Agenda and minutes

Surrey Pension Fund Committee
Friday, 9 February 2018 9.30 am

Venue: Members Conference Room, County Hall, Kingston upon Thames, Surrey KT1 2DN

Contact: Richard Plummer  Email: richard.plummer@surreycc.gov.uk

Items
No. Item

1/18

APOLOGIES FOR ABSENCE AND SUBSTITUTIONS

2/18

MINUTES OF THE PREVIOUS MEETING 29 NOVEMBER 2017 pdf icon PDF 160 KB

3/18

DECLARATIONS OF INTEREST

    All Members present are required to declare, at this point in the meeting or as soon as possible thereafter

    (i)            Any disclosable pecuniary interests and / or

    (ii)           Other interests arising under the Code of Conduct in respect of any item(s) of business being considered at this meeting

    NOTES:

    ·         Members are reminded that they must not participate in any item where they have a disclosable pecuniary interest

    ·         As well as an interest of the Member, this includes any interest, of which the Member is aware, that relates to the Member’s spouse or civil partner (or any person with whom the Member is living as a spouse or civil partner)

    ·         Members with a significant personal interest may participate in the discussion and vote on that matter unless that interest could be reasonably regarded as prejudicial.

    Minutes:

    There were none.

4/18

QUESTIONS AND PETITIONS pdf icon PDF 200 KB

    To receive any questions or petitions.

     

    Notes:

    1.  The deadline for Member’s questions is 12.00pm four working days before the meeting (Monday 5 February 2018).

    2.  The deadline for public questions is seven days before the meeting (Friday 5 February 2018).

    3.  The deadline for petitions was 14 days before the meeting, and no petitions have been received.

     

    Minutes:

    Four questions were submitted by members of the public. These are attached as Annex A. Four supplementary questions were put to the Committee following the responses provided.

     

    Supplementary question submitted by Steve McDonald:

    The questioner highlighted engagement events with fossil fuel companies regarding work on environmental concerns and questioned whether the fund was engaging with these events and if this was proving successful.

    Response:

    Members noted that these events were engaged with and that this work was worthwhile. Officers and Members noted that any decision regarding whether to continue investments in fossil fuels had not been finalised but that the fund will be in a position to make an informed decision after establishing the current exposure to carbon related assets throughout the portfolio. It was stressed that this issue was regarded with the utmost seriousness and that the fund was taking steps to ascertain the impacts of divestment.

     

    Supplementary question submitted by Irene Ridgeon

    The questioner asked the Committees views on the ethical impact of investment into fossil fuels by the Pension Fund and whether the ethical dimension was taken adequately into account.

    Response:
    Officers and Members noted that the Committee was being proactive with relation to looking at investments, but stressed that the function of the Committee was, primarily, to ensure the maximisation of returns on investments made. It was stressed that officers and Members were acutely aware of the ethical issues around this, and took them into account naturally as part of the selection process for investment.

     

    Supplementary question submitted by Leonard Beighton

    The questioner asked what the liabilities in Surrey were in comparison to other funds that have divested which prevents the fund from immediately divesting.

     

    Response:

    Members noted that there were different mitigating circumstances across different funds which were individual to how each scheme functioned, and that they were not relevant to the Surrey fund’s decision regarding investment.

    Supplementary question submitted byPeter Horitz

    The questioner queried the relationship between the Surrey Pension Fund and the Hammersmith and Fulham Pension fund’s administrative support.


    Response:
    Officers noted that the administrative support for the Hammersmith and Fulham Pension fund was provided by the Orbis partnership as an offer, but that the fund did not have a financial link with the Hammersmith and Fulham Pension fund.

     

5/18

ACTION TRACKING pdf icon PDF 51 KB

6/18

FORWARD PLAN pdf icon PDF 52 KB

    Purpose of the report: To review and approve the forward plan of the Committee.

    Minutes:

    The Chairman of the Committee noted that the actuary interviews would be open to all Members of the Committee and that an invite would be sent to all Members of the Board following the meeting.

     

    Officers noted the Cyber Security item would be looked at by the Local Board and that the Pension Fund Committee item on this would aim to tie into this.

    Members questioned the status of the manager reviews and whether they took place. It was noted that there had been five manager reviews undertaken and that the service wanted to undertake this number in a similar fashion every quarter. It was noted that, as part of this, fund managers attended the committee.

     

7/18

LOCAL BOARD REPORT pdf icon PDF 131 KB

    Purpose of the report: This report is a summary of administration and governance issues reviewed by the Local Pension Board at its meeting of 18 January 2018 that need to be brought to the attention of the Pension Fund Committee.

