Agenda and draft minutes

Cumbria Pensions Committee
Tuesday, 12th June, 2018 9.30 am

Venue: Cumbria House, Carlisle, CA1 1 RD

Contact: Holly English  Email: holly.english@cumbria.gov.uk

Items
No. Item

67.

APOLOGIES FOR ABSENCE

To receive any apologies for absence.

Minutes:

Apologies were received from Mrs H Wall, Mr J Airey, Mr P Thornton and Ms T Barber.

68.

Terms of Reference and Membership

Minutes:

It was reported that Mr D Fairbairn had resigned from the committee owing to ill health.  He has been replaced by Mr L Fisher.

69.

DISCLOSURES OF INTEREST

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).

Minutes:

Mr K McDonald disclosed that his wife and daughter are members of the Local Government Pension Scheme.  

70.

EXCLUSION OF PRESS AND PUBLIC

To consider whether there are any items on the agenda for which the press and public should be excluded.

Minutes:

RESOLVED to exclude the press and public during consideration of Items 9 and 15 to 19 inclusive.

71.

MINUTES pdf icon PDF 113 KB

To confirm as a correct record the minutes of the Cumbria Pensions Committee held on 8 March 2018 (copy enclosed).

 

Minutes:

The minutes of the Pensions Committee held on 8 March 2018 were approved as a correct record.

72.

REPRESENTATION FROM NON COUNTY COUNCIL EMPLOYERS AND DISTRICT COUNCILS

This is a standing item.  To receive concerns, queries and comments from the Cumbria Pensions Board, scheme employees, including the public.

Minutes:

There were no representations made to this meeting of the Pensions Committee.

73.

SCHEDULE OF FUTURE MEETINGS pdf icon PDF 57 KB

To receive for information a schedule of future meetings of the Cumbria Pensions Committee (copy enclosed).

Minutes:

The Committee received the Schedule of Future Meetings published with the Agenda.

74.

Minutes of BCPP Joint Committee pdf icon PDF 89 KB

To receive the minutes of BCPP Joint Committee on 13 March 2018 (copy enclosed).

 

Minutes:

The Committee received the minutes of the meeting of the Border to Coast Pension Partnership Joint Committee held on 13 March 2018.

 

The Chair advised the Committee that shareholders would be invited to nominate two non-executive directors from the Joint Committee.  The Joint Committee would vote on this at its meeting on 10 July 2018.  Cumbria County Council had not made a nomination, as the Council did not support the principle of Joint Committee members being non-executive directors, owing to concerns about potential conflict of interest. The Chair indicated that he would, however, exercise his right to vote. The Joint Committee will also vote on its Chair and Vice Chair at its July meeting.

75.

Update on BCPP Asset Management Company

To consider a report by the Assistant Director - Finance (Section 151 Officer) (copy to follow).

 

Additional documents:

Minutes:

Members resolved to consider this Agenda Item in Part 2 of the Meeting. The  Senior Manager- Pensions and Financial Services introduced a report updating Members on developments across the Border to Coast Pensions Partnership (BCPP), including governance matters, the development of UK Listed Equity sub-fund investments and due diligence undertaken by officers and independent advisers on those sub-funds.

 

Members considered the BCPP draft Governance Charter and requested that a structure diagram contained within it could be made clearer.  Officers agreed to raise this request at the Officer Operations Group of BCPP. The Chair would be advised by the Section 151 Officer on the final draft of the Charter.

 

The Senior Manager advised Members that a draft Conflicts of Interest Policy was due to be considered by the Officer Operations Group and by the Joint Committee before the next meeting of the Pensions Committee. 

 

The Senior Manager explained that a delegation to the Section 151 Officer was sought to enable the Council to participate in shareholder decisions in the summer period between meetings of the Pensions Committee.

 

Members discussed the development of investment sub-funds by BCPP and the continuing due diligence being undertaken by officers and Investment Advisers before a recommendation is made to Committee.

