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Items
No.
Item
13/17
APOLOGIES FOR ABSENCE AND SUBSTITUTIONS
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Minutes:
There were no apologies received.
The Chairman noted it was the last meeting
before the elections. He thanked the Board for their contributions,
and in particular highlighted the work of John Orrick, the
Vice-Chairman, who would not be standing for re-election in
May.
To agree the minutes as a true record of the
meeting.
Minutes:
The minutes were agreed as an accurate record
of the meeting.
15/17
DECLARATIONS OF INTEREST
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To receive any interests from
members of the Board in respect of any item to be considered at the
meeting.
Minutes:
David Stewart asked that it be noted that he
was employed by Hammersmith and Fulham, an authority whose pension
administration is provided by Surrey County Council as part of the
Orbis Partnership.
16/17
QUESTIONS AND PETITIONS
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To receive any questions or petitions.
Notes:
1. The deadline for Member’s questions
is 12.00pm four working days before the meeting (9 March 2017).
2. The deadline for public questions is seven
days before the meeting (8 March 2017)
3. The deadline for petitions was 14 days
before the meeting, and no petitions have been received.
Neil Mason, Senior Advisor (Pension Fund),
Pensions and Treasury
Key points raised
during the discussion:
1.
The Board reviewed the action tracker and noted a number of items
as complete. Officers highlighted that the risk register had been
updated at the advice of Mercer following the American elections,
and that asset allocation was being reviewed in light of this. The
Pension Fund Committee was due to receive an update at its next
meeting.
The Board is asked to note the
contents of this report and the verbal update at the meeting.
Minutes:
Declarations of interest:
None
Witnesses:
Jason Bailey, Pensions Lead
Manager
Neil Mason, Senior Advisor (Pension Fund), Pensions and
Treasury
Key
points raised during the discussion:
The Board was
informed that the 91% increase in the funding level had seen the
majority of individual employer deficits decrease. Officers noted
that there had not been a significant impact on contribution rates,
with the exception of academies. It was explained that when
academies converted, they were assessed at a low funding level due
to their initial full funding of historic pensioner and deferred
liabilities, this meant that future funding was accelerated due to
there being no requirement to fund pensioner and deferred
liabilities prior to conversion . The Board was informed that the
bigger employers in the fund were part of a stabilisation funding
programme, which meant contribution rates were not significantly
affected in light of the funding level increase. This was intended
to ensure longer term stability for those larger employers in
setting their contribution rates.
The Board discussed
how community admitted bodies were able to improve their funding
levels through providing securities such as a charge against
property. It was noted that independent covenant firms were an
option, and that legal and other costs for these arrangements were
recharged to the employer. The Board discussed the different
categorisations on the basis of probability and how this applied to
different employers.
The Board discussed
Fund investments. It was noted that Mercer was revising its asset
allocation on behalf of the Fund in light of positive performance.
The Board highlighted that there was an opportunity to look at
wider investments such as bonds or infrastructure investment, in
order to ensure longer term security on the Fund’s returns.
Officers commented that infrastructure investment would be a
consideration, though this would be considered more viable in the
pooled Fund arrangements once in place.
The Board was
informed that the Pension Fund Committee had made a commitment of
£35-£40 million to Darwin Property Fund, contingent on
a reduction in management fees. It had agreed an investment of
£15 million to Standard Life, and declined a similar
investment with HGA as it was felt that management fees had been
too high.
The Board discussed
whether the Fund was considering a de-risking strategy trigger
point for deficit management. Officers commented that the previous
proposed trigger had been based on a gilts plus methodology, and
that the new actuarial methodology of Consumer Price Index (CPI)
plus did not permit a similar application. The Board expressed the
view that this could be revisited in light of current Fund
performance.
The Board discussed
the representations made by the public with reference to fossil
fuel and “sin stock” investments. It had been agreed
that a response from the Chairman of the Pension Committee would be
supplied to address the key points raised in respect to
this.
Officers informed the
Board that cyber security had been added to the Fund risk register.
Board members queried what insurance arrangements were in place in
respect ...
view the full minutes text for item 18/17
The Board is asked to note the
content of this report.
