Agenda and minutes

Cumbria Pensions Committee - Tuesday, 15th September, 2020 9.30 am

Contact: Nicola Harrison  Email: nicola.harrison@cumbria.gov.uk

Items
No. Item

100.

ROLL CALL AND APOLOGIES FOR ABSENCE

To receive any apologies for absence.

Minutes:

A roll call of officers and Members was taken.

 

Apologies had been received from Mrs T Barber.

101.

Terms of Reference and Membership

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

 

For members to note that Councillor C Whiteside has been appointed as a permanent member of the Cumbria Pensions Committee.

Minutes:

The Terms of Reference of the Committee was noted.

 

The Chair advised that Councillor Chris Whiteside had been appointed as a permanent member of the Committee for the Conservative Group. He welcomed Cllr Whiteside to his first meeting of the Committee.

102.

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:

No Disclosures of Interest were made.

103.

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,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;

 

13       Update on Developments with Border to Coast Pensions Partnership Ltd – Part 2

 

14        Monitoring Report for the Quarter Ended 30 June 2020 – Part 2

 

15        Verbal Update, Emerging Issues

 

16        Presentation – 2019/20 Performance Against LAPPA Universe (PIRC)

 

17       Cumbria LGPS Investment Sub Group Activity Report to September 2020

 

18       Closing Comments

104.

MINUTES pdf icon PDF 82 KB

To confirm as a correct record the minutes of the Cumbria Pensions Committee held on 23 June 2020.

Minutes:

RESOLVED  that, the minutes of the meeting held on 23 June 2020 be approved as a correct record.

105.

REPRESENTATION FROM NON COUNTY COUNCIL EMPLOYERS AND DISTRICT COUNCILS

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

Minutes:

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

106.

SCHEDULE OF FUTURE MEETINGS pdf icon PDF 80 KB

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

Minutes:

The Schedule of Future Meetings that had been published with the Agenda was noted.

 

Members were reminded that the next meeting of the Committee had been moved to 18 December 2020.

107.

MINUTES OF THE BCPP JOINT COMMITTEE MEETING ON 9 MARCH 2020, 16 JUNE 2020 AND AGM ON 15 JULY 2020 pdf icon PDF 171 KB

To receive the Minutes of the BCPP Joint Committee meeting held on 9 March 2020, and the draft minutes of the meetings held on 16 June 2020 and Annual General Meeting held on 15 July 2020.

Additional documents:

Minutes:

The Chair presented three sets of BCPP Joint Committee minutes from meetings held on 9 March 2020, 16 June 2020 and the Annual General Meeting (AGM) held on 15 July 2020.

 

He drew members’ attention to the 16 June 2020 draft minutes, highlighting that there had been the Annual Election of the Chair and Vice Chair. Councillor Tim Evans had been appointed Chair and Councillor David Coupe had been appointed Vice Chair for the ensuing year. The Joint Committee’s final spend of its budget in 2019/20 had been £14,000 against a budget of £40,000.

 

With regard to the 15 July 2020 meeting, the Chair advised that all resolutions presented to the meeting had been agreed unanimously other than the approval of the extension of term of office of the Non-Executive Directors Mr Hitchin and Ms Castell.

 

The Independent Advisor referred to the 9 March 2020 minutes, where it had been recorded in the 2019 Partner Funds Feedback Survey item that 46% of respondents were very satisfied and 49% were somewhat satisfied with BCPP’s work. He was unclear whether this was a positive or negative situation. The Chair concurred with this. His impression was that half of the respondents weren’t satisfied with BCPP’s work and hoped figures would improve next year. The Independent Advisor highlighted the challenges of virtual meetings and the difficulty of engaging effectively to keep Funds updated.

 

RESOLVED that, the three sets of BCPP Joint Committee minutes from meetings held on 9 March 2020, 16 June 2020 and the Annual General Meeting (AGM) held on 15 July 2020 be noted.

108.