     

    Additional documents:

    Minutes:

    Witnesses:

    Nick Harrison, Chairman of the Surrey Local Pension Board
    Neil Mason, Head of Pensions
    Jason Bailey, Lead Pensions Manager

    Key points raised in the discussion:

    1. The Chairman of the Local Pension Board noted the work of the Board, highlighting particularly the administrative performance report and the red risk items that were brought to the Committee’s attention. It was also noted that there were items of concern in the transfer of individual member in and out of the fund but that improvement work was underway.

    2. It was noted by the Chairman of the Local Board that they observed the work to reconcile accuracy to Guaranteed Minimum Pensions (GMP) records held by the fund and that the corresponding reporting service was being closed down by HMRC. It was also highlighted that GMP be considered in the pension risk registers.

     

    1. It was noted that the Local Board had suggested that the fund seek legal advice regarding the treatment of under or over payments identified through the HMRC.

     

    1. Officers noted that HMRC would be unlikely to be in a position to respond to all queries regarding this within their five month timescale, and that it would be likely that this would be delayed.

    2. Officers noted that Annual Benefit statements were available online as of February 2018 which will ensure that assessment will be easier in future. It was noted that the expected completion of the assessment of statements were expected to be complete by July 2018.

    3. Members noted that the Board appreciated the completion of the backlog casework for transfers in and out of the Surrey pension fund.

    4. Members highlighted that the number of complaints received were small and that all complaints received were handled in with agreed service timescales. The Chairman of the Local Pension Board noted that the Committee had requested more in depth information detailing the complaints process and how timely cases were.

    5. The Chairman of the Local Board noted the Border to Coast Pensions Partnership (BCPP) arrangements and had, following agreement of the Board, agreed to discuss with the Pension Fund Committee governance arrangements regarding member representation on BCPP and how this had been progressed. Members noted that the BCPP joint committee did not have provision for member representation, but that the meetings of the committee were held in public and members or their representatives were welcome to attend. It was also noted that the executive functions continued to be undertaken by the Pension Fund Committee, and that there would be little benefit to an additional Member representation on BCPP.

    RESOLVED:

    That the Pension Fund Committee:

    1. Approved the recommendations from the Local Pension Board in regard to the Administration Performance Report.

     

    1. Noted that they were satisfied with the current work programme of the Surrey Local Pension Board.

    2. That the Committee would draft a written response regarding BCPP Membership to the local board chairman.

     


8/18

INVESTMENT STRATEGY STATEMENT pdf icon PDF 75 KB

    Purpose of the report: The pension fund is required to publish an investment strategy statement (ISS) as a result of new investment regulations. It is a statutory requirement that the Pension Fund Committee should approve and regularly review its ISS.

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, Head of Pensions
    Steve Turner, Mercer
    Anthony Fletcher, Allenbridge

    Key points raised in discussion:

    1.    It was noted by officers that the current version of the Investment Strategy Statement was agreed at the last meeting of 10 November 2017.Changes to this iteration were noted in pages 35 and 26 of the report pack.

    2.    Officers highlighted that this was a high level strategic document. Members noted the changes to the report.

    RESOLVED:

    1.    That the Committee approved the latest Investment Strategy Statement

     

9/18

PENSION FUND BUSINESS PLAN 2018-19 pdf icon PDF 123 KB

    Purpose of the report: 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:

    Witnesses:

    Neil Mason, Head of Pensions
    Steve Turner, Mercer
    Anthony Fletcher, Allenbridge
    Sheila Little, Head of Finance


    Key points raised in discussion:

    1.    Officers noted that the key objectives of the business plan were broken down into several key areas of focus: Administration, Communications, Actuarial/Funding, Governance, Financial and Risk Management and Investment. These would be augmented by a high level mission statements that would be added to the forward plan in June 2018.

    2.    Officers noted that there would be an overall progress update on the business plan in one financial year and that the service could provide short progress updates on the business plan to the committee over the year to assure the committee that actions were being effectively managed.

    RESOLVED:

    1.    That the Committee adopted the proposed Business Plan.

     

10/18

CORPORATE GOVERNANCE SHARE VOTING pdf icon PDF 245 KB

    Purpose of the report: This report provides a summary of the Fund’s share voting process in Q3 of 2017/18 (1 October 2017 to 31 December 2017).

     

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, Head of Pensions
    Steve Turner, Mercer
    Anthony Fletcher, Allenbridge
    Sheila Little, Head of Finance

     

    Key points raised in discussion:

    1.    Officers noted that there had been no significant changes to the Corporate Governance Share Voting scheme since it was last reviewed by the Committee. Members recognised that the version that they had approved previously was adequate and that there were no mitigating circumstances to suggest that the Committee review the scheme.

