Agenda and draft minutes

The Chair will ask the Committee Administrator to draw attention to the emergency evacuation procedure as set out under Note 5.

The Chair welcomed Councillor Fi Hance (Bristol City Council) to her first meeting of the Committee.

The Chair drew attention to the emergency evacuation procedure. 

Councillor Shaun Stephenson-McGall, Councillor Joanna Wright, Pauline Gordon and Charles Gerrish had all sent their apologies to the Committee.

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 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 4.4 Appendix 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 Officeror a member of his staff before the meeting to expedite dealing with the item during the meeting.

There were none.

There was none.

There were none.

There were none.

The Committee RESOLVED that the minutes of the meeting on 22^nd March 2024 be confirmed as a correct record and signed by the Chair.

The Committee is asked to note the draft minutes of the meeting of the Pension Board held on 12th June 2024.

The Committee RESOLVED to note the minutes of the Board meeting held on 12th June 2024.

The Committee will receive a presentation from Brunel on this matter at the meeting.

Laura Chappell, CEO Brunel Pension Partnership and Vaishnavi Ravishankar, Head of Stewardship addressed the Committee. A summary of their presentation is set out below and a copy of it will be attached as an online appendix to these minutes.

Brunel update Q2 ‘24 - Part 1 – Laura Chappell

Brunel is a flagship organisation with an industry leading reputation that is 100% committed to the needs of its client pensions funds.

85% of assets have climate change targets and Brunel aims to align stewardship across all of our work areas. Brunel has implemented a new approach to Human Rights in terms of our investing and Artificial Intelligence (AI) has recently been introduced at Brunel.

A series of metrics and targets for our investment in Private Markets are in progress.

We are happy where the company is in totality, responsible investing is our focus and we have a long-term view towards investing.

2024-5: Priorities ahead

·  Responsible Investment Performance

·  Strategic Objectives

·  Governance

·  Pooling

Pooling – Likely to be no Government money in the pot. Discussions ongoing with representatives of both the Conservatives and Labour. Can we invest in the UK and align with our priorities? Our members remain our priority.

Jackie Peel asked for further details in relation to cost savings and how they benchmark against the aims set out when Brunel began.

Laura Chappel replied that when they submitted their business case 7 years ago they stated that they would seek to outperform what the Fund was already achieving and that they have succeeded in doing so by saving £41m over this period. She added that over the past year a further £2m has been saved on investment fees.

Jackie Peel asked if they had any further targets in mind to achieve.

Laura Chappell replied that they have to be mindful to not squeeze managers too much, but said that there is a shift of funds investing passively as opposed to active. She said that they had actively embarked on an engagement process regarding fees that had led to the savings achieved.

Councillor Kate Kelliher asked if they could define what they see as long-term investing.

Laura Chappell replied that she sees this as a 25 – 50 year timeline and even performance over a 5 year period is not so relevant unless it can be sustained. She added that they obviously need to be aware of blips that may occur and how to manage them.

John Finch asked if during her recent discussions with the political groups she was able to gain what their views are on pooling.

Laura Chappell replied that Labour are not showing for much of a push on consolidation and are more interested in investment into the UK. She added that she acknowledges that the Fund will need to continue to grow, but are not able to accommodate this currently and will need to find a balance point to do so in the future.

Councillor Mike Drew asked what the set-up costs were for Brunel  ...  view the full minutes text for item 9.

This paper reports on the investment performance of the Fund and seeks to update the Committee on routine strategic aspects of the Fund’s investments and funding level, policy and operational aspects of the Fund.

The Investments Manager introduced the report and highlighted these points from it.

·  Over 1 year the Fund returned 7.8% in absolute terms and -2.0% in relative terms, where most portfolios underperformed their respective benchmarks.

·  The Investment Panel met on 5 June 2024. The most substantive item discussed during the meeting was the proposal to appoint Octopus Real Estate as the manager of the Fund’s £50m initial commitment to affordable housing. The £50m represents c.30% of the fund’s overall allocation to local impact and will be split between a national pooled fund (£40m) and a purpose built co-investment vehicle (£10m), which will invest in affordable housing schemes in the Avon region.

·  A key source of liquidity is the excess cash collateral in the BlackRock QIF that was released following the reduction in the equity hedge. Rather than use this excess collateral to reinstate the LDI trigger framework and increase the level of liability hedging, Panel agreed to keep the trigger framework on pause so as not to create pressure on the Fund’s near-term liquidity position.

Steve Turner, Mercer addressed the Committee and highlighted the following points from Appendix 1.

