Agenda and minutes

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

The Democratic Services Officer announced the emergency evacuation procedure.

Edmund Cannon had sent his 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.

Councillor George Leach declared an ‘other interest’ with particular regard to agenda item 14 (Governance Update). He is an employee of Hymans Robertson who provide LGPS training services, but he has no direct professional links with Avon Pension Fund.

There was none.

Youssef Ezzat Ibrahim addressed the Committee in the absence of Ray Wilson who had registered to make a statement but was unable to attend. A copy of Ray Wilson’s statement is available as an online appendix to these minutes, and a summary of the statement given is set out below.

He stated that the climate crisis is at a breaking point and that the Avon Pension Fund was still investing in companies that will make it worse.

He said that the ongoing conflicts that involve weapons funded by Avon Pension Fund are having a devastating overall effect on the planet. He added that they are destroying its natural structure, poisoning the environment and leading to a climate breakdown.

He said that the arms companies that profit from these wars are facilitating a climate emergency.

He asked if all the Fund members realise that they are investing in the acceleration of a climate crisis and funding war crimes?

He demanded that a full consultation of all members is carried out, not just a sample of them. He said that people were feared of being shut down and want to know that their pension is protecting the planet and not funding war crimes.

He stated that the Fund cannot claim to support peace and climate justice by still funding these crimes.

He said that he was disappointed that the Committee had not already made a decision to disinvest from companies involved in the arms trade that is supporting the genocide in Gaza.

Benazir Jatoi addressed the Committee, a copy of her statement is available as an online appendix to these minutes, and a summary is set out below.

‘I speak before you today as an Avon Pension Fund Scheme member, a Bath resident and a passionate believer in peace and justice – which means no war, no weapons and definitely no investment of my pension money in arms companies and weapons manufacturers.

Unfortunately, at the last Committee meeting, it was decided that the committee will continue to maintain the status quo – i.e continue to invest our money in arms companies.

As a reminder: Your fiduciary duty, as trustees of our money, is not, as some wrongly believe, only about ensuring maximum returns for the best interest of members. You can exclude sectors if they would cause legal, environmental or reputational risks relevant to beneficiaries.

You have discretion and we know you know how to use it – you have rightly recognised the risk to the Fund from climate change and recognise your power as a shareholder to influence change.

Given the grave environmental impact of weapons production and the devastating death and destruction they cause to people and planet around the world, I cannot emphasis enough the need for a transparent, thorough, and robust consultation that is widely carried out with all its members. I welcome that research partners are being consulted.

Since the last Committee meeting, a small group of members, here in Bath, have organised to draft, print and  ...  view the full minutes text for item 5.

There were none.

The Committee RESOLVED that the minutes of the meeting on 28^th March 2025 be confirmed as a correct record and signed by the Chair.

The Committee are asked to note the draft minutes of the Pension Board which met on 3^rd June 2025.

The Committee RESOLVED to note the draft minutes of the Board meeting held on 3^rd June 2025.

The Local Government Pension Scheme (LGPS) regulations require each administering authority to prepare and publish a Funding Strategy Statement (FSS). The FSS sets out the key assumptions which the Fund’s Actuary has used in preparing the actuarial valuation and the policies adopted by the Administering Authority. 

The Group Manager for Funding, Investment & Risk introduced the report. She explained that a review of the Statement takes place every 3 years to coincide with the completion of a full statutory actuarial valuation. She added that the report reflects the workshop discussion that took place earlier in the month.

Paul Middleman, Mercer, addressed the Committee and highlighted the following points to them.

In the draft Funding Strategy Statement 2025 the following changes are being incorporated:

·  Discount Rate basis for past service liabilities (funding target) - The key assumption which drives the value of the pension Fund liabilities (the future benefit payments) and therefore deficit or surplus is the discount rate. This is set by the Fund, based on advice from the Actuary, to reflect the overall investment return which we expect to achieve on the Fund’s assets (within reasonable risk parameters) over the long term with a suitable and necessary allowance for prudence to support contribution sustainability.

·  The discount rate reflects the “real” expected asset return above the CPI baseline assumption when assessing the long-term solvency target. Increases in inflation will increase the liabilities as the benefits are inflation linked and potentially it can also reduce the real return on assets. A judgement is needed as to expected future inflation, with the risk that understating inflation and its persistency in this valuation will transpire into higher contributions at the next valuation in 2028.

·  The Actuary is proposing to increase the expected level of real return above CPI by 1.80% from the 2022 valuation to CPI+3.30% per annum, which includes an appropriate level of prudence to support contribution sustainability (as in the probability of achieving the discount rate) taking into account a range of factors/assumptions including the economic and geopolitical environment. The level of prudence includes judgement for the Actuary on the level of uncertainty of these factors in the context of the current global environment.

·  Future service rate (FSR) discount rate basis - The future service liabilities are calculated using the same assumptions as the funding target except that a different financial assumption for the discount rate is used. A critical aspect here is that the Regulations state the desirability of keeping the “Primary Rate” (which is the future service rate) as stable as possible so this needs to be taken into account when setting the assumptions.