Minutes:
Declarations of interest:
None
Witnesses:
Jason Bailey, Pensions Lead
Manager
Neil Mason, Senior Advisor (Pension Fund), Pensions and
Treasury
Key
points raised during the discussion:
The Board was
provided an update with respect to changes in staffing structures
within Pension Services. This was intended to place a greater focus
on performance. It was noted that the staff consultation was
ongoing, and an interim structure would be in place from 1 April
2017.
The Board discussed
the timescale for improvement, it was confirmed that officers
anticipated some immediate improvements, with performance
stabilising over the next six months. It was expected that all
outstanding work would be completed in 12 months. It was confirmed
that the Board would receive the project plan, with deliverables
and target dates for reporting progress.
The Board queried
whether employers were kept informed of how the Pension Services
was responding to performance issues. It was noted that there was
minimal engagement at this stage, though officers invited the
Board’s views as to how employers could be kept up to date.
The Board highlighted the Surrey Treasurer’s Group and HR
Managers group as appropriate forums to raise the matter. It was
also proposed that an update could be included in the employer
bulletin produced by the service.
The Board was
informed that the work to put annual benefits statements online for
active members was on target. It was noted that deferred members
would continue to receive paper statements, though they would be
encouraged to register for an online statement in the
future.
The Board discussed
progress on data cleansing and address screening for frozen refunds
and unprocessed leavers. It was noted that the National LGPS
Procurement Framework would support this activity, though its
delayed launch in February 2017 meant that work would be conducted
in quarter 1 2017/18.
The Board was
informed that 400 deferred members were approaching retirement in
the unprocessed leavers category. It was noted that the majority of
these had elected to defer benefits to a later date. It was
confirmed that approximately 90 were without up-to-date contact
details, and that Pension Services was making use of the Department
of Work and Pensions tracing service to locate them.
The Board queried how
frozen refunds were reported. Officers outlined that these were
reported in the Fund accounts under a specific category. It was
confirmed that this group represented a liability of £500,000
plus interest to the Fund.
The Board queried
what an acceptable level of unprocessed leavers would be for a
pension fund of equivalent size. Officers commented that this was
around 1,000, including records that required aggregation. It was
highlighted that reducing the number of unprocessed leavers from
7,261 would be a primary area of focus for Pension
Services.
Actions/ further information to be provided:
Officers to share
project plan, deliverables and reporting timescales to the
Board.
Officers to include
information on changes within Pension Services in its bulletin to
employers.
Officers to discuss
planned performance improvements with the relevant employer
forums.
Neil Mason, Senior Advisor
(Pension Fund), Pensions and Treasury
Key
points raised during the discussion:
The Board raised
questions on performance related to death benefits and ill health
retirements. Officers noted that this should be two areas of
highest priority for Pensions Services, and informed the Board that
steps were being taken to address performance in this area. The
Board was informed that quarter four 2016/17 figures were showing
improvement in this area. The Board asked for further information
with regard to the payment of death grants following receipt of
relevant documentation. The Board expressed concern regarding the
delay in providing retirement options for ill-health retirements
had arisen, officers outlined that this related to two
cases.
The Board discussed
the monitoring of transfers in, and suggested that an additional
key performance indicator could be the time it takes to provide new
joiners with information. The Board queried the increase in active
members, it was confirmed that this was reflective of the London
Borough of Hillingdon having entered into a partnership agreement
with Pension Services in respect to its pensions administration. It
was also highlighted that a number of the larger employers had
reached the re-enrolment date for staff whom had previously opted
out of the scheme. Officers commented that a fund would normally
see a membership increase of about 5% a year.
Actions/ further information to be provided:
Officers to provide
information with regard to the payment of death grants following
receipt of relevant documentation.
Recommendations:
That the Key Performance
Indicators report on the time it takes to supply information to new
joiners.
The Board is asked to note the content of the Chartered Institute of Public
Finance and Accountancy (CIPFA) Pension Administration Benchmarking
Club 2016 report (annex 1).
Neil Mason, Senior Advisor
(Pension Fund), Pensions and Treasury
Key
points raised during the discussion:
The Board queried how
the cost/member tree was calculated per member, and where actuarial
and audit costs appeared in relation to the cost per member of the
Surrey Fund. Officers commented that the breakdown related
explicitly to the administration of the scheme, and agreed to
clarify where these costs appeared in relation to the
fund.
