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 to this. It was highlighted that fund managers were
expected to undertake their own arrangements, and that the Pension
Services would clarify whether it was covered under corporate
insurance arrangements for the council.
Actions/ further information to be provided:
- Officers to provide
Pension Committee response to fossil fuel investments.
- Officers to confirm
insurance arrangements for Pension Services in the event of a cyber
security issue
Recommendations:
- That the Pension
Committee consider what appropriate measures could be taken in
order to reduce risk in response to the increasing funding
level.