·  As future service contributions are paid in respect of benefits built up in the future, the FSR should take account of the uncertainty in market conditions applying at future dates, not just the date of the valuation, it is justifiable to use a lower expected return from the investment strategy compared to the past service discount rate.

·  The Actuary’s view is that the real return applied in 2022 can be increased by 0.25% to CPI +2.25% per annum. As a result, there will be a reduction in FSR (all other things equal).

·  Mortality assumption - The baseline and short-term trend in mortality will be adjusted to reflect the Fund’s experience since 2022.  ...  view the full minutes text for item 9.

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 to the Committee and highlighted the following areas.

·  No changes have been made to the Terms of Reference (ToR) for the Committee & Investment Panel apart from minor job title changes. The minor changes were approved by Council on 22nd May.

·  The Committee’s role is strategic in nature, setting the policy framework and monitoring compliance within that framework. Due to the wide scope of the Committee’s remit, investment issues are delegated to the Investment Panel, (a sub-committee of the Committee) which explores the issues in greater detail before making decisions and/or recommendations to the Committee. The implementation of strategic decisions is delegated to Officers.

She stated that changes to the framework were expected following any decision on the pooling arrangements for LGPS funds.

Jackie Peel referred to page 168 of the agenda pack and said that the second paragraph under ‘Committee Scope’ should read “The Avon Pension Fund is a member of the Brunel Pension Partnership (Brunel). Brunel Pension Partnership Ltd (BPP Ltd) is responsible for implementing the Fund’s Investment Strategy.

Councillor Fi Hance commented that a summary of the amendments would be appreciated.

The Governance & Risk Advisor replied that any significant changes would have been highlighted in the report and that at this time only minor job title changes had taken place.

The Chair stated that any member of the Committee was welcome to attend future meetings of the Local Authority Pension Fund Forum (LAPFF) and said that some conferences were also upcoming.

The Committee RESOLVED to:

i)  Approves the Terms of Reference of the Committee & Investment Panel

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

iii)  Approves the Scheme of Delegation

iv)  Approves the changes to the Conflicts of Interest Policy

v)    Notes the Decision Making Matrix.

vi)   Notes the roles and responsibilities of the members, advisors and officers

vii)     Agrees independent member representation of the Brunel Working Group. 

viii)  Agrees substitute of Brunel Oversight Board. Chair of Investment Panel

 ix) Agrees the member(s) to represent the fund on the Local Authority Pension Fund Forum.  Chair of the Committee

x)  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). 

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 to the Committee and highlighted the following areas.

·  Over one year the Fund delivered an absolute return of -0.6% and underperformed its benchmark by 5.4% in relative terms, where most portfolios underperformed their respective benchmarks. Of the listed equity portfolios, underperformance was most pronounced in the Global Sustainable Equity portfolio, with Global High Alpha also lagging its benchmark return. A key driver of this underperformance was the Fund’s underweight exposure to the ‘Magnificent 7’ technology stocks which were the primary contributors to global equity gains during the period.

·  The equity protection strategy, designed to mitigate downside risk, also detracted from returns in what was a positive but narrowly led equity market. This environment proved particularly challenging for active managers as gains were concentrated in a small subset of mega-cap technology names.

·  Brunel have been invited to a future meeting of the Investment Panel to discuss performance levels.

·  The Investment Panel were informed that the remaining £30m uncommitted local impact capital would be allocated to the Fund’s existing three managers: Schroders Greencoat (Renewable Infrastructure), Octopus (Affordable Housing) and Foresight (SME Private Equity).

·  Mercer has previously provided suitability advice on all three managers and is supportive of the proposal given all managers have a demonstrable pipeline of opportunities and have successfully deployed capital in relatively short order. A ‘top-up’ of this size is unlikely to materially increase portfolio concentration in any one area or asset.

·  The Fund will be considering whether to raise its allocation to local impact as part of the 2025 Investment Strategy Review.

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

·  The funding level is in a healthy position at around 105% / 106%.

·  Continued rate cuts by most developed market central banks, European politics and tariffs were the key themes driving markets in the first quarter of 2025.

·  Overall, global equities ended the quarter in the red driven by the considerable uncertainty from tariff and growth concerns.

·  Changes in bond yields were mixed across developed markets. The curve steepened in the UK amidst hawkish BOE cuts, tariff woes and revised budget spending plans.

·  Markets have not been hugely impacted by the ongoing conflicts around the world.

·  Portfolios are well diversified, but it was recognised that there is room for improvement in the performance of Brunel.

Councillor George Leach commented that he would welcome seeing figures for five years within the report.

Steve Turner replied that these figures would be available and could form part of future reports.

Charles Gerrish asked if despite being underweight to certain big US technology stocks, had the Fund benefitted from the value of the US dollar falling.

Steve Turner replied that the Fund had benefited from this through their hedging arrangements.

William Liew asked for officers to monitor Brunel with regard to any issues of key staff retention.

The Head of Pensions replied that the Committee would be updated of any key changes.

The Committee RESOLVED to note the information set  ...  view the full minutes text for item 11.

The purpose of this report is to present the Fund’s administration performance for the period up to and including 30th April 2025 vs key performance indicators (KPI’s).