 

Following discussion of the report, Members

 

RESOLVED That

 

a)    The Committee notes the progress on the development of BCPP;

 

b)    The Committee authorises the Section 151 Officer in consultation with the Chair of the Pensions Committee (or in his absence the Vice Chair) to exercise the Council’s vote as a shareholder of BCPP between 13 June 2018 and 10 September 2018, where a shareholder decision is urgent and cannot reasonably be deferred, reporting all decisions taken to the next meeting of the Pensions Committee; 

 

c)    The Committee approves in principle the Governance Charter of Border to Coast Pensions Partnership and authorises the Chair of the Committee to approve the final Charter at the Joint Committee, having regard to the advice of the S151 Officer on the final version of the document;

 

d)    The Committee notes that the Chair will vote in the ballot process for two shareholder non-executive directors and the Chair and Vice Chair of the Joint Committee and that the appointments made will be reported to the next meeting of the Pensions Committee; and

 

e)    The Committee notes the progress on the development of the BCPP UK Listed Equity sub-funds and that a further update will be provided at the special meeting of the Committee on 17 July 2018.

 

76.

CUMBRIA LGPS PENSION FUND - CONSTITUTION REVIEW pdf icon PDF 135 KB

To consider a report by the Assistant Director - Finance (Section 151 Officer) (copy enclosed).

 

Additional documents:

Minutes:

The Senior Manager – Pensions and Financial Services introduced a report advising members of the outcome of a review of the Council’s Constitution to ensure the effective operation of the Cumbria Local Government Pension Scheme (“the Fund”). The report described the proposed changes and their rationale, with the specific proposed changes set out in appendices to the report.

 

The Senior Manager advised that most of the proposed changes were to tidy up the Terms of Reference of the Pensions Committee and Investment Sub-Group to ensure it reflected the pensions regulations, or to provide greater clarity.

 

A more substantive change was proposed to the quorum of the Investment Sub-Group, to permit one of the Section 151 Officer or Deputy Section 151 Officer to be sufficient and one of the two Investment Advisers. It was considered sufficient for one of each to be the minimum attendance. This would support the Sub-Group in being able to work nimbly in assisting the Section 151 Officer. There were no proposals to amend the quorum in respect of elected members.

 

The Senior Manager reported that owing to the timing of the meetings, and following consultation with the Chair of the Pensions Committee, the Constitution Review Group had considered the proposals on 7 June 2018.

 

The Committee agreed a further amendment to the proposed changes, for clarity, so that paragraph 2.1 (d) of Part 2H would read “as nearly constant common contribution rate…”

 

RESOLVED That Pensions Committee recommend to Council that:

 

a)    the revised Terms of Reference for the Cumbria Pensions Committee and Cumbria Investment Sub Group and the delegated authorities to the Section 151 Officer be amended as set out in Appendix 1 and 2 of the report received by the Committee (as further amended by the Committee so that paragraph 2.1 (d) of Part 2H includes the wording “… as nearly constant a common contribution rate…”);

 

b)    when the Scheme of Delegation (Part 3A) is reviewed by Council, the delegated authorities of the Director of Finance (Section 151 Officer) be amended (as set out in Appendix 3 of the report received by the Committee) to explicitly authorise the Director of Finance to terminate the contracts of investment managers and to manage the day to day operation of the Fund in accordance with the Fund Policy Document.

77.

DRAFT ANNUAL REPORT & ACCOUNTS 2017/18 pdf icon PDF 121 KB

To consider a report by the Assistant Director - Finance (Section 151 Officer) (copy enclosed).

 

Additional documents:

Minutes:

The Finance Manager – Pensions and Governance introduced a report presenting the draft accounts of the Fund for 2017/18, highlighting key points to members of the Committee, including tighter deadlines introduced for the 2017/18 Statement of Accounts.

 

The accounts were subject to audit review and officers are currently working through issues raised by the auditor. The Finance Manager informed Members that no significant issues had been raised so far.

 

The Finance Manager reported an increase in the asset valuation of the Fund of £140 million, the main contributors being the investments in property, equity and alternatives. 

 

Following consideration of the report, Members

 

RESOLVED That

 

a)    The Committee submits the Cumbria Local Government Pension Scheme Accounts 2017/18 (including any final amendments) to the Audit and Assurance Committee for approval on behalf of the Council.

