Agenda and minutes

Surrey Local Pension Board
Thursday, 12 October 2017 1.00 pm

Venue: County Hall

Contact: Sharmina Ullah 

Items
No. Item

44/17

APOLOGIES FOR ABSENCE AND SUBSTITUTIONS

45/17

MINUTES FROM THE PREVIOUS MEETING pdf icon PDF 145 KB

46/17

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:

    None were received.

47/17

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 Friday 6 October 2017.

    2. The deadline for public questions is seven days before the meeting Thursday 5 October 2017.

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

    Minutes:

    None were received.

48/17

ACTION TRACKER pdf icon PDF 157 KB

    The Board is asked to note its action tracker.

    Minutes:

    Declaration of interest:

    None

     

    Witnesses:

    Neil Mason, Senior adviser (Pension Fund), Pensions and Treasury

     

    Key points raised during the discussion:

     

    1.    The Board agreed to remove item 4/15 from the action tracker, concluding that the use of substitutes would be difficult as members required a substantial level of understanding and experience to participate effectively in meetings.

     

    2.    Officers advised that the Board can expect update reports on Surrey Pension Fund frozen refunds and unprocessed leavers at the Board’s next meeting on 18 January 2018.

     

    3.    Officers stated that collaboration with peer authorities to review AVC options continued to be explored and an update will be provided at the next meeting, with a plan to include the review in the fourth quarter.

     

    4.    Members shared concerns with the disappointing response from employers regarding their requirement to produce employer discretions policies. Officers advised that the Service was actively encouraging returns.

     

    5.    Officers agreed to provide regular Border to Coast updates.

     

    Actions/ further information to be provided:

    None

     

    Recommendations:

    None

     

49/17

COMMITTEE VERBAL UPDATE AND INVESTMENT STRATEGY STATEMENT REPORT pdf icon PDF 163 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:

    Neil Mason, Senior Advisor (Pension Fund), Pensions and Strategy

     

    Key points raised during the discussion:

     

    1.    Officers informed the Board that the Pension Fund Committee (Committee) received a presentation on cyber security risks and ways in which this was being dealt with at Northern Trust, the custodian to the Fund.  As a result it was highlighted that the Committee plan to review Surrey County Council’s own cyber security in greater depth at a future meeting.

     

    2.    It was noted that the Committee reviewed a new investment opportunity with Pantheon Infrastructure Fund and the Committee agreed to the commitment of USD60m.

     

    3.    Officers explained that there may on occasion be duplication in papers across the Board and Committee. However this was necessary for the Board to ensure compliance with the respective regulations and guidelines, and to monitor decision making by the Committee.

     

    4.    Officers highlighted that the Pension Fund investment advisor, Mercer had completed a review of the Investment Strategy and posed six questions (listed on page 21 of agenda papers) to the Committee who had responded with the following;

     

    • the Committee would consider a larger allocation to illiquid assets, given the Fund’s position as a long term investor.
    • the Committee were comfortable maintaining the same allocation to equities as the funding position continues to improve, subject to any change reference funding the illiquid assets.
    • the Committee would consider triggers for future de-risking when the funding position had been defined.
    • the Committee would consider what alternative ways to reduce risk (e.g. equity protection strategies).
    • the Committee would consider the views of the Pension Board regarding options for further integration of ESG matters into investment decision making.
    • it was agreed that a “one size fits all” investment strategy was not appropriate for all fund employers and that this would need to be pursued as part of 2019 valuation planning.

     

    5. Following consideration of the Mercer investment review report, the Committee resolved to undertake further work on the options below:-

    ·         allocation to long-term illiquid asset classes,

    ·         downside protection with regard to equity risk, and

    ·         alternative indexation for passive investments.

     

    6. The Board supported the Committee’s approach and requested officers to revert back to the Committee emphasising the importance of defining triggers for future de-risking as the funding position approves.

     

    Actions/ further information to be provided:

    Report back to the Pension Fund Committee on the Investment Strategy Statement report, emphasising the importance of defining triggers for de-risking as the funding position improves.

     

    Recommendations:

    The Board noted the verbal update and report.

