Agenda and minutes

The members had before them:

A.    The Agenda papers (previously circulated);

B.    An exempt copy of the proposed structure of the Pension Administration function; and

C.   The Minutes of the meeting held on 8 October 2021 (previously circulated).

Cllr Mel Allcott substituted for Cllr Luke Mallett.

Apology was received from Jane Evans, Cllr Karen Hanks and Cllr Luke Mallett.

Cllr Roger Phillips (Chairman of the Pension Board) declared interests as the Chairman of the Scheme Advisory Board (SAB) for the Local Government Pension Scheme and as a Director of PPL.

Members of the public wishing to take part should notify the Assistant Director for Legal and Governance in writing or by e-mail indicating the nature and content of their proposed participation no later than 9.00am on the working day before the meeting (in this case 7 December 2021). Further details are available on the Council’s website. Enquiries can be made through the telephone number/e-mail address below.

None.

To confirm the Minutes of the meeting held on 8 October 2021 (previously circulated)

RESOLVED that the Minutes of the meeting held on 8 October 2021 be confirmed as a correct record and signed by the Chairman.

RESOLVEDthat the Minutes of Pension Board and Pension Investment Sub-Committee be noted.

The Committee considered the report on the Pension Administration Resourcing.

In the ensuing debate, the following points were made:

·         Michael Hudson explained that the proposed changes to the Pension Administration function would move the Fund to a below middle quartile performance when benchmarked against other funds. However, other funds had revised their structures and were recruiting, and it was therefore expected that this Fund’s position would eventually be slightly lower in the benchmarking table

·         Michael Hudson indicated that although the appointment of the Head of Pensions Administration was not a decision for this Committee, given the close working relationship that the role was expected to have with members, it would be beneficial to some form of member involvement in the interviewing process. He therefore proposed that representatives of the Committee and the Board be involved in an informal capacity

·         The Chairman of the Pension Board confirmed that the Board had reviewed the proposed Pension Administration arrangements. The Board particularly noted the impact of the Covid pandemic on the pension administration working arrangements with an increased move for staff to work from home. An unintended consequence was that better paid employment opportunities in London were opened up to staff. The proposed changes to the function, particularly to develop the Fund’s own staff seemed sensible. It was important to keep the structure under review going forward

·         It was concerning that the Pension Administration function relied on a small number of key staff because the loss of any one of them would place a considerable strain on the service

·         It was agreed that the Chair and Vice-Chair of the Committee and the Chair of the Pension Board would be invited to take part in the interview process for the appointment of the Head of Pensions Administration in an informal capacity

·         It was important to ensure that candidates applying for posts in the new structure understood that the work would be at least partly office-based. Michael Hudson agreed with the sentiment and added that the present Council policy required staff to work in the office at least two days a week and managers three days a week.

RESOLVED that:

a)    The proposals to develop the Pension Administration function be supported; and

b)   An increase to the Pension Fund Administration Budget of £0.2 million be approved.

The Committee considered the Local Government Pension Scheme (LGPS) Central Update.

In the ensuing debate, the following points were made:

·         The transition of existing assets and investment to LGPS Central products, particularly the Global Sustainable Active Equity Fund had taken far too long to finalise. What were the reasons for the delay?  Rob Wilson explained that the delay could partly be explained by the timing of each partner fund’s agreement to the proposed transition arrangements but also the development of an understanding of the most cost-effective stage for the transition of the assets and investments

·         In response to a query, Rob Wilson indicated that it was more cost-effective to transition the assets and investments in one block rather than on an individual basis. A caveat was that LGPS Central had yet to have a meeting with partner funds to discuss the transition with the appointed transitions advisor.

RESOLVED that:

a)    The LGPS Central Update be noted; and

b)   The Committee has expressed its disappointment at the time it had taken LGPS Central to transition existing assets and investment to LGPS Central products, particularly the Global Sustainable Active Equity Fund.

The Committee considered the Pension Investment Update.