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

SLA monthly performance average April 2024 to April 2025

• Peaked at 89% (Feb 2025). Average at around 80%
• High influx of member inquiries had an impact on staff resources. Letters sent re: McCloud and tracing, year-end work and Pensions Increase a factor over this period.
• Team is working as hard as ever and we remain above our projected expectations.

Recruitment – The fund has successfully recruited 11 new officers joining the Operations and Business Change teams in the last month, 10 of which were in Administration. This leaves a further 4.5 vacant posts including 1 within Business Change team, recruitment is ongoing.

The introduction of Hybrid Mail has already improved the timescales for certain tasks for officers and should lessen the possibility of any data breaches.

McCloud – A further update would be provided to the Committee in September.

Administration Software Procurement

• New 7- year contract signed with Heywood via the COTS agreement with Softcat 17 April 2025
• New contract covers existing Altair & i-Connect plus new Products & Services - Hosting, Dashboard ISP, Data Cleanse, Engage (with SMS & EIDV), Enhanced Admin to Pay
• Reinforced and improved our relationship with Heywood
• Sets foundation for Digital improvement
• Supports regulatory needs for Pensions Dashboard

Migrating from ‘On-premises’ to ‘Hosted’

• WHY? - To support B&NES Cloud First programme moving the application software and databases from a B&NES on-premises server to a cloud hosted solution.

• WHO? - Heywood, our software provider for Altair and associated modules, will provide hosting services via their supplier, Service Express.

• WHEN? - In progress now. BANES IT & Financial Systems are supporting us with the move. Aiming to complete move by end July 2025.

Avon Pension Fund: Connecting to Pensions Dashboards

• The Avon Pension Fund is preparing to link with the Pensions Dashboard, making it easier for our members to access their pension information. This will be carried out in phases with the aim of being live and connected by 31^st October 2025.

• Phase 1 – Complete - System Configuration / Upload member data and resolve errors captured (scenario testing) / Set Matching requirement.

• Phase 2 - Configure live matching rules / Registration with TPR / Test Admin processes for enquiries.

Wendy Weston asked if it was still the case that staff within the Fund were being poached by larger companies or was it in a stronger position to retain them now.

The Pensions Operations Manager replied that staff retention has improved, and that recent turnover of staff had been limited. She added that the improved pay offer for many members of staff had helped in this process.

Shona Jemphrey asked what figures were involved in the member tracing work.

The Pensions Operations Manager replied that a member tracing project to trace around 6000 “gone away” members is underway prior to connection to the Pension Dashboard.

Charles Gerrish commented that there had been a fall in the percentage of death grants in  ...  view the full minutes text for item 12.

The purpose of this report is to update the Committee with the quarterly review of the risk register.

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

• The quarterly review of the risk register has taken place and a couple of changes have been made to scores for this quarter. Some amendments have also been made to current impacting factors.

• Risk NR19 - structural reform to LGPS / Pooling has been amended to ‘Move to new asset pool’. The score has been updated to reflect the likelihood increasing from likely to almost certain.

• Risk NR07 – Employers Data. Following the successful roll out of I-Connect to all employers and more employer training taking place the likelihood has been reduced from likely to possible.

• Our top 3 risks have been updated to reflect the change of score to the pooling risk:

o  NR06 – the loss of IT including cyber attack and loss of power. The fund is planning to move its admin system to a Heywood hosted solution and appropriate data protection and cyber assessments are being carried out.

o  NR01 – Poor service levels below agreed standards. The current factors impacting this risk are set out in the Pension Fund Administration report. As part of the Business Continuity Plan review a service level plan and crisis communication plan have also been agreed.

o  NR19 – Move to new asset pool. Work and discussions are ongoing with pool and advisors. See full report within June Committee report.

The Committee RESOLVED to note the report.

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

·  In March 2024 The Pensions Regulator (TPR) combined various codes of practice into a single General Code of Practice which is applicable to most public and private occupational pension schemes, including the LGPS.

·  The purpose of the report is to summarise the Fund’s view of compliance with the Code. There are a number of criteria which Funds must comply with in order to satisfy the requirements of the various sections of the Code.

·  Appendix 1 sets out the requirements in more detail and records the findings from the assessment by Fund officers across all relevant subject areas. Conducting the assessment against the requirements has allowed the Fund to create an action plan, detailing owners and timescales with the aim of reaching compliance with the code over the next year.

·  In summary the Fund was compliant with app 70% of the requirements. The other 30% are partially compliant. Most actions are minor or are areas where significant work is already being undertaken. Eg – implementation of changes to internal controls, review and testing of the Business Continuity Plan. The key areas of the work will be in the following areas:

o   Knowledge & Skills of Committee & Pension Board members

o   Internal Controls

o   Communications & disclosure of information to members

o   Review of record keeping and data improvement plan

o   Review of breaches policy

o   Business Continuity Plan

o  Monitoring Advisors & contracts

·  Progress against the action plan will be shared with Committee and Pension Board on a quarterly basis.

The Committee RESOLVED to:

i) Note TPR GCOP action plan

ii) Note the Committee workplan & training programme

iii) Note the service plan monitoring report

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 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.