Agenda item

The Committee considered the changes that will be required to the operational and governance arrangements for the Worcestershire County Council Pension Fund following recent amendment of the LGPS Investment Regulations.

In the ensuing debate, the following principal points were raised:

·         The Chief Financial Officer commented that representatives of the LGPS Central Pool had met the Minister for Communities and Local Government in November. The Minister re-affirmed the Government's previous stance that pooling was something all local government pension schemes were required to do. He was pleased with the progress made by the LGPS Central pool and gave permission for the pool to proceed – the first in the country

·         There remained a major concern that it would take 15 years for the Pension Fund to reach a break-even point after the creation of the LGPS Central pool. The Chief Financial Officer stated that negotiations continued with LGPS Central pool partners to achieve a fairer basis for cost allocation and he was confident of a positive outcome for the Fund. The pooling process was very complex and had tight timescales which meant that its initial spend against budget had been exceeded but was still within the delegated allocations made by the Committee

·         Discussions about the governance of the LGPS Central pool had focussed primarily on savings and investment in infrastructure but no account formally in the business case had been made of the performance of the pool. The Chief Financial Officer indicated that he had raised this matter with colleagues in the pool and he was aware that it was being discussed at the pool's programme board and working group

·         In response to a query, the Chief Financial Officer explained that a smaller number of fund managers within the LGPS Central pool would be responsible for finding efficiency savings over a number of different fund holdings. However he stressed that approximately 80% of the gains made by the Pension Fund was forecast to be achieved by the strategic allocation of assets which remained a function of the Fund. In relation to investment in Infrastructure, once deployed, the Fund was already ahead of the Government's target

·         The pooling arrangements would potentially allow greater options for investment and therefore possibly provide greater returns for the Pension Fund

·         In response to a query, the Chief Financial Officer commented that it was important to demonstrate that cross-subsidisation was not happening in the management of assets and cost share arrangements in the pool. It was a matter that would be brought back to a future Committee meeting to demonstrate how this risk was being managed.

RESOLVED the following recommendations be approved subject to a condition that a cost share agreement is agreed with all LGPS Central pool members that ensures value for money in the opinion of the Chief Financial Officer for the Worcestershire County Council Pension Fund from entering into the LGPS Central investment pool:

a)    To enter into a joint agreement with Derbyshire County Council, Leicestershire County Council, Nottinghamshire County Council, Shropshire Council, Staffordshire County Council, Wolverhampton City Council and Cheshire West and Chester Borough Council to establish a joint pension fund investment pool, in accordance with the requirements of the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016; to be overseen by a Joint Committee established under s102 of the Local Government Act 1972;

b)    TO RECOMMEND that a Joint Committee be established with the participating authorities under s102 of the Local Government Act 1972 to oversee LGPS Central arrangements and that the Head of Legal and Democratic Services be authorised to finalise the formal terms of reference for such a Joint Committee in consultation with the Chief Financial Officer;

c)    That the Chairman of the Worcestershire County Council Pensions Committee, or his nominated representative be appointed act as the Council’s representative on the Joint Committee;

d)    That the Director of Governance and the Director of Finance of Cheshire West and Chester Borough Council  provide governance and administrative support to the Joint Committee on behalf of the participating Councils, subject to an appropriate cost sharing agreement agreed by the Chief Financial Officer in respect of officer time and other expenses;

e)    To become a joint shareholder of LGPS Central as a private company, limited by shares held solely by the participating funds, on a ‘one fund, one vote’ basis and incorporated for investment management purposes and regulated under the Financial Services and Markets Act 2000;

f)     That the Chairman of the Worcestershire County Council Pensions Committee, or his nominated representative, exercise the Council’s voting rights as a shareholder of LGPS Central;

g)    That the Chief Financial Officer represent the Council on a Practitioners Advisory Forum, providing joint officer support to the Joint Committee and Shareholders; and

h)    To authorise delegated powers to the Chief Financial Officer to enter into all necessary legal agreements to establish a joint asset pool and investment management company, as outlined in this report, and to agree the Initial Strategic Plan and the Cost Sharing Schedule.