Agenda and minutes
PDF 67 KBVenue: AXA Investment Management UK Ltd, 7 Newgate Street, London, EC1A 7NX
Contact: Cheryl Hardman
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APOLOGIES FOR ABSENCE AND SUBSTITUTIONS
Minutes: There were no apologies for absence. |
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MINUTES OF THE PREVIOUS MEETING: 15 November 2013
To agree the minutes as a true record of the meeting. Additional documents: Minutes: The Minutes were agreed as an accurate record of the meeting. |
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DECLARATIONS OF INTEREST
To receive any declarations of disclosable pecuniary interests from Members in respect of any item to be considered at the meeting.
Notes: · In line with the Relevant Authorities (Disclosable Pecuniary Interests) Regulations 2012, declarations may relate to the interest of the member, or the member’s spouse or civil partner, or a person with whom the member is living as husband or wife, or a person with whom the member is living as if they were civil partners and the member is aware they have the interest. · Members need only disclose interests not currently listed on the Register of Disclosable Pecuniary Interests. · Members must notify the Monitoring Officer of any interests disclosed at the meeting so they may be added to the Register. · Members are reminded that they must not participate in any item where they have a disclosable pecuniary interest.
Minutes: Judith Glover declared a personal interest as she was in correspondence with CBRE on a property in her ward. |
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QUESTIONS AND PETITIONS
To receive any questions or petitions.
Notes: 1. The deadline for Member’s questions is 12.00pm four working days before the meeting (10 February 2014). 2. The deadline for public questions is seven days before the meeting (7 February 2014). 3. The deadline for petitions was 14 days before the meeting, and no petitions have been received.
Minutes: There were none. |
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An action tracker is attached, detailing actions from previous meetings. The Board is asked to review progress on the item listed. Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. Many of the actions from previous meetings would be addressed at the current meeting.
Actions/Further Information to be Provided: None. Resolved: That the actions tracker was noted and the committee agreed to remove page 22 of the tracker as the actions would be completed during the current meeting.
Next Steps: None. |
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MANAGER ISSUES AND INVESTMENT PERFORMANCE
This report is a summary of all manager issues that need to be brought to the attention of the Pension Fund Board, as well as manager investment performance.
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Strategic Manager – Pension Fund & Treasury introduced the report. He informed the Board that a full report on the P750 Fund would be brought to the Board at its May meeting (Action Review ref: A1/14). 2. The Board considered the Freedom of Information (FOI) requests during the last quarter. There was a query whether all FOI responses were published on the Council’s website. The Regulatory Committee Manager was asked to find out and report back (Action Review ref: A2/14).
3.
Officers confirmed that the dates listed for the November Board
meeting and the AGM in the papers were correct. A number of Members stated that they were unable
to make the meeting on 23 May and it was agreed to look for a
different date (Action Review ref:
A3/14). Ian Perkin joined the meeting.
4. The Strategic Manager – Pension Fund & Treasury informed the Board that he was working with Manifest to develop a summary report on share voting. This would categorise votes and include information on the more interesting votes. A first report would be provided to the next Board meeting (Action Review ref: A4/14). 5. The Board debated the proposal to insure against ill health retirements and the options available for doing this, including self-insurance. The Board considered issues such as: the benefits of externalising the risk of ill health retirements; the additional complex administration to notionally separate and invest the assets ring fenced if the Fund was to self-insure; size of the risk to the Fund as a whole and the paternalistic remit of the Fund to smaller employers; requirement on the Board to mitigate risks. The Board took a vote and agreed to support recommendation 2 on the report. 6. Members queried how much Surrey County Council charges for loans and the Strategic Manager – Pension Fund & Treasury agreed to check and report back to the Board (Action Review ref: A5/14). 7. The Strategic Manager noted that on page 40 of the Board papers, column 4 should be headed “Allocation at 31/1/2014”.
Actions/Further Information to be Provided: i. A full report on the P750 Fund to be brought to the Board at its May meeting. ii. Regulatory Committee Manager to find out if all FOI responses are published on the Council’s website and report back. iii. To reschedule the meeting currently set for 23 May 2014. iv. A first summary report on share voting to be brought to the next meeting of the Board. v. The Strategic Manager – Pension Fund & Treasury agreed to check how much Surrey County Council charges for loans and report back to the Board.
