasons for the Local Pensions Partnership Administration (LPPA) reduced performance levels between April and June 2022. This related to the ongoing transition of all LPPA customers to a new administration system, standardisation of reports and working to tighter timescales. An improvement in performance against targets is expected this quarter.

The number of employers in the Fund remained at 127.

In terms of Investment Management, the value of the Fund had decreased but this was a reflection of the turbulence in the markets due to increases in inflation and the war in Ukraine. Members were however reminded to focus on the long-term performance of the Fund. Members were advised that the BCPP Robeco proxy voting reports were now online.

An update was given on the McCloud judgement. The Public Service Pensions & Judicial Services Act had now received Royal Assent which paved the way for the draft revised regulations to be published early in 2023. Members would be updated when appropriate.

A Member welcomed the work on cyber security and inflation risks. He talked about the increase in inflation and the impact of the war in Ukraine on prices and assets and ultimately, the Fund. His concerns focussed on the poor performance of LPPA in the quarter. He understood the mitigating reasons but thought targets should have been reached. He asked that his concern be conveyed to LPPA.

The Senior Manager - Pensions and Financial Services talked to Members about the focus on inflation. The ISG had spoken with the Actuary on the matter and a sense check had been undertaken on what could realistically be done within the market context as many Funds were chasing the same assets. Officers were being pragmatic about how to invest in the current increasingly challenging circumstances.

The Group Finance Manager – Pensions, Investments and Insurance agreed with the Member on LPPA’s SLA performance. However, he also commented on its positive performance in the past, highlighted that he had raised the anticipated drop in performance at previous Committee meetings and expected that performance would improve.

A Member stated that due to the cost of living crisis, people may stop contributing  ...  view the full minutes text for item 84.

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

A report was considered from the Director of Finance (S151 Officer) regarding the Draft Annual Report and Accounts 2021/22. The report provided an overview of key proposed changes to the Annual Report document, including the presentation of some of the Fund’s Policy document and amendments to the Fund’s draft Stewardship Code Report. It recommended that the Committee approves the 2021/22 Annual Report of the Cumbria Pension Fund for publication on the Pension Fund’s website before 1 December 2022, subject to the inclusion of the final audited accounts, the complete Fund Policy document and any final presentational amendments.

The Finance Manager - Pensions Investments and Governance talked Members through the report. Members were informed about the change in timescales for this year’s accounts which included publication deadlines. The Fund’s external auditors Grant Thornton would not be able to complete the Audit of the Council’s accounts until close to the 30 November 2022 deadline however the Pension Fund Audit work would be mostly completed by the end of Sept 2022.

It was noted that the Draft Audit Findings Report had not been included in the report circulated with the Agenda but the Auditor had advised that they anticipated issuing an unmodified and unqualified report opinion which was a positive outcome for the Fund. Members were advised that the Additional Voluntary Contributions note 15 had been updated and this was tabled at the meeting.

The Finance Manager - Pensions Investments and Governance drew Members’ attention to the main amendments to the Fund Policy Document. Also highlighted was the inclusion of the revised Stewardship report for 2021/22, last year’s report had been approved as being compliant with the 12 ‘apply and explain principles’ by the FRC in 2021. She was pleased to report that the publication of the Draft Annual Report was expected to be ahead of the deadline of 1 December 2022.

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

RESOLVED, that the Committee:

1          Notes the anticipated opinion provided by the Fund’s external auditor Grant Thornton on the Cumbria LGPS Annual report and Account.

2          Approves for publication, (subject to the inclusion of the final audited accounts, the complete Fund Policy Document and any final presentational amendments) the Cumbria LGPS Annual Report and Accounts 2021/22.

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

A report was considered from the Director of Finance (S151 Officer) regarding the 2022 Actuarial Valuation. The report asked Members to review the updated Funding Strategy Statement (FSS) and approve its distribution to interested parties for consultation in accordance with regulatory requirements.

The Senior Manager - Pensions and Financial Services talked Members through the report. This included an outline of three key parameters proposed by the Actuary and the proposed mechanism to deal with the valuation. The Valuation’s process and timetable were explained to the Committee. Additionally, how Local Government Reorganisation was being factored into the process was also explained. Mark Wilson from Mercer Ltd, as Actuary to the Fund, was in attendance at the meeting to guide Members through the work being undertaken. He was thanked for his support by the Senior Manager - Pensions and Financial Services.

Mr Wilson gave a recap of the results of the 2019 valuation and then summarised the work being undertaken on the 2022 Actuarial Valuation.

A Member stressed that he did not want employers to see the Fund as unaffordable. He referred to the inflation assumption, adding that the Bank of England’s plan for  a two year timeline to get to a 2% rate was optimistic. He asked whether it would be gradual or sharp return to 2%. Mr Wilson advised Members as to market expectations over the next three year period.

After commenting that attitudes to inflation had changed over the years and that the Bank of England was assuming that it could get back to 2% quite quickly, a Member talked about discount rates. He asked what the combined probability rates would be of certain discount rates. Mr Wilson considered that for the 2022 Valuation it would be between 61-73% likely.

Another Member asked how Local Government Reorganisation was taken into consideration as the 6 District Councils and County Council had different rates and what the process would be. Mr Wilson explained how this would be addressed in practice and that more work was required on the disaggregation of Cumbria County Council’s assets and liabilities. It was noted that members’ benefits were set by legislation and so would not be affected. The Director of Finance (S151 Officer) explained that it was likely that all work associated with the disaggregation of the County Council’s assets and liabilities within the Pension Fund would not be able to be completed by Vesting Day and consequently there would be adjustments made after that.