·  The Fund’s assets returned 2.3% over the quarter, whilst the liabilities are estimated to have increased by c. 0.6%. The combined effect of this saw the estimated funding level increase to c. 98%. The funding level is estimated to be c. 4% higher over the year to 31 March 2024.

·  Of the listed equity portfolios, underperformance was most pronounced in the Global Sustainable Equity Portfolio, with Global High Alpha also lagging its benchmark return.

·  Underperformance over this period is attributed to underweight positions in the ‘Magnificent 7’ stocks.

·  Our medium-term outlook favours growth fixed income and nominal UK government bonds, with a slight overweight to equities (Emerging Market and Japanese equities).

William Liew asked if any further comment could be given on the decision to keep the LDI trigger framework on pause.

Steve Turner replied that a comprehensive liquidity review had taken place and that the view was reached that flexibility regarding Private Markets commitments was required, Local Impact / Natural Capital as an example. He added that the more hedging that is done, the more prudent we have to be on liquidity. He said that they remain being prepared for possible inflation hedging should inflation come down.

William Liew referred to the appointment of Octopus and asked if they would be acting as a landlord for the new affordable housing.

Steve Turner replied that Octopus own a registered provider, New Arch, who will have the responsibility to build and run the homes.

Councillor Toby Simon asked if these homes would count towards the property asset allocation.

Steve Turner replied that it is primarily viewed as Local Impact and that some degree of Real Estate exposure is taken into account.

Councillor Toby Simon asked for confirmation that Partners Overseas Property was not managed by Brunel.

Steve Turner replied that it was not and that it was not viable to transfer. He  ...  view the full minutes text for item 10.

This report is to remind members of the roles and responsibilities of members, advisors and officers of the Avon Pension Fund and the governance framework for the Fund as a whole.

The Governance & Risk Advisor introduced the report and highlighted the following areas.

She explained that the report is to remind members of the roles and responsibilities of members, advisors and officers of the Avon Pension Fund and the governance framework for the Fund as a whole.

She outlined the elements within the report that required the Committee to approve, note and agree.

Jackie Peel referred to the Representation Policy and noted that the new logo of the Fund should be put in place.

The Governance & Risk Advisor replied that this would be amended.

Councillor Toby Simon referred to the Scheme of Delegations and commented that he would like the roles in two areas to be more defined. He said that for the ‘Early release of Benefits’ it should be ‘an appropriate officer of the Administering Authority’ that has this delegation.

He added that on the matter of ‘Internal Dispute Resolution Procedure – Stage 2 – Fund decision’ this should be delegated to a specified senior officer.

The Head of Pensions replied that he would undertake this role.

The Committee RESOLVED to:

i)  Approves the Scheme of Delegation.

ii)  Approves the Governance Compliance Statement, including draft Representation Policy.

iii)  Approves the Conflict of Interest Policy

iv)  Notes the Decision Making Matrix.

v)  Notes the roles and responsibilities of the members, advisors and officers.

vi)  Agrees independent member representation of the Brunel Working Group – Pauline Gordon to continue in her role.

vii)  Agrees substitute of Brunel Oversight Board – Councillor Stephenson-McGall (Chair of the Investment Panel)

viii)  Agrees the member(s) to represent the fund on the Local Authority Pension Fund Forum – Councillor Paul Crossley, Councillor Toby Simon, Councillor Shaun Stephenson-McGall and Councillor Mike Drew (up to two member representatives from the Fund attending any meeting).

ix)  Agrees to delegate the drafting of the Annual Report to Council to Officers and the Chair (subject to informal consultation with Committee members prior to the Chair approving the report).

The purpose of this report is to present the Fund’s administration performance for the three months to 31st March 2024 vs key performance indicators (KPI’s).

The Pensions Operations Manager introduced the report to the Committee and the following points were highlighted from it.

• Recruitment for the two key posts of Employer Services Manager and Member Service Manager are under way.

• McCloud: Awaiting guidance from the Scheme Advisory Board (SAB) with respect to the application of the McCloud remedy. This is now expected to be issued following the General Election (4^th July). Early reporting suggests the fund has c1,000 members that will require the remedy.

• GMP: The fund is in the final stages of reviewing the Mercer closure report for member reconciliation. 5,150 remain outstanding as “stalemate cases” out of a population of 91,369 members, (a reduction of 8,916 previously reported to the Board in February 2024). The review will aim to be completed in July and we plan to bring recommendations to Board & Committee in September.

·  Process Controls: The fund is working with an external consultancy company to carry out a piece of work to map and review existing processes and relevant controls. The initial project will review the top 15 processes based on risk. The review is due to complete at the end of June and a full report will be brought to Board in September.

·  The budget outturn for the 2023-24 year was an underspend of £503k.