     

50/17

ENVIRONMENTAL, SOCIAL AND GOVERNANCE COMPLIANCE pdf icon PDF 189 KB

51/17

ADMINISTRATION AUDIT PROGRESS REPORT pdf icon PDF 205 KB

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

    2.    The Board recommends that the pension administration team produce a further update report for the next Local Pension Board meeting.

    Additional documents:

    Minutes:

    Declarations of interest:

    None

     

    Witnesses:

    Neil Mason, Senior Advisor (Pension Fund) Pensions and Treasury

    Jason Bailey, Pensions Lead Manager

     

    Key points raised during the discussion:

     

    1.    Officers introduced the report by highlighting the chart on page 83 of the agenda papers which sets out a range of improvement initiatives within the Pension Service and timescales.

     

    2.    It was noted that the Pensions Service were looking into individual staff performance, setting up a new development skills matrix to monitor this on a daily and monthly basis. The Pensions Lead Manager welcomed the Board to observe the change in the Service’s approach when the Board planned to visit the operation.

     

    3.    Officers provided a further backlog work plan in the meeting (attached as annex 1), quantifying the volume of work in relation to transfers in and out.

     

    4.    There was a discussion around the member self-service portal and the positive feedback received on the online system. Officers informed the Board that functionality would be improved with an upgrade planned at the end of the month.  Officers intend to promote the online portal more effectively.

     

    5.    The improvement plan also included the migration of the pension payroll to the Altair system which would allow users to view payslips, P60’s, change of address and bank details. The service were piloting i-Connect which would allow a secure way for employers to submit changes to payroll data which will then be automatically updated within the Altair system.

     

    6.    The Lead Pension Manager briefed the Board on the department management restructure, outlining that plans were designed to improve service delivery and not related to saving costs. The Board noted more information would be provided once the consultation launched in November.

     

    7.    The Chairman welcomed comments from the Internal Audit Officer in attendance who advised the Board the administration update was encouraging and that a follow up report would be provided in the New Year.

     

    8.    The Board noted the Pension Administration Internal Audit Report 2016/17 and were advised that updates would be provided at a future meeting on the recommendations. The Chairman agreed to provide the Committee with an update on 10 November 2017.

     

    Actions/ further information to be provided:

    Officers to provide the Chairman with a summary of the Local Pension Board progress report to share with the Pension Fund Committee on 10 November 2017.

     

    Recommendations:

    1.    The Board noted the contents of the report.

    2.    The Board recommended that the Pension Administration team produce a further update report for the next Local Pension Board meeting.

    3.    Internal Audit to be invited to a meeting of the Board once the follow up report was available.

     

52/17

KEY PERFORMANCE INDICATORS (QUARTER ONE) pdf icon PDF 105 KB

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

    Additional documents:

    Minutes:

    Declarations of interest:

    None

     

    Witnesses:

    Neil Mason, Senior Advisor (Pension Fund), Pensions and Strategy

    Jason Bailey, Pensions Lead Manager

     

    Key points raised during the discussion:

     

    1.    Despite the poor performance in a number of areas officers advised that improvements were expected for the second quarter and gave assurances that the Service has identified the key matters for attention.

     

    2.    The most concerning item was advising members on their retirement options that had been impacted by the significant volumes linked to care home closures.

     

    3.    The Board raised expressed their concerns and disappointment in the level of service. Officers repeated their assurance that they anticipated quarter two reports would show some improvement.

     

    Actions/ further information to be provided:

    None

     

    Recommendations:

    The Board noted the content of the report and annexes.

     

53/17

ANNUAL BENEFIT STATEMENT 2017 pdf icon PDF 124 KB

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

    2.    The Board notes that a breach has been reported to the Pensions Regulator.

    3.    The Board recommends that a project report on the production of annual benefit statements for 2017/18 be brought to the Board at its next meeting.

    Minutes:

    Declarations of interest:

    None

     

    Witnesses:

    Neil Mason, Senior Advisor (Pension Fund), Pensions and Treasury

    Jason Bailey, Pensions Lead Manager

     

    Key points raised during the discussion:

     

    1.    Officers were pleased to report that the vast majority (94%) of active members were issued with annual benefit statements by the statutory deadline of 31 August 2017. It was noted that 1,381 statements were late due to the failure of scheme employers to provide annual data returns.