 

b)    The Committee notes that the completion of the Cumbria Local Government Pension Scheme Annual Report and Accounts 2017/18 (including the Governance Compliance Statement) is progressing and will be reviewed by auditors for consistency with the Accounts. 

78.

Monitoring Report for the Quarter ended 31 March 2018 (Part 1 Items) pdf icon PDF 153 KB

To consider a report by the Assistant Director - Finance (Section 151 Officer) (copy enclosed).

 

Additional documents:

Minutes:

The Group Finance Manager – Pensions, Investments and Insurance introduced a report detailing issues associated with material risk, administration, investment performance, governance and policy issues of the Fund, highlighting key points in the report.

 

The Group Finance Manager highlighted that the Risk Register had been reviewed during the previous quarter, with one risk increasing, three reducing and one new risk being added to the Register. The additional risk identified relates to the potential failure to communicate effectively with members. Whilst there are currently no issues identified with this risk, it was considered appropriate to include it on the Register to ensure continuous consideration is given to this matter.

 

The Group Finance Manager highlighted performance of Your Pension Service in the quarter to 31 March 2018, which was above its benchmark.  However, some issues had arisen since April 2018 which would be discussed in the private part of the meeting.

 

The Group Finance Manager reported that the value of the Fund had decreased in Quarter 1 by 1.4%.  Longer term performance continued to exceed the Fund’s strategic benchmarks.

 

One breach had been reported to the Pensions Regulator, of an employer who was failing to pay contributions into the Fund in a timely manner. 

 

Following discussion of the report, including proposing an adjustment to risk 3.5 in the appended Risk Register, Members

 

RESOLVED That

 

a)    The Committee receives and notes the performance and monitoring of the Fund for the period from 1 January 2018 to 31 March 2018.

 

b)      The Committee requests officers to amend item 3.5 of the Risk Register to add the word “significantly”, so that the risk reads as follows: “’1 in 20’ year event significantly affecting employer contribution rates”.

79.

Preparations for 2019 Actuarial Valuation pdf icon PDF 141 KB

To consider a report by the Assistant Director - Finance (Section 151 Officer) (copy enclosed).

 

Minutes:

The Senior Manager – Pensions and Financial Services introduced a report which provided details of the initial preparations for the 2019 actuarial valuation of the Fund.  She advised that it was the first of a series of reports that would be presented to the Committee over the forthcoming period of preparing for, undertaking and finalising the 2019 triennial valuation. 

 

The Senior Manager highlighted key planning considerations outlined in the report, including:

·         Funding assumptions

·         Data quality

·         Employer covenant

·         Regulation changes

·         Life expectancy and

·         Training.

 

She highlighted that the report also contained key data and assumptions of the 2016 valuation, which provided context.

 

She advised that the report suggests that the Fund’s assumptions were prudent and reasonable.  The Council is expecting a report from the Government Actuary Department (GAD) which considers how Local Government Pension Scheme Funds undertook the 2016 valuation, focusing on compliance, consistency, solvency and long term cost efficiency.  This report will identify any Funds which GAD considers to be outliers across the Local Government Pension Scheme. The Senior Manager did not expect Cumbria to be identified as an outlier. 

 

Members discussed a number of questions about the assumptions, including the deficit recovery period, the adjustment of national figures on mortality rate to reflect the member profile for Cumbria and the extent to which there is a process of iteration across the investment strategy and the valuation.

 

Following consideration of the report, Members

 

RESOLVED That

 

The Committee notes the initial preparations for the 2019 triennial valuation of Cumbria Local Government Pension Scheme.

80.

Forecast Budget Outturn Progress against 2017/18 Business Plan pdf icon PDF 188 KB

To consider a report by the Assistant Director - Finance (Section 151 Officer) (copy enclosed).

 

Minutes:

The Group Finance Manager – Pensions, Investment and Insurance introduced a report, which advised members of the progress made towards the delivery of the 2017/18 Business Plan and the 2017/18 Budget Outturn in support of delivery of the Business Plan for Fund, including variances against the budget.