Philip Hebson, the Independent Investment Adviser to the Fund introduced the report and made the following points:

·         The total of Committed Infrastructure Investments stood at £424m (59%). It was anticipated that this level of commitment would increase as more of the Fund’s Infrastructure projects materialised

·         The Fund’s investment in the Gresham House Forestry Fund had generated a considerable amount of external interest. The Fund was one of the first in the country to pursue property investment of this nature

·         The Fund had a current estimated Funding Level of 103% which was a healthy position. The Fund had benefited from a balanced pool of investments which had provided protection against market movement. If this level of funding could be maintained until 31 March 2022, then conversations would need to take place with the Actuary about the appropriate assumptions to use in the actuarial valuation to maintain stability of employer contribution rates in the future

·         The Equity Protection Strategy had been working effectively for the Fund to date. He would not recommend making any changes to the Strategy before Christmas

·         The Strategic Asset Allocation (SAA) had required a degree of rebalancing, as it was outside its normal bounds mainly due to the strong performance of equities. A lot of work had taken place since the last SAA but some more fine-tuning was still required. However, he would recommend a period of stability before any further major changes to the SAA were considered.

In the ensuing debate, the following points were made:

·         Consideration should be given to issuing a press release concerning the Fund’s proposed investment in Gresham House Forestry

·         In response to a query, Philip Hebson confirmed that an external provider would be invited to review the SAA again as was done previously. Unlike last time, the review would take place after the valuation had been completed, not before

·         It would appear that the vast majority of funds were pursuing a global equity mandate whereas this Fund was pursuing a regional allocation approach. It would be interesting to get the views of an external provider on the benefits/disbenefits of each approach. Philip Hebson commented that the US market made up a large percentage of the global index. The US market relied on the performance of a small number of major stocks. Therefore, the global equity mandate was very vulnerable to the poor performance of major US stocks. He considered that there were more opportunities for the Fund outside the US market

·         The Government advice on Climate Change Financial Reporting was awaited. This advice would have an impact on the Fund’s approach to Responsible Investment

·         It was noted that the investment of the existing passively managed equities target allocation equated to circa £200m.

RESOLVED that:

a)    The Independent Investment Adviser's fund performance summary and market background be noted (Appendices 1 and 2);

b)   The update on the Investment Managers placed 'on watch' by the Pension Investment Sub Committee be noted;

c)    The funding position compared to  ...  view the full minutes text for item 347.

The Committee considered the Pension Fund Annual Report for the year ended 31 March 2021.

In the ensuing debate, the following points were made:

·         Rob Wilson indicated that the Pension Fund Accounts had yet to be signed-off by the external auditor. The external auditor had indicated that there were no issues with the Accounts but would not be able to sign them off until the County Council Accounts were ready for sign-off. Michael Hudson added that the delay in the sign-off arrangements for the County Council’s Accounts related to the way in which Place Partnership Limited (PPL) had been recorded in the draft Accounts

·         On behalf of the Committee, the Chair thanked officers for their hard work in preparing the Annual Report.

RESOLVED that the Pension Fund Annual Report for the year ended the 31 March 2021 be approved.

The Committee considered the Business Plan.

In the ensuing debate, the following points were made:

·         In response to a query, Chris Frohlich commented that the Fund’s external pensions admin system provider would be starting their next cyber security review in December and the outcome of that review was awaited

·         Had the Fund protected itself from the cyber-attacks similar to those experienced by the Spar supermarket chain which had resulted from cyber security weaknesses in its supply chain? Chris Frohlich advised that the Fund had only a limited number of IT interfaces, the key one being with the Council’s E5 system and therefore was less vulnerable to the issues experienced by Spar. However, it would be useful for the Fund to have a matrix of all its data transfer interfaces

·         The Chairman of the Pension Board confirmed that the Scheme Advisory Board were examining the issues associated with cyber security. 

RESOLVED that the Worcestershire Pension Fund (WPF) Business Plan as at 1 November 2021 be noted.

The Committee considered the Risk Register.

In the ensuing debate, it was queried whether Liberata were failing to provide the Fund with the required level of service and whether the Fund could take action to seek redress? Chris Frohlich responded that due to the way in which the contract had been drawn up with Liberata, there was very little scope for the Fund to seek redress. The County Council had received data on a regular basis from from Liberata but it was getting harder to acquire and needed further work on receipt.

RESOLVED that the 1 November 2021 WPF Risk Register be noted.

RESOLVED that the Forward Plan be noted.