·  From 30 May 2024 APF entered a 45-day consultation period with all staff for an organisational re-structure which will take effect on 1 August. The new structure will increase overall FTE’s from 83 to 94.

Councillor Mike Drew asked if anything unexpected had been raised as part of the consultation so far.

The Pensions Operations Manager replied that there had not yet been anything of significance. She said that some posts were likely receive a two grade increase and that some roles may change to allow the formation of the new Digital Team. She added that promotion opportunities would be more possible within the new structure.

Councillor Fi Hance asked if there would be a role for all of the 28 staff who have been ring-fenced.

The Pensions Operations Manager replied that there would and that the appropriate Trade Unions have been involved in these discussions.

McCloud – Pensions in-to payment from 1st October 2023 to 31st May 2024

·  From 925 normal (from active or deferred) pensions 18 (2%) have had the underpin applied resulting in an annual uplift of £6,735 which equates to £561 monthly.

·  From 204 dependant pensions there has been no need to apply the underpin.

The Chair asked if further work was required of officers with regard to McCloud.

The Pensions Operations Manager replied that there was and that they had around another 20,000 member details to work through. She said that it was likely that around 1,000 members could receive the underpin.

SLA – Performance average June 23 to May 2024

• Figures are not improving much which is still due to the backlog of cases.

KPI’s - cases outstanding under 31 days

• 1,601 as at 2^nd June 2024

KPI’s  ...  view the full minutes text for item 12.

The purpose of this report is to update the Pension Committee on the latest position concerning the Local Government Pension Scheme [LGPS] and any proposed regulatory matters that could affect scheme administration. 

The Technical and Compliance Manager introduced the report and highlighted the following points to the Board.

McCloud Judgement

A closed consultation on the draft McCloud Statutory guidance ran between March 2024 and April 2024. Generally, across the sector, a number of concerns have been raised on the issues of administrative burden, communication challenges, and consistency of treatment both within the LGPS and across the public sector. A response to the latest consultation is awaited, now expected to be delayed due to the General Election.

The administration team are processing business as usual cases to be compliant with the McCloud regulations although they still are having to be vigilant as subsequent issues have been found with calculations following the release of further software versions.

Systems and Quality Assurance are still working through the system issues which were identified by the software provider since switching on the McCloud functionality in October 2023. These are being fixed in bulk and will ensure that the scope of the McCloud Remedy is accurate, in terms of population and cost.

Pensions Taxation

The Lifetime Allowance (LTA) was formally abolished with effect from 6 April 2024 via the Finance Act 2024. Two new limits – the Lump Sum Allowance (LSA) and the Lump Sum and Death Benefit Allowance (LSDBA) are now in force.

Whilst the removal of the LTA is beneficial to members, there are a number of practical considerations that the administration team are having to take into account when implementing the changes. The member website and other documents need to be redrafted for the changes to the LTA, so that communications to members are clear and accurate.

Levelling Up / Pooling

On 15 May 2024, the local government minister Simon Hoare MP wrote to all Pension Committee Chairs and administering authority S151 officers in England setting out questions in relation to pooling progress and LGPS efficiencies, including governance.

A response to the letter will be considered accordingly by the Fund and if still required (due to the General election) it will be submitted prior to the 19 July deadline.

John Finch asked if the Committee could see the draft response letter prior to its submission.

The Chair agreed and asked officers to circulate it to the Committee when ready.

Nick Weaver, Chair of the Pension Board asked for clarification on the progress of the supplementary PI issue for lump sums.

The Technical and Compliance Manager replied that they were still awaiting confirmation from Heywood on a system fix, for it was an issue that affected all Heywood users. She confirmed that the system fix was in the latest software release and was in the process of being tested.

The Committee, having been satisfied that the public interest would be better served by not disclosing relevant information, RESOLVED, in accordance with the provisions of the Section 100(A)(4) of the Local Government Act 1972 that the public should be excluded from the meeting for this item of business, because of the likely disclosure of exempt information as defined in paragraph 3 of Part I of Schedule 12A of the Act as amended.

The Governance & Risk Advisor introduced the report to the Committee and highlighted the following areas from it.

Risk Register

No changes to risks or scores.

Workshops

26th September – Code of Practice (Hymans)

24th October – Interim Valuation (Mercer)

Hymans Learning Academy

All modules should be completed by the end of July. New schedule to commence in September.

The Group Manager for Funding, Investment & Risk informed the Committee that they had all been invited to the Brunel Investor Day on 18^th September at the Wiltshire Council offices in Trowbridge.

The Committee RESOLVED to:

i) Note the risk register

ii) Note the Committee workplan & training programme

iii) Note the service plan monitoring.