 

The Group Finance Manager highlighted key points in the report, including that all targets set in the 2017/18 Business Plan have been achieved, with key tasks either completed, or on track for completion in line with the Plan.

 

The Group Finance Manager highlighted the reasons for recommending a re-profiling of £0.161 million of the budget from 2017/18 to 2018/19 to reflect the timing of expenditure associated with BCPP. Accounting for this re-profile of the budget, the revised budget for the year was £5.755 million and underspent during the year by £0.049 million.

 

The Committee discussed the report including a question about how staff time is allocated to the Fund. It was confirmed that some staff working on the Fund also have other duties outside the Pension Fund and the costs of these staff are apportioned accordingly.

 

Following consideration of the report Members

 

RESOLVED That

 

a)    The Committee notes that the business of the Local Government Pension Scheme in 2017/18 was completed in accordance with the Business Plan approved in March 2017.

b)    The Committee approves the re-profiling of the BCPP development budget to transfer £0.161m from 2017/18 to 2018/19 to appropriately reflect the timing of expenditure.

c)      The Committee notes that in 2017/18 the Cumbria Local Government Pension Scheme underspent by £0.049m against its revised budget of £5.755m after accounting for the re-profiling of the BCPP development budget.

81.

Forecast Budget Outturn and Progress against 2017/18 Business Plan (Part 2 Appendix)

To consider a report by the Assistant Director – Finance (s151 Officer) (copy enclosed).

 

Minutes:

RESOLVED That

 

The Committee notes the private (Part 2) information provided with the report (Agenda Item 14) 2017/18 Budget Outturn and Progress Against Business Plan.

 

82.

Monitoring Report for the Quarter ended 31 March 2018 (Part 2 Items)

To consider a report by the Assistant Director - Finance (Section 151 Officer) (copy enclosed).

 

Minutes:

The Group Finance Manager – Pensions, Investment and Insurance introduced a private quarterly monitoring report which advised members about certain issues and the steps taken to resolve them.

 

Following consideration of the report, the Committee

 

RESOLVED That

 

The Committee receives and notes the quarterly monitoring report Part 2 items for the Fund for the period to 31 March 2018.

83.

Verbal Update - Emerging Issues

To consider a verbal update from the Assistant Director - Finance (Section 151 Officer).

 

Minutes:

The Committee received a verbal update from the Senior Manager – Pensions and Financial Services on a number of emerging issues which will be reported to future meetings.

 

The Chair of the Committee informed members about correspondence he had received from Unison.  He reported that he was seeking clarification. 

84.

CUMBRIA LGPS INVESTMENT SUB GROUP ACTIVITY REPORT TO MAY 2018

To consider a report by the Assistant Director - Finance (Section 151 Officer) (copy enclosed).

 

Minutes:

The Finance Manager – Pensions and Treasury introduced a report which outlined Investment Sub-Group (ISG) activity since 20 February 2018, decisions made by the Section 151 Officer and the proposed future work schedule of the ISG, highlighting key points.

 

Following consideration of the report, Members

 

RESOLVED That

 

a)    The Committee notes the progress of the Investment Sub Group from February 2018 to May 2018, as detailed in the report, including decisions made regarding an increase to regulatory capital of BCPP Ltd and three investment commitments.

 

b)    The Committee notes the overall performance of the Fund at March 2018 and that, at a specific manager level, while one equity manager remains on watch there are no matters of sufficient concern to warrant escalation from the individual manager performance reviews.

 

c)    The Committee approves the proposed work programme of the ISG for the next reporting period, including progressing an interim investment strategy ‘sense check’ and the short-listing of further investment opportunities.

 

85.

Annual Performance Review - Presentation from State Street

To consider a presentation by Ms E Packer of State Street.

 

Minutes:

The Committee received and discussed a presentation from Elaine Packer of State Street Investment Analytics on the investment performance of the Local Government Pension Scheme for the year ending 31 March 2018.

 

Following a request from a member of the Committee officers undertook to provide a further update to the September 2018 meeting of the Committee on the forthcoming Annual Review discussions with the Fund’s investment managers.