Agenda and minutes
PDF 188 KBVenue: Mess Conference Room, County Hall, Kingston upon Thames, Surrey KT1 2DN
Contact: Cheryl Hardman Email: cherylh@surreycc.gov.uk
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APOLOGIES FOR ABSENCE AND SUBSTITUTIONS
Minutes: The revised membership following the Annual General Meeting of the Council and listed on the revised agenda front sheet was noted.
Apologies were received from Tim Evans, Hazel Watson and Phil Walker. |
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MINUTES OF THE PREVIOUS MEETING: 13 February 2015
To agree the minutes as a true record of the meeting. Minutes: The Minutes were approved 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: There were no declarations of interest. |
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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 (18 May 2015). 2. The deadline for public questions is seven days before the meeting (15 May 2015). 3. The deadline for petitions was 14 days before the meeting, and no petitions have been received.
Minutes: There were no questions and petitions. |
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An action tracker is attached, detailing actions from previous meetings. The Board is asked to review progress on the items listed. Additional documents: Minutes: Declarations of interest: None.
Key points raised during the discussion: 1. In relation to A21/14 (synthetic equities training), this training will be scheduled when timely. 2. In relation to A5/15 (Chairman meetings), these will be scheduled in the near future. New Board members will need to undertake a needs assessment. 3. In relation to A6/15 (deep dive), this will start following the meeting and will report back at the September Board meeting. Tim Evans and Stuart Selleck would be leading on behalf of the Board.
Actions/Further information to be provided: None.
Resolved: That the action tracker was noted and the committee agreed to remove the completed actions from the tracker.
Next steps: None. |
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The report explains the statutory changes to pension fund scheme rules that will allow LGPS members over the age of 55 to transfer their LGPS benefits to defined contribution (DC) arrangements, or take advantage of the new trivial commutation limits.
Additional documents: Minutes: Declarations of interest: None.
Key points raised during the discussion: 1. The Strategic Finance Manager (Pension Fund and Treasury) introduced the item. He explained that any potential effect on cash flow from the statutory changes to pension fund scheme rules would become apparent this year. Hymans Robertson had been commissioned to undertake further analysis concerning the effect on the Surrey Pension Fund. 2. The Hymans Robertson representative presented the highlights of the analysis and informed the Board that he had concluded that there was unlikely to be a significant run on money. 3. In response to a question, the Senior Advisor (Pension Fund) confirmed that it is the responsibility of the administering authority to check that a member has received advice from a qualified and accredited advisor. However, it was important to note that members must evidence receipt of advice but not that they have followed that advice. 4. The Chairman explained that it was not necessary for the Fund to have a floating cash balance as it was always possible to borrow short term if necessary. 5. The Senior Advisor (Pension Fund) confirmed that there was a specific unit within central government providing information on the Local Government Pension Scheme. Also, the Fund has to provide information to all individuals reaching retirement and all Members of the Fund receive a regular newsletter.
Actions/Further information to be provided: None.
Resolved: That the report be NOTED.
Next steps: Further updates on outcomes will be presented at future Board meetings.
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EMPLOYER BODY ADMISSION/TERMINATION GUIDANCE
The report explains the need for the creation of comprehensive and focused admission and termination guidance for scheme employers, including the option for the Fund to offer a bespoke solution to allow scheme employers to quantify the financial value of pension risk.
Minutes: Declarations of interest: None.
Key points raised during the discussion: 1. The Senior Advisor (Pension Fund) introduced the report, highlighting the key points. 2. Members queried who decides the risk ratings of employers and whether it is open to challenge. The Hymans Robertson representative explained that up to now the ratings had been quite subjective. The intention was to develop a more objective system of metrics so that the Fund can defend against any employer challenges. 3. Members asked whether the Fund is near the point at which some employers may default. The Hymans Robertson representative explained that there was a problem with willingness to pay by some but that it was not clear if this was because they were unable to pay. It was pointed out by a Board member that this issue was not on the risk register.
Actions/Further information to be provided: None.
Resolved: That the report be NOTED.