Resolved: i. That the report be APPROVED; ii. That the purchase of an annual insurance policy with Legal & General to insure the fund against the cost of ill health retirements be APPROVED, subject to the County Council’s Head of Procurement confirming that it is not necessary to formally ... view the full minutes text for item 6/14 |
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ACTUARIAL VALUATION 2013: OUTCOME
Report setting out the outcome of the triennial actuarial valuation in respect of the Surrey County Council Pension Fund. Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Chairman updated the Board by informing them that the Surrey Pension Fund Advisor had stated that as of 13 February 2014, the Surrey County Council Pension Fund had a funding level of 81%. 2. The Strategic Manager – Pension Fund & Treasury informed the Board that the Funding Strategy Statement would be circulated to employer organisations for feedback and a final version would be brought to the next meeting of the Board (Action Review ref: A6/14). 3. Members of the Board thanked officers for the good communications and reassurance to smaller employers and Borough/District Councils during the actuarial process.
Actions/Further Information to be Provided:
i.
The final version of the Funding Strategy Statement to be brought
to the next meeting of the Board. Resolved: That the report was NOTED and the 2013 actuarial valuation was ADOPTED.
Next Steps: None.
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PENSION FUND RISK REGISTER
Surrey County Council, as administering authority for the Surrey Pension Fund, is responsible for the delivery of benefit promises made to members of the Surrey Pension Fund. It achieves this by setting objectives and goals with varying timeframes. Risks lie in failing to meet the intended goals.
Risks that are established as an issue must be identified and evaluated via a risk register. The risks must be prioritised with existing controls or new controls implemented to mitigate the risks. This should be recorded in a risk register, which is monitored on a quarterly basis by the Pension Fund Board.
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Strategic Manager – Pension Fund and Treasury introduced the report, highlighting the newly identified risks and the additional columns which provides a revised likelihood once mitigating actions have been taken and a net risk score.
Actions/Further Information to be Provided: None. Resolved: That the Risk Register be NOTED.
Next Steps: None.
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PENSION FUND BUSINESS PLAN 2014/15
The 2001 Myners Report recommended that local authority pension funds should approve an annual business plan in respect of the objectives required for the ensuing year. Business planning is regarded as an important tool, assisting in the identification of how service delivery can be maximised within resource constraints.
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Strategic Manager – Pension Fund & Treasury introduced the report. 2. In response to a query, the Pensions Manager informed the Board that the final regulations on the revised Local Government Pension Scheme had not yet been published. However, a communications programme had been implemented with employers and Fund members. 3. Members suggested that the description of Action 5 under the heading “Communication” be amended to remove the word “positive”.
4.
Members praised the simple design of the Business Plan. Actions/Further Information to be Provided: None. Resolved: That, subject to the amendments discussed at the meeting, the Board ADOPT the Business Plan in respect of the 2014/15 financial year attached as Annex 1 to the report.
Next Steps: i. Progress monitoring will take place and, if necessary, matters will be discussed at future Board meetings. ii. Outturn report of the 2014/15 financial year to be presented at the first meeting of the Pension Fund Board in 2015/16.
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REVISED STATEMENT OF INVESTMENT PRINCIPLES
With adjustments to governance practices within the Pension Fund, it is necessary to approve a revised Statement of Investment Principles (SIP).
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Strategic Manager – Pension Fund & Treasury introduced the report and highlighted the cosmetic changes to the Statement of Investment Principles. He also noted that the “Commitment” column on page 159 of the papers refers to millions and that this would be amended to make it clear.
Actions/Further Information to be Provided: None. Resolved: That the revised Statement of Investment Principles be APPROVED.
Next Steps: None.
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KEY PERFORMANCE INDICATORS
In line with best practice, Pension Fund Board members will be supplied with Pension Fund key performance indicators (KPIs) on a quarterly basis, covering investment and administration practices.
Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Pensions Manager introduced the report. He informed the Board that the data pending for the overall satisfaction score of employers had now come in and was 92%. This was a good result and above the set target of 80%. It was suggested that it was a particularly good score given the current environment as employers tend to confuse actuarial valuations with pensions administration. 2. The Chairman informed the Board that she had requested that the red downwards arrow against the indicator for investment returns is removed. The red arrow is misleading as the Fund had done very well in the past quarter and had only done a little less well than the previous quarter. The Fund was still achieving well over the benchmark.
Actions/Further Information to be Provided: None. Resolved: That the KPI statement format be APPROVED.
Next Steps: None.
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REVIEW OF PENSION ABATEMENT POLICY
The introduction of the new Local Government Pension Scheme (LGPS) from 1 April 2014 requires the pension fund administering authority (AA) to review its discretionary pension policy on the abatement of retirement pensions when a scheme member in receipt of a LGPS pension is re-employed in local government employment.
