Issue - meetings

The Chancellor of the Exchequer presented his budget to the House of Commons on 8 July 2015. This paper contains a summary of the implications for the Local Government Pension Scheme (LGPS).  

Declarations of interest:

None.

Key points raised during the discussion:

1.    The Strategic Finance Manager (Pension Fund and Treasury) introduce the report, highlighting the likely criteria for pooling and outlining the options for change.  He explained that officers had deliberately not steered the committee towards any particular option because the consultation paper had not yet been published.  However, the committee could give a steer to officers on a preferred option to investigate further.  It was felt that options 1 to 3 would be rejected by the Government as not being ‘sufficiently ambitious’.

2.    The Surrey Pension Fund Advisor clarified the differences between Collective Investment Vehicles (CIVs) and Joint Vehicles.

3.    The Chairman highlighted the need to work with like minded Funds with a similar investment philosophy. 

4.    Members stressed the need to get in early with proposals and negotiate a good deal. 

5.    The possibility of joining an existing CIV or Joint Vehicle was discussed at length, with officers responding to questions about the London CIV and the London Pension Fund Authority.

6.    Members pointed out the good governance and investment performance of the Surrey Pension Fund and questioned the benefit of pooling assets.  The Chairman highlighted the benefit of scale allowing the Local Government Pension Scheme to invest in alternatives and be a global competitor.  Local accountability would also be retained, with the main difference to the committee being the loss of being able to choose investment managers.

7.    Officers informed the committee that extensive networking was underway with regard to how pooling could be taken forward.

8.    The Surrey Pension Fund Advisor suggested that the committee consider how joint governance will be organised, eg the London CIV has 31 members on its governing board which could be unwieldy.  From the perspective of fund managers, pooling would give them one person to speak to which would potentially lead to reduced fees. 

9.    Members felt that as the Surrey Pension Fund was well-governed and ambitious for its investment performance, it should be a leader in whichever option it decides to follow and retain a reasonable amount of control.  It was understood that this would require a lot of work.

10.  The Surrey Pension Fund Advisor explained the need to run-off private equity, liquid assets being easier to pool than illiquid assets.  However, run-off can go on for 20-30 years.
 

Actions/Further information to be provided:

None

Resolved:

That officers undertake further investigation into the options set out in the report, with option 7 being the preferred option, and bring a report back in November 2015 (Recommendations tracker ref: A12/15).

Next steps:
None.