Next steps: A further report presented at a future Board meeting.
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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 Surrey 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 Finance Manager (Pension Fund and Treasury) introduced the item and highlighted the advice that the Board delay a decision to invest via the Marathon Emerging Markets Fund. The Board supported this delay. 2. It was suggested that, in relation to the Marathon Emerging Markets Fund, the Board should have a discussion on whether to increase exposure to emerging markets. The Mercer representative explained that the Board had not been looking to increase its exposure with emerging markets but that Marathon had asked its clients to move from segregated investments into a pooled fund. 3. A Member queried the adoption of stock lending, suggesting that it adds volatility to the market. The Chairman pointed out that stock lending was adopted two years ago by the Board. It was also suggested on the plus side that stock lending creates liquidity. 4. The Surrey Pension Fund Advisor introduced the notes of meetings with Fund Managers, attached as Annex 2 to the report. There was some concern about Franklin Templeton’s exposure to the Ukraine. The Surrey Pension Fund Advisor assured the Board that, while Franklin Templeton was a large investor in the Ukraine on behalf of its clients, this exposure was not considered a risk to the company’s viability. The pooled fund owned by the Surrey Pension Fund does have a holding in Ukraine bonds, but these represent a small allocation of the overall fund. 5. It was confirmed that, while the Surrey Pension Fund Advisor and Strategic Finance Manager (Pension Fund and Treasury) hold the meetings with Fund Managers, Board members were always invited to attend. 6. It was requested that figures in the report be provided net of fees. The Strategic Finance Manager (Pension Fund and Treasury) confirmed that the custodian could provide this, although the Mercer representative explained that where performance-related fees were concerned there would be some manual work and therefore some additional cost. The Chairman suggested that this be considered as part of the deep dive into all costings and fees (Action Review ref A6/15). 7. The Board noted that asset allocations were all comfortably within variances.
Actions/Further information to be provided: The deep dive review of the Pension Fund to include a review of the information provided to the Board, eg the potential for receiving figures net of fees.
Resolved: i. That the report be NOTED. ii. That the allocation of the £34.5m cash position would be deferred to the end of the meeting. iii. That multi asset credit would be considered under item 17. iv. That the Surrey Pension Fund Board training policy be APPROVED.
Next steps: None.
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PENSION FUND BUSINESS PLAN 2014/15: OUTTURN REPORT
The 2001 Myners Report (later confirmed by the CIPFA/Myners Principles) recommended that local authority pension funds 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. This report sets out the outturn of the annual business plan for 2014/15. Additional documents: Minutes: Declarations of interest: None.
Key points raised during the discussion: 1. The Strategic Finance Manager (Pension Fund and Treasury) introduced the report and raised the issue of member training. The Chairman stated that a questionnaire will be sent to all members of the Board and the results would be brought to the September meeting (Action Review ref: A8/15).
Actions/Further information to be provided: Officers to send questionnaire to all members of the Board.
Resolved: That the achievements and progress made with regard to the Business Plan objectives in respect of the 2014/15 financial year be NOTED.
Next steps: · Progress reports will be discussed at future Board meetings if necessary. · Outturn report of the 2015/16 financial year to be presented at the first meeting of the Surrey Pension Fund Board in 2016/17.
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REVISED STATEMENT OF INVESTMENT PRINCIPLES
With adjustments to asset allocation 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 Finance Manager (Pension Fund and Treasury) introduced the report and highlighted the main change being to include the Local Pension Board. 2. It was suggested that the table heading on page 113 ‘control range’ be changed to ‘review range’ as it currently implies more action than is anticipated. There was also a discussion regarding the categorisation of active managers with relatively unconstrained mandates. It was suggested that these points be picked up in the deep dive review of the Pension Fund (Action review ref: A6/15).
Actions/Further information to be provided: The deep dive review of the Pension Fund to consider the points raised under this item.
Resolved: i. That the revised Statement of Investment Principles be APPROVED. ii. That the Core Belief Statement be APPROVED.
Next steps: None.
