Agenda and minutes

Surrey Local Pension Board
Wednesday, 15 March 2017 10.00 am

Venue: Ashcombe Suite, County Hall, Kingston upon Thames, Surrey KT1 2DN. View directions

Contact: Andrew Spragg 

Items
No. Item

13/17

APOLOGIES FOR ABSENCE AND SUBSTITUTIONS

    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.

14/17

MINUTES FROM THE PREVIOUS MEETING: 25 January 2017 pdf icon PDF 167 KB

15/17

DECLARATIONS OF INTEREST

    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

    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.

    Minutes:

    There were none.

17/17

ACTION TRACKER pdf icon PDF 176 KB

    The Board is asked to note its action tracker.

    Minutes:

    Declarations of interest:

     

    None

     

    Witnesses:

    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.

     

    Actions/ further information to be provided:

     

    None.

     

    Recommendations:

     

    None.

18/17

PENSION COMMITTEE UPDATE pdf icon PDF 104 KB

    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:

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    1. 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

19/17

ADMINISTRATION UPDATE pdf icon PDF 179 KB

    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:

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    Recommendations:

     

    None.

     

20/17

KEY PERFORMANCE INDICATORS QUARTER 3 2016/17 pdf icon PDF 105 KB

    The Board is asked to note the content of this report.

    Additional documents:

    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:

     

    1. 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.

     

    1. 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.

     

21/17

INTERNAL DISPUTE RESOLUTION CASES: QUARTER 3 2017/18 pdf icon PDF 118 KB

    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:

     

    1.    The Board noted the report, there were no further comments.

     

    Actions/ further information to be provided:

     

    None.

     

    Recommendations:

     

    None

22/17

CIPFA ADMINISTRATION BENCHMARKING CLUB 2017 pdf icon PDF 167 KB

    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).

    Additional documents:

    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:

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    Recommendations:

     

    None.

     

23/17

DRAFT FUNDING STRATEGY STATEMENT pdf icon PDF 155 KB

    The Board is asked to note the content of the report.

    Additional documents:

    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:

     

    1. 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.

     

    1. 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.

     

    Actions/ further information to be provided

     

    None.

     

    Recommendations:

     

    None.

     

24/17

SURREY FUND PARTICIPATION IN ASSET POOLING pdf icon PDF 265 KB

    The Board is asked to note the contents of this report.

    Additional documents:

    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:

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    1. 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.

     

    1. 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

    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.