Agenda and draft minutes

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Contact: Sean O'Neill  01225 395090

Items
No. Item

20.

EMERGENCY EVACUATION PROCEDURE

Minutes:

 

The Democratic Services Officer advised the meeting of the procedure.

21.

APPOINTMENT OF CHAIR pdf icon PDF 66 KB

Minutes:

The Service Director – One West informed Members that Nick Weaver been selected as the preferred candidate as Chairman of the Board following a competitive recruitment process. The previous Chairman, Howard Pearce, had not wished to be considered for a second term. Advertisements to invite applications for the two vacancies for Board Members would be placed shortly.

 

The Board was invited to approve the appointment of Nick Weaver as Chairman for a four-year period.

 

RESOLVED to approve the appointment of Nick Weaver as independent Chairman of the Avon Local Pension Board.

 

Nick Weaver joined the meeting and took the chair for the remainder of the meeting.

 

22.

APOLOGIES FOR ABSENCE

Minutes:

There were none.

23.

DECLARATIONS OF INTEREST

Minutes:

There were none.

24.

TO ANNOUNCE ANY URGENT BUSINESS AGREED BY THE CHAIR

Minutes:

There was none.

25.

ITEMS FROM THE PUBLIC

Minutes:

There were none.

26.

ITEMS FROM MEMBERS

Minutes:

There were none.

27.

CHAIRMAN'S OVERVIEW AND INTRODUCTION

Minutes:

The Chair said that he would like to complete today’s agenda relatively quickly, to that Members would have time to discuss the Board’s future workplan and activities. His aim was to ensure that the Board was adding value to the work of the Avon Pension Fund. He would always welcome advice and suggestions from Members about how the Board operated.

28.

MINUTES OF PREVIOUS MEETING: 13 JUNE 2019 pdf icon PDF 72 KB

Minutes:

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

 

A Member asked whether copies of Brunel’s Climate Position Statement (second paragraph, item 10, agenda page 8) would be provided to Members. The Investment Manager said she believed it was available on the Brunel website; she would forward it to Members if they wished. The Brunel statement would be fed into the Pension Fund Committee’s Strategic Investment Review; there would be a Committee workshop shortly, and a special meeting to agree the new policy would take place in February 2020. The Service Director – One West assured the Board that it would be kept updated about the progress of the Review.

 

29.

AVON PENSION FUND INVESTMENT PANEL MINUTES 2 SEPTEMBER 2019 pdf icon PDF 68 KB

Additional documents:

Minutes:

RESOLVED to note the Minutes of the meeting of the Avon Pension Fund Committee Investment Panel of 2 September 2019.

 

In response to questions from a Member the Investment Manager confirmed that the Strategic Review workshop referred to in the September minutes had taken place on 7 November. A further meeting of the Panel took place on 20th November, at which it been agreed that a further static Equity Protection Strategy (EPS) should be put in place for 12-18 months. The Investment Strategy Review would not be completed until February 2020, but decisions had to be taken on the EPS before then, as the current strategy would shortly begin to roll off.

30.

AVON PENSION FUND COMMITTEE MINUTES 27TH SEPTEMBER 2019 pdf icon PDF 79 KB

Additional documents:

Minutes:

RESOLVED to note the Minutes of the meeting of the Avon Pension Fund Committee of 27th September 2019.

31.

FUNDING STRATEGY STATEMENT pdf icon PDF 83 KB

Minutes:

The Investment Manager presented the report.

 

At the invitation of the Chair the Investment Manager commented on the issues raised by the Board in its response to the Funding Strategy Statement (FSS) consultation as detailed in section 4.10 of the report.

 

(a)  Solvency

 

The Board had suggested that it might be prudent for the Fund to target greater than 100% solvency to smooth out the risk arising from market fluctuations. The actuary advised that that the Fund did not need to do that, as there was enough freedom in its discount rates and assumptions not to require higher solvency ratios, except in the case of some smaller employers who might be exiting the Fund.

 

(b)  Deficit recovery

 

The Board had suggested that a reduction in the debt recovery period from 16 to 13 years could impact on employer contributions and trigger a negative reaction from the Fund’s key stakeholders. However, the deficit recovery period could be tailored to employers’ specific needs. As part of the valuation process every employer’s results were reviewed. In general, the aim was to reduce the deficit recovery period for employers to at least 12 years. With some employers, such as Academies, it was more difficult, because they were facing very large increases in future service rates because of the McCloud decision and because of their employee profile and a reduction in the discount rate.

 

(c)  Future regulatory changes

 

All known potential regulatory changes had been included in the FSS. The policy on McCloud had been made more specific, and all employers had been notified of their estimated McCloud-related additional costs. Because It is not known when the changes arising from the McCloud decision will be applied and because they will be backdated, employers will be asked to pay these costs from 1st April 2020.

 

(d)  Climate change

 

The Board had recommended that the FSS should refer to climate change. However, it was felt that climate change was more appropriately addressed in the Investment Strategy Statement. The level of prudence included in the asset outperformance assumption is a contingency for all investment risk including climate change. There is a great deal of discussion in the actuarial profession about the impact of climate change on demographics and insurance, but nothing really meaningful has emerged at this stage. A Member noted that climate change was now frequently referred to in Pension Committee documents and was to be discussed at a Pensions Committee workshop in December, so it was a subject that naturally attracted the attention of the Board, which wanted to understand how it impacted on the Fund and the work of the Pensions Committee. The Head of Business, Finance and Pensions suggested that this had to be seen in perspective. The main task of the Pension Fund Committee was to ensure that sufficient returns were made on investments to pay pensions. Therefore, the Investment Strategy had to address risk, including climate risk. The Pensions Committee was currently reviewing its investment strategy and the workshop was part  ...  view the full minutes text for item 31.