     

    2.    The Board noted that these delays would be reported to the Pension Regulator.

     

    3.    The Board suggested that the employers be notified that their delays had caused the breach to be reported to the regulator.

     

    4.    Officers advised a second run of statements would be produced late October.

     

    5.    Due to problems with the external print house, statements to deferred members were issued 13 days late.

     

    6.     The breach report to the Pension Regulator would reflect the planned improvement to on-line reporting of annual benefit statements.

     

    The meeting was recessed at 2.30pm for a training session.

     

    Actions/ further information to be provided:

    None

     

    Recommendations:

    a)    The Board noted the content of this report.

    b)    The Board noted that a breach would be reported to the Pensions Regulator.

    c)    The Board recommended that a project report on the production of annual benefit statements for 2017/18 be brought to the Board at its next meeting.

     

TRAINING SESSION 14.30 - 15.30

54/17

NEW PERFORMANCE METRICS pdf icon PDF 124 KB

    The Board is asked to note the new performance metrics which will replace the existing Key Performance Indicators from quarter 3 reporting.

    Additional documents:

    Minutes:

    Declaration of interest:

    None

     

    Witnesses:

    Neil Mason, Senior Advisor (Pension Fund), Pensions and Treasury

    Jason Bailey, Pensions Lead Manager

     

    Key points raised during the discussion:

     

    The meeting resumed at 3.35pm

     

    1.    Officers informed the Board that the new performance metrics would replace the existing key performance from quarter three.

     

    2.    The Board requested that the new performance metrics include the use of colour to be able to differentiate between the levels of performance.

     

    3.    It was noted that the new format would give a broader perspective of the administrative function, providing an overview of workflow, customer feedback and project plans.

     

    Actions/ further information to be provided:

    None

     

    Recommendations:

    The Board noted the new performance metrics

55/17

NEW SERVICE SPECIFICATION BETWEEN THE PENSION FUND AND THE PENSION ADMINISTRATION FUNCTION pdf icon PDF 171 KB

    The Board is asked to note the new Service Specification which replaces Service Level Agreement with effect from 15 September 2017.

    Additional documents:

    Minutes:

    Declaration of interest:

    None

     

    Witnesses:

    Neil Mason, Senior Advisor (Pension Fund), Pensions and Treasury

    Jason Bailey, Pensions Lead Manager

     

    Key points raised during the discussion:

     

    1.    The Board was advised that the new service specification had replaced the Service Level Agreement (SLA) with effect from 15 September 2017.

     

    2.    It reflected the change in the relationship between the Fund and the Orbis Pension Service team which had developed since the previous SLA was approved in 2014. The intention was define the level of service which the Fund should expect.

     

    3.    It was noted that the service specification had been was approved by the Pension Fund Committee at its meeting on 15 September 2017.

     

    Actions/ further information to be provided:

    None

     

    Recommendations:

    The Board noted the new service specification.

     

56/17

DRAFT ADMINISTRATION STRATEGY pdf icon PDF 205 KB

    The Board is asked to note the Draft Administration Strategy which revises the existing strategy.

    Additional documents:

    Minutes:

    Declarations of interest:

    None

     

    Witnesses:

    Neil Mason, Senior Advisor (Pension Fund), Pensions and Treasury

    Jason Bailey, Pensions Lead Manager

     

    Key Points raised during the discussion:

     

    1.    The Board was informed that the purpose of the draft Administration Strategy was to define and regulate the relationship between the scheme employers and the Pension Fund. It reflected the substantial increase in the number of employers, now more than 200.

     

    2.    A new aspect of the draft Administration Strategy was employers’ levels of expectation and the consequences of the failure to meet those expectations, together with the obligations on employers.

     

    3.    The draft strategy would allow the Fund to make supplementary charges for services outside the norm (such as internal dispute resolution) or not used by all employers. It also set out penalties should employers not meet their obligations.

     

    4.    The Board noted concerns with the administration charge which had remained the same despite an increase of active employers. Officers explained a consultation is in progress, closing on 23 October 2017.

     

    Actions/ further information to be provided:

    None

     

    Recommendations:

    The Local Pension Board noted the draft Administration Strategy.

57/17

ADMINISTRATION RISK REGISTER pdf icon PDF 107 KB

    The Board is asked to note the new Administration Risk Register.