    Ayesha Azad entered the meeting at 10.39am

    2.    Members requested that the recommendation to the committee reflect that the report has not changed significantly since its last review and that it note the current version, rather than latest version.

     

    RESOLVED:

    That the Committee

     

    1.    Noted the report; and

     

    2.    Approved the latest version of the Responsible Investment and Stewardship Policy and Voting Template.

     

11/18

CASHFLOW ANALYSIS pdf icon PDF 132 KB

    Purpose of the report: A cash-flow analysis allows the Fund to ascertain a projection as to when benefit payments make exceed income. This information can influence both the investment and funding strategy.

     

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, Head of Pensions
    Steve Turner, Mercer
    Anthony Fletcher, Allenbridge
    Sheila Little, Head of Finance


    Key points raised in discussion:

    1.    Members expressed interest in the current balance of cash-flow, but noted that there were no accounts made in the report relating to investment income generated and the implications of this. Officers explained that there was a financial buffer received from investment income. It was also noted that this investment income was important to compound return on assets.

    2.    Members raised concerns regarding evidence of a possible future drop in income generated due to potential falls in membership of the pension fund. It was noted that this risk is continued to be monitored as part of the risk register.

    3.    Officers noted that there was no current requirement to draw income from assets, but that there was a risk that the fund could become cash-flow negative without such income drawing within the period of seven years as a result of staff changes in the organisation and other unforeseen circumstances.

    4.    Officers noted that there had been recent reduction in the Annual Allowance, highlighting that this could increase the risk to cash-flow to the fund should a significant number of senior officers elect to opt out of the fund. It was noted that the allowance changes had effected the Surrey fund less than in other areas, but that this was increasing. Officers noted that work needed to be undertaken to assess how this would affect the fund in future.

    5.    Officers noted that the cash-flow analysis could incorporate a breakdown of key risks and a detailed list of scenario plans to mitigate these risks in the next iteration of a cash-flow analysis report.

    6.    Members questioned why the average age of contributors was so high. Officers noted that fund member’s age was weighted by liability which created a high average. It was noted that this was common with other Local Government Pension Schemes (LGPS).

    7.    Members questioned whether there was any risk following the transition of schools from being maintained by the Local Authority to being managed by academy trusts. Officers noted that the proportion of education staff in the scheme was significant and that the risks that could arise from this could be incorporated into the next report to the committee.

    8.    Members noted their interest in this report and suggested that a regular update could be provided to the committee on a quarterly basis, with a more comprehensive actuarial forecast provided on an annual basis.

    RESOLVED:

    1.   Noted the simple cash-flow position for quarters two and three.

     

    2.   Noted the assessment as to when the Fund may become cash-flow negative

     

    3.   Agreed that a regular update would be provided to the committee on a quarterly basis including a breakdown of key risks and a detailed list of scenario plans.

     

12/18

RISK REGISTERS: PENSION FUND AND ADMINISTRATION pdf icon PDF 131 KB

    Purpose of the report: 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 should be monitored on a quarterly basis.

     

    Additional documents:

    Minutes:

    Witnesses:

    Neil Mason, Head of Pensions
    Jason Bailey, Pensions Lead Manager
    Sheila Little, Head of Finance

    Key points raised in discussion:

    1.    Members questioned whether there were any potential risks regarding future cash-flow and whether this should be added as an additional risk to the register for future analysis. Officers noted that cash flow risk was included in the Pension Fund Risk Register.

    2.    Officers noted that the risk register had remained static from the last meeting of the committee.

    3.    Members noted that there was a potential risk to the fund to inaccuracies in the GMP records which needed to be considered and monitored carefully by the fund.

    4.    Officers highlighted that the risk registers used a standard calculation of risk and mitigated risk scores which are used nationally by local government pension schemes. It was suggested by the Chairman of the Local Pension Board that they could consider how the risks are measured and whether the weighting is appropriate at a later date.

    RESOLVED:

    The Committee:

    1. Noted and approved the risk registers;

    2. Approved the recommendations from the Local Pension Board in regard to the Administration Performance Report.

    3. Agreed that future risk registers be initially reviewed by the Local Pension Board and contained within the quarterly Local Pension Board Report to the Pension Fund Committee.

    4. Agreed that the Local Pension Board add to their forward plan consideration of how the risks are measured and whether the weighting is appropriate

     

13/18

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 the relevant paragraphs of Part 1 of Schedule 12A of the Act.

     

     

    PART TWO – IN PRIVATE

14/18

PUBLICITY OF PART 2 ITEMS

    To consider whether the item considered under Part 2 of the agenda should be made available to the Press and public.

    Minutes:

    It was agreed that the content of the discussion contained exempt information which could not be made available to the press and public.

     

15/18

DATE OF NEXT MEETING