UPDATE ON DEVELOPMENTS WITH BORDER TO COAST PENSIONS PARTNERSHIP LTD pdf icon PDF 143 KB

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

Additional documents:

Minutes:

A report was considered from the Director of Finance (s151 Officers) which updated Members on two key governance developments across the Border to Coast Pensions Partnership Ltd (BCPP) since March 2020; its Annual General meeting (AGM) and the merger of the Northumberland County Council Pension Fund (Northumberland Fund) into the Tyne and Wear Pension Fund (Tyne & Wear Fund).

           

The Senior Manager - Pensions and Financial Services guided members through the report, asking members to note two governance developments relating to the company, the Border to Coast Pensions Partnership Annual General meetingand the merger of two Partner Funds in the pool (Northumberland and Tyne and Wear). The business conducted at the AGM was reported. This included details of special resolutions which had been agreed by Shareholders.

 

Members were informed about the merger of Northumberland County Council Pension Fund into the Tyne and Wear Fund and how this had been enacted through regulations laid before Parliament. The measures undertaken to effect the merger were explained. Detail was provided on the changes to the Shareholding of the company and changes to ‘A Class’ and ‘B Class’ shares. It was highlighted that this did not affect voting rights of the remaining Partner Funds. It was reported that changes to the share capital had required the approval of all Partner Funds, through Shareholder Resolutions and the signing of a legal agreement. The Committee was informed that the signing of the documents could not be reasonably deferred to the next meeting of the Pensions Committee therefore the decision had been taken by the Director of Finance (Section 151 officer) under delegated authority, in consultation with the Chair of the Committee. Members were reminded of the Section 151 Officer’s delegated powers for urgent decisions or those decisions which could not be reasonably deferred.

 

A Member referred to the regulations relating to the merger. He asked for reassurance that officers had undertaken the appropriate due diligence before the merger had taken place. The Senior Manager - Pensions and Financial Services confirmed that this was indeed the case and all parties involved in the merger had acted appropriately throughout the whole process to ensure that all interests of Partner Funds were protected.

 

Following a Member question, the Senior Manager - Pensions and Financial Services confirmed that this related only to the merging of the Northumberland Pension Fund into the Tyne and Wear Pension Fund, combining the assets and liabilities of those two pension funds only, with no impact on Cumbria. It was confirmed that the number of Partner Funds in Border to Coast had reduced from 12 to 11.

 

A Member referred to the delegated decision taken by the Section 151 Officer and the previous decision of the Committee to allow urgent delegated decisions to be taken outside of the Committee’s meetings. The Chair drew Member’s attention to the fact that the Council’s Constitution did outline the type of decision that could be taken, whilst the Senior Manager - Pensions and Financial Services reassured Members that officers were  ...  view the full minutes text for item 108.

109.

DRAFT ANNUAL REPORT AND ACCOUNTS 2019/20 pdf icon PDF 134 KB

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

Additional documents:

Minutes:

A report was considered from the Director of Finance (s151 Officer) which recommended that the Committee approved the 2019/20 Annual Report of the Cumbria Pension Fund for publication on the Pension Fund’s website before 1st December 2020, subject to the inclusion of the final audited accounts, the Fund Policy Document and any final presentational amendments.

 

The Chair highlighted that in his introduction to the Annual Report and Accounts 2019-20, an addition would be made to mention the sad passing of Tim Gardener during the report year, who had been an Investment Advisor to the Committee for over 35 years.

 

The Finance Manager - Pensions Investments and Governance reported on the changes made, for one year only, to Government legislation as a result of the COVID 19 pandemic. This allowed the unaudited accounts to be published on 31 August 2020 and the audited accounts to be published on 30 November 2020. The County Council’s Audit and Assurance Committee had been appraised of the unaudited accounts and they had been subsequently published on the Council’s website. The audit of the Funds accounts would be finalised by November this year. Members were informed of the date when Grant Thornton, the Auditor would finalise the Fund’s accounts.