    Additional documents:

    Minutes:

    Declarations of interest:

    None

     

    Witnesses:

    Neil Mason, Senior Advisor (Pension Fund), Pensions and Treasury

    Jason Bailey, Pensions Lead Manager

     

     

    Key Points raised during the discussion:

     

    1.    The Board was informed that the new administration risk register includes an inherent risk score and a residual risk score as a result of control processes in place.

     

    2.    Items on the administration risk register were agreed through consultation between the Pension Fund and the Administration Service, and was overseen by the Risk & Governance Manager.

     

    3.    The Board drew particular interest to risk A8, A11, A14 and A18 which remained amber. Officers assured that these were actively monitored and options were being explored to treat and mitigate further. It was agreed that the inherent risk in A4 should be better defined.

     

    Actions/ further information to be provided:

    None

     

    Recommendations:

    The Local Pension Board noted the new administration risk register.

58/17

REVIEW OF INTERNAL DISPUTE RESOLUTION CASES IN 2017/18 (QUARTER ONE) pdf icon PDF 121 KB

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

    Minutes:

    Declarations of interest:

    None

     

    Witnesses:

    Neil Mason, Senior Advisor (Pension Fund), Pensions and Treasury

     

    Key points raised during the discussion:

     

    1.    It was noted that one first stage appeal was submitted and responded to in the first quarter of 2017/18.

     

    2.    Officers explained that the adjudicator in this instance asked the employer to review their decision as there were systemic issues.

     

    3.    Surrey’s HR Service has recently reviewed its ill health retirement process and this addressed the systemic issues identified by the adjudicator’s advice in the matter.

     

    Actions/ further information to be provided:

    None

     

    Recommendations:

     

    The Board noted the content of the report.

     

59/17

BREACHES LOG

    The Board is asked to note the verbal update at the meeting.

    Minutes:

    Declarations of interest:

    None

     

    Witnesses:

    Neil Mason, Senior Advisor (Pension Fund), Pensions and Treasury

     

    Key points raised during the discussion:

     

    1.    Officers reported the breach at Item 10 and informed members that in accordance with the Surrey Pension Fund breaches policy the Chairman of the Pension Fund Committee and the Chairman of the Local Pension Board were informed that the late issuance of annual benefit statements would be reported to the Pension Regulator.

     

    Actions/ further information to be provided:

    None

     

    Recommendations:

    The Local Pension Board noted the verbal update.

     

60/17

GUARANTEED MINIMUM PENSION RECONCILIATION UPDATE pdf icon PDF 222 KB

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

    Minutes:

    Declarations of interest:

    None

     

    Witnesses:

    Neil Mason, Senior Advisor (Pension Fund), Pensions and Treasury

    Jason Bailey, Pensions Lead Manager

     

    Key points raised during the discussion:

     

    1.    Officers introduced the report by informing members that the Committee agreed for the Administration Service to engage with an external provider who had specialist expertise.

     

    2.    The project would take two months and progress was reported on a fortnightly basis.

     

    3.    The baseline position in the report did indicate significant work requirements and a better picture would be available by 31 October 2017.

     

    4.    Officers reported that the Committee were not in a position to decide the provisional tolerance levels in the reconciliation until the volume of cases was established.

     

    Actions/ further information to be provided:

    None

     

    Recommendations:

    The Local Pension Board noted the content of this report.

61/17

LOCAL PENSION BOARD ANNUAL REPORT 2016/17 pdf icon PDF 197 KB

    To review and note the Local Pension Board Annual Report 2016/17.

    Minutes:

    Declarations of interest:

    None

     

    Witnesses:

    Neil Mason, Senior Advisor (Pension Fund) Pensions and Treasury

     

    Key points raised during the discussion:

     

    1.    The Board made reference to the attendance and training log in the Annual report and requested revisions against members where appropriate.

     

    Actions/ further information to be provided:

    Officers to update the Local Pension Board attendance and training log 2016/17.

     

    Recommendations:

    The Board reviewed and noted the Local Pension Board Annual Report 2016/17.

     

62/17

ANNUAL ACCOUNTS 2016/17 pdf icon PDF 157 KB

63/17

DATE OF THE NEXT MEETING