Agenda and draft minutes

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Items
No. Item

30.

EMERGENCY EVACUATION PROCEDURE

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

Minutes:

The Democratic Services Officer announced the emergency evacuation procedure.

31.

APOLOGIES FOR ABSENCE AND SUBSTITUTIONS

Minutes:

Councillor Kate Kelliher joined the meeting online via Teams.

32.

DECLARATIONS OF INTEREST

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.

 

Minutes:

There were none.

33.

TO ANNOUNCE ANY URGENT BUSINESS AGREED BY THE CHAIR

Minutes:

There was none.

34.

ITEMS FROM THE PUBLIC - TO RECEIVE STATEMENTS, PETITIONS OR QUESTIONS

Minutes:

Huw Spanner addressed the Committee, a copy of his statement will be attached as an online appendix to theses minutes and a summary is set out below.

 

The ongoing atrocities in Gaza are a moral catastrophe without parallel. There is no comparable case in recent times in which a captive population has been so relentlessly targeted, persecuted, and killed by a State act on this scale. The suffering Israel is inflicting has already claimed more than 45,000 lives, laid Gaza to waste, and undermined international institutions and the rule of law in the process. If we do not act, there may be worse to come – and history will judge us all gravely.

 

It is incumbent on us all to do what we can to end this terrible suffering. In this context, we note that Avon Pension Fund have investments of:

 

·  £12 million of public money in companies profiting from illegal Israeli settlements and human rights abuses in the Occupied Palestinian Territories.

 

·  £10 million of public money in arms companies supplying Israel with military equipment used to kill Palestinians.

 

The world’s highest court, the International Court of Justice, ruled in January 2024 that Israel may be committing genocide in Gaza. Our government and public institutions must employ all means reasonably available to prevent and deter further genocidal acts.

 

In November 2024, the International Criminal Court issued arrest warrants for Israel’s leaders for war crimes and crimes against humanity. If convicted, complicity by UK citizens would also be a criminal offence in the UK. 

 

In June 2024, the UN warned that investors failing to cut ties to arms companies supplying Israel “could move from being linked to human rights abuses to contributing to them, with repercussions for complicity in potential atrocity crimes”.

 

The UK Government’s own advice identifies the economic and financial risks associated with investments in illegal Israeli settlements and discourages such business activities.

 

Dr Eldin Fahmy addressed the Committee, a copy of his statement will be attached as an online appendix to theses minutes and a summary is set out below.

 

The APF has a fiduciary duty to its investors. This includes a legal duty to give due regard the potential reputational impacts of its business activities. The last year or so has witnessed some of the largest demonstrations in recent UK history and the potential for reputational damage from continuing to invest in companies widely perceived to be complicit in Israeli genocide is demonstrable.

 

Investing in companies which may be facilitating genocide, war crimes, and egregious breaches of international humanitarian law clearly does not constitute a socially beneficial purpose. Adherence to international law is not optional.

 

With this in mind, and to avoid any potential due diligence or human rights challenges in future, can the APF confirm:

 

  1. What actions have APF taken to implement heightened due diligence on human rights harms in the OPTs as a result of Israel’s war in Gaza?

 

  1. What action have APF undertaken to evaluate the feasibility of engagement on actual human  ...  view the full minutes text for item 34.

Dr Eldin Fahmy pdf icon PDF 95 KB

Additional documents:

35.

ITEMS FROM COUNCILLORS AND CO-OPTED AND ADDED MEMBERS

To deal with any petitions or questions from Councillors and where appropriate co-opted and added members.

 

Minutes:

There were none.

36.

MINUTES: 20th September 2024 (Public & Exempt) pdf icon PDF 135 KB

Additional documents:

Minutes:

The Committee RESOLVED that the minutes of the meeting on 20th September 2024 be confirmed as a correct record and signed by the Chair.

37.

Pension Board Draft Minutes: 5th December 2024

Minutes:

The Committee RESOLVED to note the minutes of the Board meeting held on 5th December 2024.

38.

LGPS Consultation: Fit for the Future pdf icon PDF 89 KB

The government is consulting the LGPS on further changes to how our investment assets are managed. The proposals embed pooling and extends the role of the FCA regulated pool company in managing our assets.

 

Additional documents:

Minutes:

The Group Manager for Funding, Investment & Risk introduced the report to the Committee and highlighted the following issues to them.

 

She explained that the government is consulting the LGPS on further changes to how our investment assets are managed. She said that the proposals embed pooling and extends the role of the FCA regulated pool company in managing our assets.