 

Members’ attention was drawn to the Grant Thornton 2019/20 Draft Audit Findings report. It was highlighted that Grant Thornton anticipated issuing an unmodified audit report and that, subject to completion of their remaining work on the financial statements of the Fund, the Auditor anticipated issuing an unqualified audit opinion on the statements which would be presented to the Audit and Assurance Committee on 23 November 2020. This was a positive outcome for the Fund and was welcomed by officers.

The Committee was informed about an additional emphasis of matter paragraph to be included in the Audit Findings report, relating to directly held property and one recommendation within the 2018-19 Audit report which related to the process for uploading journals. The latter had no impact on the financial statements or disclosure notes within the Fund’s Annual Report and Accounts.

 

The draft Annual Report and Accounts were brought to members’ attention. It was confirmed that the deadline for publication of the Annual Report and Accounts was 1 December 2020. 

In referring to the Auditor’s draft report, specifically the material uncertainty clause on direct property, clarification was requested on the scope and work of the Auditor’s Valuation Expert, relating to levels 1-3 investments and whether the Valuer’s work was still ongoing for direct properties. The Finance Manager - Pensions Investments and Governance advised that some of the Valuer’s work was still ongoing but no concerns had been raised by the Auditor.

 

Members were informed with regards to the valuation of other Level 3 investments, indications were that this had been closed off by the Auditor and no concerns had been raised.

 

The Director of Finance (s151 Officer) detailed the Audit sign off process for members of the public watching the meeting online and outlined the role of the  ...  view the full minutes text for item 109.

110.

Monitoring Report for the Quarter ended 30 June 2020 pdf icon PDF 179 KB

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

Additional documents:

Minutes:

A report was considered from the Director of Finance (s151 Officer) which advised Members of any material risk, administration, investment performance, governance, and policy issues of the Fund for the quarter ending 30th June 2020. The report also noted a summary of annual pensions’ administration performance for the 2019/20 financial year. Additionally, the report identified any current governance issues and national regulatory changes and outlined the performance of the whole portfolio and movement on liabilities over the quarter to 30th June 2020.

The Group Finance Manager - Pensions Investments and Insurance guided members through the report. He highlighted the two new risks added to the Risk Register which were associated with COVID 19. These related to the impact of COVID 19 on the Pensions’ Administration service and the potential negative impact that COVID-19 may have on the Fund’s investments.Details were provided of these risks.

The Group Finance Manager - Pensions Investments and Insurance was pleased to report that the Pensions’ Administration performance throughout the pandemic remained at a very high level with no reduction in quality or service performance. In terms of the impact of the pandemic on the Fund’s investments, the Fund had recovered all the losses from the previous quarter due to its diverse portfolio of investments.

Members were informed about Pensions’ Administration. In the context of the global pandemic, Your Pension Service’s performance against key performance indicators in the quarter continued to exceed 99%. Officers would monitor this situation in case there was another spike in the number of cases of COVID 19 to ensure that scheme employers continued to be supported and that the impact on the quality of Pensions’ Administration service received by scheme members was minimised.

Members were informed about the reorganisation of the Local Pensions Partnership which included a review of practices in order to standardise its activities.This would include a change of name only from ‘Your Pension Service’ to the ‘Local Pensions Partnership Administration’. The change of name would not be expected to affect service performance. 

Members were briefed on Investment Management. It was highlighted that the long term performance of the Fund was ahead of the benchmark as the 10 year performance had returned 9.0% per annum compared to the Fund’s specific benchmark of 8.5%.

 

In terms of Oversight and Governance, members’ attention was drawn to the resolution of the McCloud case. The Government and Scheme Advisory Board had announced that they would be restarting their review of the Cost Cap so the Pensions Committee would be updated as further information was received.

It was reported that the Local Pension Board continued to perform their governance role during the COVID 19 lockdown period.  Although the Board had not formally met, officers had produced briefing notes to update members on issues that would normally be reported to the Board. This had been followed up by a group call on 27 July 2020 so members of the Board could discuss any matters arising.