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

RESOLVED, that the Committee:

1          Agrees with the key parameters proposed by the Actuary, subject to consultation with scheme employers), of:

·                                  Discount rate for past service of CPI + 1.25%

·                                  Discount rate for future service of CPI + 2.00%

·                                  Minimum deficit recovery period of 10 years

2          Agrees that surpluses should not be refunded to scheme employers unless their respective funding level exceeds 110%, and then that surpluses should be refunded over 10  ...  view the full minutes text for item 86.

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

A report was considered from the Director of Finance (S151 Officer) regarding the Border to Coast Pensions Partnership Ltd (BCPP) - Shareholder Decisions. The report provided details of the Shareholder Resolutions taken at the BCPP Annual General Meeting (AGM) on 19 July 2022

The Senior Manager - Pensions and Financial Services  talked Members through the report.

Members asked questions on Global Real Estate and the Investment Strategy.

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

RESOLVED that, the Committee:

1          Notes the Border to Coast Pensions Partnership Ltd (BCPP) shareholder resolutions agreed at the BCPP Annual General Meeting on 19July 2022, specifically:

A         To receive the financial statements of BCPP for the year ended 31 March 2022.

B         To re-appoint the external auditors, KPMG LLP, to audit the financial statements for the year to 31 March 2023 and to authorise the directors to agree the external auditor’s fee.

C         To approve the revised Conflicts of Interest Policy;

D         To receive the supporting register of Directors’ interests;

E         To approve the extension to Mr November’s term as a director of the Board to 30 September 2026;

F          To approve, subject to the approval to the changes of Shareholder governance, the search for a new independent non-executive director to serve on the Board of BCPP.

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

A report was considered from the Director of Finance (S151 Officer) regarding a Review of Cyber Security Arrangements within Cumbria Pension Fund. The report advised on the review’s findings and actions to enhance cyber resilience.

The Group Finance Manager – Pensions, Investments and Insurance talked Members through the report.

Members welcomed the recommendations from the review. Comments were made on the importance of protocols against hacking, third parties owning Fund member data, the levy enforced if there was a data breach and the tracking of cyber attacks

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

RESOLVED that, the  Pensions Committee:

1          Notes the review of cyber security arrangements with the Fund;

2          Notes the action plan to further strengthen cyber security arrangements within the Fund;

3          Requests that the Local Pension Board monitor progress against the action plan and report back to the Pensions Committee on progress; and

4          Approves the draft Fund Cyber Governance Strategy.

To consider 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 June 2022 - Part 2 items. 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 including employers in the Fund, tax recovery cases, class actions and fraud cases), and therefore excluded from public disclosure, arising during the quarter ending 30 June 2022. These matters were generally in regard to either governance or employer issues.

The Finance Manager – Pensions talked Members through the report. A Member asked a question on a school’s new admission into the Fund.

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

RESOLVED, that the Pensions Committee:

1          Receives and notes the quarterly monitoring Part 2 items of the Fund for the period to 30 June 2022.

2          Supports the approval by the Section 151 Officer of the applications for admission to the Cumbria Fund from four companies providing services to Scheme employers in the Fund, on the basis that a guarantee is provided by each relevant Scheme employer.

Presentation from BCPP

TO FOLLOW

A detailed presentation was given by Mr G Long and Mr M Kerr from BCPP on Global Equity Alpha performance and the proposed changes.

During the presentation, Members asked questions and commented on the geopolitical risk from China, the manager structure of the sub-fund, in addition to investing in low carbon shares or the penalties from minimising or avoiding carbon, BCPP’s satisfaction with managers and their performance, the investment in Chinese markets and future investment based on past performance.

Following the presentation Members asked questions and commented on the performance of managers and BCPP, the management structure, BCPP charges and investment in China.

The Chair asked that officers maintain regular dialogue with BCPP regarding its performance.

RESOLVED, that the position be noted

To consider 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 September 2022. The report outlined activities of the Investment Sub Group (ISG) meeting on 1 September 2022, including any decisions made by the Section 151 Officer (none this quarter) and the proposed future work schedule in respect of the Investment Sub Group.

The Finance Manager - Pensions and Treasury talked Members through the report.

There were no Member questions or comments on this item.

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

RESOLVED, that the Pensions Committee:

1          Notes the activities of the Investment Sub Group from June to September 2022;

2          Notes the performance of the Fund over the quarter to 30 June 2022;

3          Following the presentation from Border to Coast Pensions Partnership Ltd (BCPP) on the Border to Coast Global Equity Alpha sub-fund (item 16 on the agenda), agree that the investment continues to be closely monitored by the ISG, Officers and Advisors;

4          Agrees the re-worded Inflation Risk (Risk 3.4) in the Risk Register; and

5          Agrees the proposed work programme of the Investment Sub Group for the next reporting period, including supporting the s151 Officer to continue planning and implementation of the changes required and research of available opportunities for investment to enable the Fund to achieve the Target Investment Strategy.

To receive a verbal update on emerging issues

A verbal update was given by the Senior Manager – Pensions and Financial Services. She commented on the training that the Committee’s Member’s would be receiving on 14 September 2022, the consultation on Task Force on Climate-related Financial Disclosures and Good Governance.

RESOLVED that, the position be noted

To receive closing comments from the Chair

The Chair recommended that following Local Government Reorganisation, the Pensions Committee should retain its September meetings being held away from its usual venue in Cumbria.