 

She stated that the proposed changes are highly material and broadly cover three areas:

 

  • Reforming LGPS asset pools
  • Boosting LGPS investment in their localities and regions of the UK
  • Strengthening governance of both LGPS and pools

 

We do not agree that administering authorities (AA) should be required to transfer legacy illiquid investments to the management of the pool as it has not been made clear the benefit to the pool company or the AA of transferring illiquid, closed ended funds being wound down to expiry.

 

We do not agree that the pool should provide investment advice on the investment strategies of its partner AAs as conflicts of interest may arise if pools provide strategic advice and implement the strategy. Therefore, LGPS funds should not be required to take strategic advice from the pool company. Whilst AAs may wish to obtain strategic advice from the pool company, they must be able to access independent high-level strategic advice.

 

She explained that the Avon Pension Fund Committee will still set the Investment Strategy.

 

She stated that they are pleased to see that the main recommendations of the 2021 Good Governance Review by The Scheme Advisory Board are finally being implemented. She added that the APF has already implemented many of the recommendations and as a result these proposals will have less impact on the fund.

 

She said that they were not supportive of mandated collaboration on issues such as administration as the potential to generate significant economies are lower but the risk of transferring data etc. are far higher.

 

She said that the deadline for responses from the Fund was 16th January 2025 and from the Pools by 1st March 2025. She added that, at this stage, any changes were anticipated to commence from 1st April 2026.

 

She added that any changes made to the circulated draft response would be cleared with the Chair of the Committee prior to submission.

 

Jackie Peel said that she wanted more clarity in the response and for it to clearly state where it does and does not support the proposals.

 

John Finch stated that the Fund must continue to receive its own independent investment advice. He added that he felt that the APF were one of the most advanced funds in terms of its governance arrangements.

 

He said that the deadlines that have been set are too short.

 

He added that if a pool was not established as an investment management company and authorised by the FCA by 2026 then it should consolidate.

 

Pauline Gordon asked if there would be a big difference to the asset allocation process.

 

The Group Manager for Funding, Investment  ...  view the full minutes text for item 38.

39.

INVESTMENT STRATEGY (for periods ending 30 September 2024) pdf icon PDF 167 KB

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, notable Responsible Investment developments and operational aspects of the Fund.

 

Additional documents:

Minutes:

The Investments Manager introduced the report to the Committee.

 

Local Impact Portfolio

 

He explained that the Fund is seeking to appoint an SME funding manager to complete the core local impact portfolio.

 

He stated that the SME strand of the portfolio will seek to stimulate local economic growth through business innovation and the creation of local jobs. The appointed manager will focus on private equity style investments in local SMEs with established business models and attractive growth potential.

 

He said that ‘Local’ in respect of this fund is defined as the Brunel catchment area of Avon, Somerset, Wiltshire, Cornwall, Dorset, Devon, Gloucestershire and Oxfordshire, with some limited ‘out of county’ exposure to be expected.

 

He explained that the Committee are being asked to note the decision of the Investment Panel to appoint Foresight as the Fund’s Local Impact SME Funding Manager, subject to further due diligence, independent suitability, tax and legal advice.

 

He added that the final decision to appoint Foresight and the size of the allocation will be agreed by the Head of Pensions under delegated authority and in consultation with Mercer.

 

Natural Capital

 

He informed the Committee that Mercer have provided the Investment Panel with an overview of the investment case and implementation options for a dedicated Natural Capital allocation.  He added that the analysis shared with the Panel indicates an initial 2% of assets (c. £120m) would be a reasonable initial allocation.

 

He said that the Panel agreed that any investment in Natural Capital represents an opportunity to show leadership within the LGPS and there is a clear desire to invest in both established forms of natural capital such as sustainable forestry and agriculture as well as more nascent strategies such as wetland and coastal restoration.

 

He explained that the Panel will make a recommendation to the Committee in the first half of 2025 once the Brunel portfolio specification has been finalised. He added that this would ensure the views of the Panel are fed directly into the Brunel portfolio development process and the Committee can gain assurance that the Brunel portfolio delivers on the Fund’s requirements, prior to making a commitment.

 

Councillor Fi Hance referred to the Local Impact Portfolio and commented that she felt that this was good news. She asked if press releases on this subject could be shared with the Committee.

 

The Head of Pensions replied that he would ask for these and a video relating to the Investment Strategy to be shared with the Committee.

 

Nick Page, Mercer addressed the Committee and highlighted the following points to them.

 

  •  The Fund’s assets were £6,034m on 30 September 2024 and delivered a net investment return of 3.5% over the quarter which was 2.2% ahead of its strategic benchmark.

 

  • Over 1 year to the end of September the Fund returned 14.8% in absolute terms and +2.7% in relative terms.