 

A member voiced his concerns  ...  view the full minutes text for item 110.

111.

IMPLICATIONS OF THE MCCLOUD JUDGEMENT pdf icon PDF 133 KB

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

Additional documents:

Minutes:

A report was considered from the Director of Finance (s151 Officer) which provided Members with an overview of the proposed remedy for the LGPS (changes to the statutory underpin protection) hereafter referred to as the “McCloud resolution”. The report also considered the implications for the implementation of the resolution and the impact this may have for pension administration services and employers within the LGPS.

The Group Finance Manager – Pensions, Investments and Insurance reminded the Committee about reforms introduced by the Government in 2014 and 2015 to public sector pension schemes which moved scheme members from a pension based on their final salary to a pension based on their average earnings throughout their career (referred to as Career Average Revalued Earnings (CARE)). The background to the judgement was provided and the impact on the LGPS was detailed. The proposed resolution for the LGPS was that an underpin would apply to every scheme member who was actively contributing to the LGPS on 31 March 2012.The challenges of the work ahead were highlighted for members. It was confirmed that there would be no additional costs from McCloud in the current administration budget in the current financial year but there would be increased administration costs in the 2021/22 budget. It was expected that Members would receive this information in March 2021.

 

It was reported that officers would be responding to a consultation from the Ministry for Housing, Communities and Local Government on how it proposed to remedy the discrimination in the Local Government Pension Scheme. The Fund’s response would be circulated for comment to the Committee and Cumbria LGPS Board Members before it was released.

A member highlighted that 16,000 employees would need to be processed to establish the costs, following the judgement. He queried whether this would be completed within one year or over the period of their employment and whether the costs would be up front or spread over the term of their employment if they were still working. The Group Finance Manager – Pensions, Investments and Insurance advised that the formal calculations were undertaken at the date when the pension was drawn and commented on the complexity of the proposals. In terms of upfront costs, there would be an increase in pension costs in administration of the Fund and in terms of increased liabilities for the Fund, accurate figures would be given as part of the 2022 Valuation.

The Committee was informed by a member of the reasons why the CARE scheme was introduced. He queried if this would apply to people who had joined the Scheme before the new system was introduced. The Group Finance Manager - Pensions Investments and Insurance talked about the underpin dates, how the calculations had been made under the CARE scheme and that some members may be better off under the new scheme. The member thought that monitoring should be introduced in order to ensure no one was favoured. The Group Finance Manager - Pensions Investments and Insurance considered that the £95,000 Exit  ...  view the full minutes text for item 111.

112.

UPDATE ON DEVELOPMENTS WITH BORDER TO COAST PENSIONS PARTNERSHIP LTD - PART 2

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

Minutes:

A report was considered from the Director of Finance (s151 Officer) which sought the Committee’s agreement on a Supplemental Shareholders’ Agreement, updated Members on two shareholder decisions and asked that progress on a sub fund and pooling proposition be noted.

 

This report was presented by the Senior Manager – Pensions and Financial Services. Members asked questions on salary levels, operation of the Pool and property.

Following careful consideration of the report and the detail provided by the Senior Manager – Pensions and Financial Services, the Chair proposed acceptance of the recommendations as set out in the report, to the Committee. As there was no dissent, it was,

RESOLVED that, the Committee

 

1    Agrees that the Supplemental Shareholders’ Agreement relating to the process for dealing with unexpected liabilities arising in relation to the BCPP Authorised Contractual Scheme (ACS) be executed as a deed and authorise the Director of Finance (s151 Officer) to progress the sealing of the Agreement;

2     Notes the two shareholder decisions relating to Border to Coast Pensions Partnership Ltd taken under delegated powers; and

3     Note the progress in relation to the ongoing build and design work on the Border to Coast Multi-Asset Credit sub-fund and the property-pooling proposition.

113.