The regulations also require the AA to make policy decisions in relation to other pension matters that do not require a formal written policy statement. One such policy decision that requires review is whether or not to require medical clearance of scheme members before they are permitted to purchase an additional pension. Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Pensions Manager introduced the report. 2. Members asked whether there were any equality issues with regard to requiring medical clearance before permitting the purchase of an additional pension. Officers responded that if a person has a life-threatening illness, it wouldn’t make sense for it to be an equalities issue. The Board was also informed by the Pensions Manager that every Pension Fund he had worked for has required medical clearance before scheme members could purchase additional years/pension. The Pensions Manager informed the Board that it cost the scheme member £40 to undertake the medical check. 3. Officers clarified that recommendation 2 was not affected by the decision under item 6 to take out insurance against ill health retirements.
Actions/Further Information to be Provided: None. Resolved: i. That a policy that continues with the existing practice of not abating the pension of a scheme member that is re-employed by a local government pension scheme employer be ADOPTED. ii. That a policy that continues with the existing practice requiring a scheme member to receive medical clearance before being permitted to purchase an additional pension be ADOPTED.
Next Steps: A further report will be submitted on the outcome of consultation with scheme employers to the next meeting of the Board.
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PENSION FUND ADMINISTRATION STRATEGY
A Pension Fund Administration Strategy is set out in Annex 1 for the Board to approve. Additional documents: Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Pensions Manager introduced the report and highlighted the amendments made to the Pension Fund Administration Strategy following consultation with scheme employers.
Actions/Further Information to be Provided: None. Resolved: That the Pension Fund Administration Strategy be APPROVED.
Next Steps: None.
The Board adjourned at 10.55am for training and presentations. It reconvened at 2.06pm. Nick Skellett, Paul Baker and Sheila Little gave their apologies for the afternoon session.
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INVESTMENT STRATEGY REVIEW
Following the actuarial valuation, Mercer has been requested to conduct an investment strategy review of the Surrey Pension Fund.
Please contact the Committee Manager for a copy of the annex.
Minutes: Declarations of Interest: None.
Key Points Raised During the Discussion: 1. The Mercer representatives outlined the conclusions of its investment strategy review of the Surrey Pension Fund. It was explained that 5000 simulated projections of the future funding position had been undertaken with the use of a number of changing variables. This had created the funnel chart on page 8 of the annex. The simulations suggest that the funding position would reach 100% in 2021. However, it is accepted that assumptions will not necessarily bear out and so a deficit risk has been calculated. The Mercer representatives highlighted that the Pension Board and Officers needed to carefully consider the extent to which a deficit risk was tolerable and suggested ways in which it would be possible to (1) further diversify the Fund’s sources of return and (2) better manage any deficit risk. The analysis represented showed the expected benefits of addressing these issues in combination. Simply diversifying the sources of return has minimal impact on reducing deficit risk. 2. The Mercer representatives proposed that an investment strategy for once the Fund is 100% funded should be considered sooner rather than later as it would take one to two years for a new Strategy to be fully implemented. This would provide a “target” investment strategy for the future and provide a clear framework for helping to decide what changes to the current investment strategy should be made over time.
Mike Goodman left the meeting at 2.50pm.
3. The Mercer representatives explained that the potential target return from the revised strategy appeared low but that a high return would not be required if the Scheme was 100% funded. Members pointed out that the Scheme still needed to honour future liabilities. The Mercer representatives assured the Board that the Strategy would still be designed to have an expected return that supported that Actuarial funding assumptions so would continue to help maintain the affordability of financially supporting the Fund. They also suggested that the Fund should be less concerned about the level of real interest rates it locked into once it is 100% funded, if it was agreed to introduce improved risk management techniques to help better manage deficit risk. 4. The Mercer representatives stressed that there were many opportunities for long-term investors such as the LGPS to tap into. 5. A Member raised a concern about risks associated with infrastructure debt and derivatives. The Mercer representatives assured Members that large, established investment management firms had solid experience with these types of assets. The Chairman also responded that the Pension Fund Board did not know how to trade these assets (this would be delegated to an investment manager) but just needed to understand what they are. 6. The Mercer representatives reiterated that they were not recommending a big bang approach to changing the investment strategy but that any agreed change should be undertaken in stages.
Stuart Selleck left the meeting at 3.15pm.
7. The Chairman suggested that training on leveraged gilts and synthetic equities ... view the full minutes text for item 14/14 |
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DATE OF NEXT MEETING
The next meeting of the Surrey Pension Fund Board will be on 23 May 2014. Minutes: The date of the next meeting would be rescheduled and the Members updated. |