 

  • Outperformance relative to the strategic benchmark over the one-year period was due to the Synthetic Equity, Liquid Growth portfolio, Renewable Infrastructure and Private Debt, as well  ...  view the full minutes text for item 39.

40.

ANNUAL REVIEW OF RISK MANAGEMENT STRATEGIES pdf icon PDF 77 KB

The Committee reviews the strategies annually to assess whether they continue to meet the Fund’s strategic objectives. The annual review also considers any financial implications on the wider portfolio, specifically in terms of collateral requirements.

 

Additional documents:

Minutes:

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 RESOLVED to:

 

i)  Agree the recommendation that the options set out in Exempt Appendix 1 should be considered as part of the 2025 Strategic Investment Review.

ii)  Note the Risk Management Strategies are performing in line with the Fund’s strategic objectives.

 

41.

INTERIM ACTUARIAL VALUATION 2024 AND GAD SECTION 13 UPDATE pdf icon PDF 86 KB

Local Government Pension Scheme Regulations 2013 require the Fund to carry out an actuarial valuation every three years, the next is due as at 31 March 2025. Between these mandatory valuations, the Fund periodically requests interim valuations to assess whether the funding strategy is on track and to begin the discussions with the actuary, committee and employers about the 2025 valuation.

 

Additional documents:

Minutes:

The Funding & Valuation Manager introduced the report to the Committee and explained that it contains a summary of the interim valuation outcome that had been previously discussed at the Committee workshop in October.

 

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

 

·  On 16th August the Government Actuary’s Department published its report on the 2022 fund valuations, as required by Section 13 of the Public Service Pensions Act 2013. Overall, as expected the results showed a positive funding position for the LGPS, with 70% of funds now reporting a funding surplus and an aggregate funding level of 106% on a local basis as at 31 March 2022 (119% on the standardised GAD “best estimate” set of assumptions – i.e. excluding prudence).

 

·  No red flags were raised and only a handful of amber flags were raised as areas of concern for individual Funds. The Avon Pension Fund was green for all measurements in terms of meeting the required Solvency and Long-Term Cost Efficiency objectives.

 

·  Given the strong financial position quoted, and the limited number of flags to emerge, this highlights the hard work, improved governance and strong performance of all LGPS Funds. However, it was highlighted that there will be more scrutiny on the use of surplus as part of the 2025 valuation Section 13 project given more Funds will have moved into surplus on a local basis.

 

·  The objective of the Fund is to keep contributions as stable and affordable as possible and also ensure intergenerational equity for taxpayers (“Long Term Cost Efficiency”). Therefore, the aim in 2025 will be to have stable lower employer contribution rates and consider the position employer by employer relating to deficits and surpluses as supported by the employer covenant assessment.

 

Councillor Toby Simon said that a decision on surpluses should be made in advance of the 2025 valuation. He suggested that at the Committee’s March 2025 meeting he would like it to be decided what the ‘cut-off position' is in relation to employers having a reduced contribution or take a holiday.

 

The Group Manager for Funding, Investment & Risk replied that this would be decided before the valuation results are known. She added that the Surplus Policy and the Deficit Policy will form part of the Funding Strategy Statement that the Committee will discuss in their June meeting.

 

The Committee RESOLVED to note the outcome of the 2024 interim valuation and 2025 valuation timetable.

42.

PENSION FUND ADMINISTRATION - Overview & Summary Performance Report pdf icon PDF 106 KB

The purpose of this report is to present the Fund’s administration performance for the period up to and including 17th November 2024 vs key performance indicators (KPI’s).

 

Additional documents:

Minutes:

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

 

McCloud

 

  • The first phase of the remedy project for pensioners has begun, and cases will be reviewed on a case-by-case basis.
  • 2 further sub-projects have been established a) to write to all members that we believe are not in scope for remedy but may be if they have qualifying service elsewhere, b) data rectification for c5000 due to bulk tranche update errors.
  • She updated the Committee to say that this figure had already reduced to c1200 and hoped to have these reconciled by the end of January. 
  • The deadline for McCloud remedy is August 2025.

 

Pensions Increase

 

  • The Fund have made the decision based on the number of records left to be reviewed, that the Pension Increase project is now concluded.
  • The majority of members have now been remediated or have been excluded as not needing to be increased.
  • The remaining member records to be actioned will form part of the administrations team’s business as usual:
    • 24 Death cases – awaiting responses from the spouse or next of kin to make payment of arrears to the Estate.
    • 6 Dependant cases – awaiting responses from the dependant to make payment of arrears.
    • 96 GMP cases – High level analysis shows that these may not be an underpayment. All these records will require more investigation and manual calculations to determine whether there is an under or overpayment. The plan is to project manage these cases across the administration team and complete in 2025.