MONITORING REPORT FOR THE QUARTER ENDED 30TH JUNE 2020 - PART 2

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

Minutes:

A report was considered from the Director of Finance (s151 Officer) which 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 30th June 2020. These matters were generally in regards to either governance or employer issues.

 

The Group Finance Manager – Pensions, Investments and Insurance presented this report. Members asked questions on data from employers that was received late, data provision and the accuracy of data.

 

Following careful consideration of the report and the detail provided by the Group Finance Manager – Pensions, Investments and Insurance, the Chair proposed acceptance of the recommendations as set out in the report, to the Committee. As there was no dissent, it was,

RESOLVED that, the Committee receives and notes the quarterly monitoring Part 2 items of the Fund for the period to 30th June 2020.

114.

Verbal Update - Emerging Issues

To receive a verbal update on emerging issues

Minutes:

Members received a verbal update from the Senior Manager - Pensions and Financial Services on a number of emerging issues. This included a number of consultations relevant to the Committee.

 

A member asked a question on stranded assets.

 

RESOLVED that, the position be noted.

115.

PRESENTATION - 2019/20 PERFORMANCE AGAINST LAPPA UNIVERSE (PIRC)

To receive a presentation on the 2019/20 Performance against LAPPA Universe (PIRC).

Minutes:

A presentation was received from the Client Services Manager, PIRC Limited regarding the 2019/20 Performance against the LAPPA Universe.

 

Detailed questions on the content of the presentation were asked.

 

The Director of Finance (s151 Officer) was pleased to acknowledge that an external contributing officer to the Committee had recognised the outstanding performance of the Fund. This was due to the investment choices made, some of which had been particularly challenging.

 

RESOLVED that, the position be noted.

116.

CUMBRIA LGPS INVESTMENT SUB GROUP ACTIVITY REPORT TO SEPTEMBER 2020

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

Minutes:

A report was considered from the Director of Finance (s151 Officer) which outlined activities of the Investment Sub Group (ISG) meetings on 24th July 2020 (special meeting) and 1st September 2020, including any decisions made by the Section 151 Officer and the proposed future work schedule in respect of the Investment Sub Group.

 

The Finance Manager - Pensions and Treasury presented this report to the Committee. A Member asked a question on cash levels.

 

Following careful consideration of the report and the detail provided by the Finance Manager - Pensions and Treasury, the Chair proposed acceptance of the recommendations as set out in the report, to the Committee. As there was no dissent, it was,

RESOLVED that, the Committee

 

1             Agrees the proposed revised Interim Investment Strategy.

2             Agrees that the s.151 Officer, in consultation with the ISG, commence work on moving the actual allocation towards the revised Interim Strategy, recognising that, in light of uncertainties affecting the markets, investment decisions will be taken in a managed and responsive way, with the ISG meeting on a more regular basis over the next few months to review any investment opportunities in the light of the prevailing market conditions and recognising the potential implications on the expected return for the Fund versus the Actuary’s assumptions; 

3             Notes that, whilst the work to move the actual allocation towards the revised Interim Strategy is ongoing, the upper limit of Fund’s current target range for cash (2% to 10%) may be temporarily breached as a result of market movements and/or cash flows into the Fund;

4             Notes that, in recognition of the current  uncertainties in the global macroeconomic context, it is anticipated that work on reviewing the Fund’s Target Investment Strategy will be undertaken over the coming 6 to 9 months and the outcome of this reported to the next ISG and Committee meetings after its completion;

5             Notes the progress of the Investment Sub Group from July 2020 to September 2020;

6             Notes the performance of the Fund over the quarter; and

7             Agrees the proposed work programme of the Investment Sub Group for the next reporting period (including the consideration of an investment recommendation in the Border to Coast Multi-Asset Credit sub-fund at the November ISG meeting)

117.

Closing Comments

To receive closing comments from the Chair

Minutes:

The Chair thanked Members and Officers for taking part in the remote meeting.