Agenda and minutes

The Democratic Services Officer read out the procedure.

Apologies were received from Gabriel Batt, Mike Drew and Ian Gilchrist.

At this point in the meeting declarations of interest are received from Members in any of the agenda items under consideration at the meeting. Members are asked to complete the green interest forms circulated to groups in their pre-meetings (which will be announced at the Council Meeting) to indicate:

(a) The agenda item number in which they have an interest to declare.

(b) The nature of their interest.

(c) Whether their interest is a disclosable pecuniary interest or an other interest,  (as defined in Part 2, A and B of the Code of Conduct and Rules for Registration of Interests)

Any Member who needs to clarify any matters relating to the declaration of interests is recommended to seek advice from the Council’s Monitoring Officer or a member of his staff before the meeting to expedite dealing with the item during the meeting.

There were none.

There was none.

The attached letter, requesting the Fund to disinvest from tobacco products entirely, has been received from Bristol City Council.

Members considered a letter informing the Committee of a resolution passed by Bristol City Council urging the Mayor of Bristol to press the Avon Pension Fund and its members to disinvest from tobacco products entirely. The Mayor had forwarded the resolution to the Committee without comment.

The Head of Business, Finance and Pensions recalled the various discussions that the Committee had had on this topic and that it would be revisited next year. It was officers’ current understanding of the law that the Fund’s fiduciary duty to its members was primarily a financial one. However the Law Commission was currently consulting on this issue, following the publication of Professor John Kay’s Final Report on UK Equity Markets and Long Term Decision Making. The Commission would be making recommendations to the Government next year. In addition, the local authority pensions scheme Shadow Advisory Board had asked a QC for advice on a number of issues, including this one. The Chair said that the Committee’s future discussions would be informed by the outcomes of these two reviews.

The Vice-Chair pointed out that if funds were assured that they could choose to disinvest from tobacco, there could be significant falls in tobacco shares.

A Member referred to a recent legal judgement of which he had a copy. The Chair asked him to pass it to officers.

There were none.

These were approved as a correct record and signed by the Chair.

The Investments Manager presented the report. She said that comparative data for the funding levels of other LGPS funds was not currently available, but would be reported to the Committee at a future meeting.

The Fund’s actuary, Mr Middleman, gave a presentation on the 2013 valuation results and funding strategy. A copy of his slides is attached as an appendix to these minutes.

Members raised a number of issues during the presentation and in the discussion afterwards.

Deficit Reduction Strategy

Mr Middleman assured a Member who had expressed concern, that his recommendations for new contributions rates would not impose undue burdens in the future, given that the assumptions had been set with a level of prudence within acceptable bounds.

Ill-Health Retirements

Mr Middleman said these had dropped dramatically since the 1980s. They were now much more tightly controlled via LGPS regulations, and this is reflected in the assumptions adopted.

The Discount Rate for Pension Liabilities

In reply to a question from the Chair, Mr Middleman clarified that lower interest rates increased the deficit by about £900m, which was offset by a reduction of about £300m due to lower inflation at the end of March 2013.

Contribution Rates and Deficit Payments

The Investments Manager and Mr Middleman explained that rates were set by the actuary in accordance with the Funding Strategy Statement previously agreed by the Committee.

A Member asked why there appeared to be two valuations, one at 31 March 2013 and one at 31 August 2013, and why contribution rates were being based on the 31 August valuation. Mr Middleman explained that the actuary’s fiduciary duty under the Regulations required him to state the valuation position as at 31 March 2013. The figure for August 2013 took account of market movements (in particular increases in the discount rate due to bond yield reversion) and other factors, and allowed lower deficit contribution payments to be set. These lower contribution payments had been stress-tested for sustainability against the target of 100% funding and had been found entirely satisfactory within reasonable bounds of likelihood.

The Actuary advised that the declared valuation as at 31 March 2013 should take account of short term pay restraint as evidenced by most employers. 

A Member suggested that pay for some local authority workers might rise more than the Chancellor’s limit of 1%, because of pressures to pay a living wage and other factors. The Chair pointed out that the 1% limit applied to the total pay bill; there was a risk that a future government might raise pay more.

A Member expressed concern that some of the Fund’s employers might not exist at the time of the next valuation. The Investments Manager said that those not guaranteed were mostly small charities and that their combined liabilities were very small. The funding strategy for those employers had been varied to consider these issues within the bounds of affordability. The Chair asked for a report on this at the next meeting. The Head of Business, Finance and Pensions  ...  view the full minutes text for item 41.

The Investments Manager presented the report. She said that the response submitted on behalf of the Fund had taken the line that the Fund’s current treatment of academies was transparent, in line with the DfE’s guidance and therefore that the Fund did not support pooling.

RESOLVED to note the Fund’s response to the consultation paper on pooling arrangements for academies.