The Board was
informed that some costs were clearly defined in the CIPFA
guidance, while others, such as the accommodation and central
charges, were subject to individual fund determination. It was
noted by the Board that the CIPFA figures were intended as an
indicative comparison, rather than definitive.
The Board queried the
level of qualified to unqualified staff, sickness absence and the
number in training. It was noted that the figures were low due to
staffing issues, and that officers expected an improvement in
future reporting.
The Board was
informed that training and qualification opportunities for the team
were being developed, with five members of staff being put forward
for vocational training. Officers commented that it was important
to ensure that staff were experienced and aware of the transitional
protections that had built up over the life of local government
pension schemes. The Board asked for further information regarding
the skills mix within Pension Services, and a target for the
optimum level of training and qualifications across the
team.
Actions/ further information to be provided
Officers to provide information
on how actuarial and audit costs are calculated per
member.
Officers to provide details on
the skills matrix for the Pension Services including targets for
developing.
Neil Mason, Senior Advisor
(Pension Fund), Pensions and Treasury
Key
points raised during the discussion:
The Board noted the
different approaches for different employers, and officers outlined
that multi-academy trusts were considered in a more favourable
light to single academies, as they provided cross guarantees. It
was highlighted that Further Education colleges were considered
private enterprises by central Government, and the insolvency
regime associated with this impacted on how colleges were assessed.
The Board was
informed that the consultation process followed on from the draft
being agreed at the Committee meeting on 10 February 2017.
Following this, the strategy had been issued to all employers for
consultation. The deadline had been extended to the last week of
March, and there had been limited response. Officers expressed the
view that this was not unusual, and that individual employers had
been in discussion about their own funding plans within the
principles of the strategy.
Neil Mason, Senior Advisor
(Pension Fund), Pensions and Treasury
Key
points raised during the discussion:
The Chairman tabled a
number of responses from local pension boards within the pooled
arrangements. These outlined the views of different boards with
reference to member representation at a pool level. This document
is attached as an annex to these minutes.
The Board discussed
the governance structure for the pooled funds, including the role
of the shareholder board and joint committee. It was noted that any
decision required 75%-100% approval by those administering
authorities within the pool. The Board was informed that the
administering authorities would retain sovereign responsibility
with respect to setting the asset and funding strategy for the
pooled fund. Officers outlined that the proposal was due to go to
full Council on 22 March 2017 for
decision, with implementation in April 2018.
The Board queried how
quickly assets would be transferred to the pooled arrangement. It
was explained by officers that this could be a quick process, as a
number of managers already used by funds were likely to be involved
in pooled investments.
The Board was
informed that each administering authority would have
responsibility for undertaking its own actuarial evaluation. It was
highlighted that this could lead to different funds in the pooled
arrangement having differing actuarial assumptions.
The Board discussed
the role of local pension boards, and member representatives in
respect to pooled investment arrangements. The Board expressed a
range of views, including some support for a non-voting observer,
or a joint local pension board arrangement. It was noted that it
was difficult to ensure a member representative would reflect the
different demographics in the pooled arrangements. It was
highlighted that Unison representatives across the 12 administering
authorities were already meeting to discuss shared priorities and
concerns. Other members of the Board reflected that there was
benefit in ensuring appropriate communication flow between the
different layers of governance. The Board expressed the view that
it would require a more thorough options appraisal in order to come
to a firm view.
Actions/ further information to be provided
None.
Recommendations:
That officers develop an
options appraisal and analysis with respect to the governance of
the pooled investment arrangements, covering the implications of
the following:
·Joint local pension board arrangements
·Communication arrangements between local pension
boards
·Member representation at pool level
·Formalised communications pathways between the
different layers of governance; or
·No change to the current governance
arrangements.
25/17
DATE OF THE NEXT MEETING
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The date of the next meeting is 27 July
2017.
Minutes:
The Board noted its next public meeting was
scheduled for 27 July 2017.
The Board noted it had a private workshop in
order to consider how environmental, social and governance factors
were factored into the draft investment strategy statement on 19
April 2017.
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