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GOVERNANCE COMPLIANCE STATEMENT
Local authority pension funds are required to publish and keep under review a Governance Compliance Statement. The Governance Compliance Statement of the Surrey Pension Fund is comprised from the Compliance to Statutory Guidance Statement and a Governance Policy Statement. The Public Services Pensions Act 2013 (The Act) introduces a new framework for the governance and administration of public service pension schemes. The Act has a material impact on existing governance arrangements in the Local Government Pension Scheme (LGPS), which are enforced by changes to the LGPS regulations.
As a result of the Act, The Pensions Regulator has introduced codes of practice covering specific areas relating to public sector pension schemes. The changes to the LGPS regulations and introduction of the Pensions Regulator code of practice 14 and changes in the Scheme of Delegation approved by County Council on 14 October 2014 require revisions to the existing Surrey Pension Fund Governance Compliance Statement. Additional documents: Minutes: Declarations of interest: None.
Key points raised during the discussion: 1. The Senior Advisor (Pension Fund) introduced the revised and refreshed Governance Compliance Statement.
Actions/Further information to be provided: None.
Resolved: i. That the Surrey Pension Fund Board APPROVED the amendments to the Governance Policy Statement. ii. That the Surrey Pension Fund Board APPROVED the Compliance Statement to the Pension Regulator Code of Practice 14.
Next steps: None.
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LOCAL PENSION BOARD
The report explains the implemented changes to the governance of the Local Government Pension Scheme (LGPS) as a result of the Public Service Pensions Act 2013 and Regulations issued on 28 January 2015. The key requirement is for a proposed new Local Pension Board to assist the Administering Authority in the running of the Pension Fund, and to monitor compliance with rules and standards. The Council’s Constitution was amended on 17 March 2015, following a report to full Council. This report provides an update on progress achieved. Additional documents: Minutes: Declarations of interest: None.
Key points raised during the discussion: 1. The Strategic Finance Manager (Pension Fund and Treasury) introduced the report and confirmed that the Local Pension Board had been created at full Council on 17 March 2015. 2. The Strategic Finance Manager (Pension Fund and Treasury) explained that he would continue providing primary support to the Surrey Pension Fund Board while the Senior Advisor (Pension Fund) would provide primary support to the Local Pension Board. 3. It was clarified that appointments of the Borough/District representatives on Surrey Pension Fund Board would continue to be made through the Surrey Leaders’ Group. For the Local Pension Board, all employer bodies would put nominations through to the Appointment Panel. All employer bodies had been sent notification of this process.
Actions/Further information to be provided: None.
Resolved: The report was NOTED.
Next steps: None.
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CORPORATE GOVERNANCE SHARE VOTING
This report provides a summary of the Fund’s share voting process in Q2 and Q3 2014/15. Additional documents: Minutes: Declarations of interest: None.
Key points raised during the discussion: 1. The Strategic Finance Manager (Pension Fund and Treasury) introduced the report.
Actions/Further information to be provided: None.
Resolved: That the report was NOTED.
Next steps: None.
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KEY PERFORMANCE INDICATORS
In line with best practice, Surrey 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 Senior Advisor (Pension Fund) introduced the report and highlighted the submission of a pilot set of key performance indicators to the Scheme Advisory Board. 2. In response to a query about the unavailability of an employer satisfaction score, the Senior Advisor (Pension Fund) explained that the survey is undertaken annually and the results were due soon.
Actions/Further information to be provided: None.
Resolved: i. That the Surrey Pension Fund Board NOTED the KPI statement. ii. That the Surrey Pension Fund Board NOTED the Scheme Advisory Board pilot KPI statement.
Next steps: None.
It was agreed to defer Item 15 Pension Fund Risk Register to later on the agenda as a revised Register was being printed.
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EXCLUSION OF THE PUBLIC
Recommendation: That under Section 100(A) of the Local Government Act 1972, the public be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information under the relevant paragraphs of Part 1 of Schedule 12A of the Act.
Minutes: RESOLVED: That under Section 100(A) of the Local Government Act 1972, the public be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information under paragraph 3 of Schedule 12A of the Act.