The Technical and Compliance Manager presented the report. He said that discussions were still on-going about the future of the Councillors’ pension scheme. The following options were being considered:

i)  retain the exiting scheme for councillors;

ii)  abolish the scheme;

iii)  restrict the scheme to certain categories of councillor;

iv)  retain the scheme only for existing members;

Regulations were imminently expected, and if the issues surrounding the Councillors scheme were not resolved in time, separate Regulations might have to be issued for the Councillors’ scheme in future.

Members discussed the possible restructuring of LGPS funds. The Chair noted that there could be a single fund for all local authorities in Wales. He thought that there was interesting information in the chart on page 57 of the agenda entitled “Gross Value Added”. The Investments Manager said that some of the data underlying the chart would be available for consideration in future debates about the structuring of funds. She drew attention to the forward timetable in paragraph 6.12.

RESOLVED

1.  To note the current position regarding changes to the LGPS in 2014.

2.  To note the information on administration and investment costs.

Before discussing exempt appendices 2, 3 and 4, the Committee is invited to pass the following resolution:

“That, having been satisfied that the public interest would be better served by not disclosing relevant information, and in accordance with the provisions of Section 100(A)(4) of the Local Government Act 1972, the public shall be excluded from the meeting for the following item of business because of the likely disclosure of exempt information as defined in paragraph 3 of Part 1 of Schedule 12A of the Act as amended”.

The Assistant Investments Manager presented the report. The Panel had recommended that the Committee adopt the policy framework for infrastructure. It had also met Schroder and had set a timetable for evaluating the impact of recent organisational changes on their performance, as detailed in Exempt Appendix 3. A summary of the appointment for the Diversified Growth Fund mandate was given in Exempt Appendix 4.

RESOLVED to note:

1. the draft minutes of the Investment Panel held on 15^th November 2013;

2. the recommendations and decisions made by the Panel this quarter as set out in 4.1.

The Investments Manager presented the report. She said that the proposed policy framework for infrastructure investment was less specific than would be expected for other asset classes, but this represented the nature of infrastructure investment. The evaluation of tenders, however, would be as robust as usual.

Julian Brown said that the JLT report had been well summarised by officers in the covering paper. He thought the framework needed to be wide-ranging in order to secure access to many different specific investments.

A Member said that the briefing session held before today’s meeting had been very helpful; he wondered who would set the criteria for the appointment of a manager for infrastructure investment. The Investments Manager said that work was only just beginning on this; it would be discussed with the Investment Panel. Co-operation with other funds in the manager procurement process might result in lower fees.

A Member asked whether it might be beneficial to select more than one infrastructure investment manager. Mr Brown replied that it would be an open tender, which did not preclude appointing more than one manager. However a fund of funds might give the appropriate level of diversification.

RESOLVED to agree the proposed policy framework in section 6.

The Assistant Investments Manager summarised the headline figures.

RESOLVED to note the information as set out in the report.

The Finance & Systems Manager (Pensions) presented the budget report.  Salaries were £20,000 below budget because of delayed appointments. Investment Governance & Member Training were £50,000 below budget. Investment Manager Fees were £821,000 above budget because of strong markets since the budget was set. He tabled an update to Appendix 7 (pages 193-194) to the report. He pointed out that Appendix 8 (risk register) was now more detailed, following comments from a Member at the previous meeting.

The Pensions Benefits Manager presented the administration report. He drew attention to the small increase in active members. The administrative performance of the unitary authorities had remained steady. There were still concerns about the supply of data by Bristol City Council; notification of approximately 400 scheme leavers since April 2013 were outstanding. Pensions staff had met officers of BCC in November. Since March the Pensions Team had trained staff from 57 employers accounting for 71% of Fund members in electronic data delivery. Electronic data delivery would take a significant step forward when South Gloucestershire implemented i-Connect software in 2014. Bristol CC gave notice of redundancy to a large number of staff in November and another batch was expected in the near future. The Pensions Team would support Bristol CC and send staff to pensions surgeries. In 2014 the Pensions Team would participate in member roadshow events  about the new LGPS in 2014.  It has also planned separate events for employer practitioners with separate sessions targeting both academies and town and parish councils.

The Head of Business, Finance and Pensions gave on an update on the convalescence of the Pensions Manager and his planned return to work.

RESOLVED to note:

1. Administration and management expenditure incurred for 7 months to 31 October 2013.

2. Performance Indicators and Customer Satisfaction feedback for 3 months to 31 October 2013.

The Investments Manager presented the report.

A Member noted that there was no timescale for the appointment of the Infrastructure Manager. The Investments Manager replied that there was still preparatory work to do on this, including an indicative timetable.

It was noted that the timing of Fund Governance and Assurance on the training plan (page 211) should be June 2014, not June 2015.

RESOLVED to note the workplans for the period to 31 March 2014.