 

KPIs – SLA monthly performance average July 2023 to October 2024

 

  • Performance has improved for the majority of KPIs across this period.

 

KPI cases completed Oct 2024 to 17th Nov 24

 

  • The KPI target for all case types was achieved during this period.

 

KPI’s outstanding over 31 days – Oct 2023 to 17th Nov 2024

 

  • This figure has decreased from 2,545 in October 2023 to 99 in November 2024

 

Service performance – Plan v’s Actual – 17th Nov 24

 

  • We have currently achieved 90% of our plan which is ahead of our target of 65%.

 

Priorities for 2025

 

  • Complete procurement for main Pensions Administration System (PAS) including Pensions Dashboard
  • Implement Hosting of PAS
  • Implement Pensions Dashboard
  • McCloud remedy
  • GMP project reconciliation

 

Councillor Toby Simon referred to the subject of divorce quotes for Teachers and the issue of this in terms of McCloud and the need to have a quote from both schemes. He asked if this was a general problem.

 

The Pensions Operations Manager replied that they don’t yet have sight of the records for excess teacher service and are awaiting advice from the Scheme Advisory Board and the LGA.

 

The Technical & Compliance Advisor added that the McCloud remedy has only started recently and said that divorce quotes were being issued, although these were low in numbers. She added that it will depend on the teacher’s back service as to whether they have an underpin or not.

 

Nick Weaver stated that in  ...  view the full minutes text for item 42.

43.

Risk Management Process & Risk Register pdf icon PDF 95 KB

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

 

Additional documents:

Minutes:

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

 

  • The quarterly review of the risk register has taken place and the changes are as follows:

 

  • NR04 – Governance of the Fund - wording has been reverted to reflect the wider governance risks rather than just the recent focus on internal controls. Based on recent audits and the review of controls no systemic failures have been identified and therefore the risk has been amended from high impact and likely to medium impact and possible.

 

  • The top three risks are now:

 

  • NR06 – the likelihood of a cyber-attack remains a high risk due to the recent high-profile attacks in the public domain. The Fund is in the process of carrying out a review of its business continuity plan. 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.

 

  • NR01 – Poor service levels below agreed standards. The current factors impacting this risk are set out in item 03 – Pension Fund Administration report. The risks associated with the implementation of the controls review are now reflected in this risk.

 

  • NR05 – Failure to manage personal data per regulations. The volume of personal data the Fund manages in day-to-day processing keeps this risk high on the register. Within the Operations Teams process changes are planned including removing duplication of checking and bulk processing. Whilst these are welcome changes we note that additional data protection assessments will be required.

 

The Committee RESOLVED to note the report.

44.

Legislation Update pdf icon PDF 80 KB

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.

Additional documents:

Minutes:

The Technical & Compliance Advisor introduced the report to the Committee. She said that on this occasion there were no significant changes to bring to their attention, but did wish to make them aware of the following points.

 

Pension Taxation

 

·  On 30 October 2024, the Chancellor delivered the Autumn Budget, the first under the new Labour Government. The focus was a package of tax increases amounting to more than £40 billion (including increases to Employer National Insurance and Capital Gains Tax). The biggest pension-related change to emerge is in relation to Inheritance Tax. With effect from April 2027 payments from registered pension schemes following the death of a member where the recipient is not the spouse, or civil partner will now be within scope. A technical consultation is now underway.

 

FE College Guarantee

 

·  In November 2024, the Government announced that the Department for Education (DfE) would provide a crown guarantee to Further Education providers in England and Wales operating in the statutory sector. Higher Education providers are not covered.

 

·  The guarantee will operate in a similar manner to that provided for Academies. It will not apply to mergers or pooled colleges (where one constituent closes). The guarantee is unlimited with the DfE being able to make payments up to £32 million per annum (across the LGPS) before approval needs to be sought from the Treasury.

 

The Committee RESOLVED to note the current position regarding the developments that could affect the administration of the fund.

45.

Governance Update pdf icon PDF 98 KB

Additional documents:

Minutes:

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

 

·  The Review of the Admin Strategy and Review of the General Code of Practice Compliance have been deferred from this meeting.

 

·  Breaches - No incidents were reported to the ICO (Information Commissioner’s Office during the period of October 2023 to October 2024. There has been a significant drop in data breaches this year. The total has fallen from 20 in 2022/23 to 7 this year.

 

·  Internal Audit presented their findings to the Pension Board on 5thDecember along with the external auditor report.

 

Jackie Peel asked if there was a plan for future audits in the coming years.

 

The Governance & Risk Advisor replied that they should be able to share that information with the Committee in March 2025.