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MULTI ASSET CREDIT The report recommends a multi asset credit portfolio to replace the Fund’s current investment grade credit assets with Legal & General (passive mandate) and the active managed mandate with Western.
Minutes: Declarations of interest: None.
Key points during the discussion: 1. The Strategic Finance Manager (Pension Fund and Treasury) introduced the report. The committee asked a number of questions which were responded to by the officers present, before moving to the recommendation.
Actions/Further information to be provided: Board to meet five or six multi asset credit managers in July 2015 (Action review ref: A9/15).
RESOLVED: That the report be NOTED.
Committee next steps: None.
The Board adjourned for lunch from 12.40pm to 1.15pm. Stuart Selleck gave his apologies for absence from the afternoon session. |
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PRIVATE EQUITY INVESTMENT PERFORMANCE REVIEW The Surrey Pension Fund has a commitment to invest 5% of the fund in private equity. This is achieved by investing in funds of funds and directly managed funds, managed by a number of private equity specialists.
The Surrey Pension Fund Board reviews the private equity strategy. This report is a review of the investment performance of the private equity portfolio. Minutes: Declarations of interest: None.
Key points during the discussion: 1. The Strategic Finance Manager (Pension Fund and Treasury) introduced the report. The committee asked a number of questions which were responded to by the officers present, before moving to the recommendation.
Actions/Further information to be provided: Officers to compare the cost-effectiveness of investing in a Fund of Funds with investment in other private equity opportunities (Action review re: A10/15).
RESOLVED: i. That the Board NOTED the current position on the Fund’s Private Equity investment performance. ii. That the Fund CONTINUES to commit to draw downs of the existing private equity schemes, while the Surrey Pension Fund Board considers new opportunities presented to it.
Committee next steps: None.
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PORTFOLIO TRANSITION: LGIM TO MAJEDIE The report explains the transition process from LGIM to Majedie.
Minutes: Declarations of interest: None.
Key points during the discussion: 1. The Strategic Finance Manager (Pension Fund and Treasury) introduced the report.
Actions/Further information to be provided: None.
RESOLVED: That the Board NOTED the report.
Committee next steps: None.
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PUBLICITY FOR PART TWO ITEMS
To consider whether the items considered under Part 2 of the agenda should be made available to the Press and the public.
Minutes: RESOLVED: That items considered under Part 2 of the agenda should remain confidential and not be made available to the press and public |
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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 needs monitoring on a quarterly basis.
Additional documents: Minutes: Declarations of interest: None.
Key points raised during the discussion: 1. The Strategic Finance Manager (Pension Fund and Treasury) tabled a revised Risk Register (attached as Annex 1 to the Minutes). The late addition was a risk associated with the possible withdrawal of the UK from the European Union. Members queried why the reputational impact of the risk to the Fund was rated as 3. The Strategic Finance Manager (Pension Fund and Treasury) explained that there was a reputational risk if the Fund was perceived as being not sufficiently appraised on the situation or if mitigating actions were not adequate. Members also suggested that the likelihood rating was too high. Following a discussion, the Strategic Finance Manager (Pension Fund and Treasury) agreed to reduce the ratings for reputational impact and likelihood to 2.
Actions/Further information to be provided: None.
Resolved: That the Board NOTED the revised Risk Register and made suggestions for amendments as detailed above.
Next steps: None.
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MANAGER ISSUES AND INVESTMENT PERFORMANCE (CONTINUED)
Minutes: The Board continued with consideration of the cash position.
Key points raised during the discussion: 1. The Chairman highlighted that Tim Evans, who had sent apologies for the meeting, had previously urged any surplus cash to be invested to help balance our asset allocation benchmarks. 2. The Board went through the options available for investment of cash.
Actions/Further information to be provided: None.
Resolved: That £30m cash be invested in GARS/GFS according to the Fund’s mandate ie in the ratio of 70:30 GARS and GFS respectively.
Next steps: None.
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DATE OF NEXT MEETING
The next meeting of the Surrey Pension Fund Board will be on 18 September 2015. Minutes: The date of the next meeting was noted. |