32.

REGULATORY UPDATE pdf icon PDF 76 KB

Additional documents:

Minutes:

The Pensions Manager presented the report.

 

Members discussed the impact of regulatory changes on the efficiency and effectiveness of the Fund.

 

The Chair recalled that in 2006 the Government had introduced ‘pension tax simplification’. However, in the intervening years laws and regulations impacting on the LGPS had become more and more complicated. In the FT the previous Saturday a Government minister had been quoted as saying that the health pension scheme should not worry about breaking the tax laws. The Chair’s concern was that over the past few years the LGPS had been subjected to unceasing change. How could the Board understand the impact of these changes on the service that the scheme’s administrators were able to provide to members and, while forming its own opinion on how well the Fund was performing, work constructively with it? The Pensions Manager said he believed that the Fund’s officers should demonstrate that robust processes were in place to respond to regulatory changes, that workloads were being regularly reviewed and that there was appropriate prioritisation.

 

The Head of Business, Finance and Pensions said that the Chair’s question was a difficult one. The Fund was resourced for a ‘normal’ level of activity, but the legal and regulatory environment was constantly changing. He felt that the LGPS was being used as a means by which the Government pursues objectives that go beyond just the payment of pensions. He felt the most constructive thing that could be done through the work of the Board would be to try through engagement to ensure change happened in a more sensible way, and to try to get HMRC, the Scheme Advisory Board and other bodies to understand the impact of their directives  etc on the LGPS. Part of the problem is that local government pensions practitioners are poorly represented on all the national bodies which dictate to the funds what they have to do, and that the Local Government Association (LGA), which might be expected to be the champions of local authority funds, is very under-resourced. The Chair commented that at a conference he had attended pensions managers had said that a subscription to the LGA of a couple of thousand pounds a year was excellent value for money in terms of the support received, and that they would be prepared to pay double the subscription to provide LGA with double the resources.

 

The Chair said that it was important for the Board to understand how the regulatory challenges were being managed by the Fund. The Head of Business, Finance and Pensions replied that the Fund tried to address them in its Annual Service Plan and Budget in March each year. There was, of course, always the possibility of a totally unforeseen issue arising during the year. The McCloud decision is a case in point: the legislative process is unlikely to resolve the issue for the next couple of years, but it is known that the impact will be as great as the mis-selling scandals of the 1990s. The  ...  view the full minutes text for item 32.

33.

COMPLIANCE REPORT pdf icon PDF 151 KB

Additional documents:

Minutes:

The Pensions Manager presented the report.

 

The Chair referred to the report on the data breach (Annex 1) and suggested that this should be reviewed in the Board’s digital strategy workshop with a view to learning how similar breaches might be prevented in future as digitization is rolled out. This might be achieved by reducing the amount of paper communications mailed to members and increasing online access. The Head of Business, Finance and Pensions said the digitization strategy emphasized self-service for employers and employees. This required a digital system with robust inbuilt controls, which the Fund’s system did not have at present, though such systems were available in the marketplace. The digitization strategy would focus on specifying such a system and identifying a suitable supplier, which might not be the current supplier. He pointed out that the Pensions Regulator regulates funds, while there is no regulation for employers, so a security failure by an employer is the responsibility of the Fund. That needs to be addressed in the regulatory framework. The Pensions Regulator should introduce standards for employers, payroll providers and data control.

 

The Chair noted that the Fund had fined 15 employers for late submission of data, and asked how they could be helped to avoid this in the future. The Pensions Manager replied that late payers were at first offered training. If they were late submitting data two years in a row they were required to sign a document committing themselves to improve their performance and attend training. The penalty charges are set out in the Pensions Administration Strategy. The Chair asked whether information about how the escalation process was being applied was shared with the Committee and the Board. The Pensions Manager said that it would be included in a report to the next meeting of the Board and the affected employers would be named.

 

The Service Director – One West asked whether the data breach had been escalated within North Somerset Council. The Pensions Manager informed the Board that he had a conversation about it with the head of HR in North Somerset and with their payroll provider.

 

A Member said that he was aware that schools often did not take pensions into account when selecting their payroll provider. The Pensions Manager said that all employers in the Fund had been notified of their obligations in relation to data provision; consideration was being given to sending them regular reminders about it. The Head of Business, Finance and Pensions said that when Bath and North East Somerset ceased to provide payroll services to schools, it had sent them a document setting out all the issues they should take account of when procuring new payroll services and what conditions they should include in payroll contracts. However, he thought the failure of the Regulator to issue standards for employers was the most fundamental problem. He said that the Fund had no legal power to expel poorly performing employers. The most it could do was to report them to the  ...  view the full minutes text for item 33.

34.

RISK UPDATE pdf icon PDF 58 KB

Additional documents:

Minutes:

The Pensions Manager and the Governance and Risk Advisor presented the report.

 

The Chair asked whether, in the light of the earlier discussion, McCloud should be registered as a separate risk. The Governance and Risk Advisor confirmed that it had been entered separately on the main risk register.

 

A Member asked whether there was any prospect of the top risk (ability to recruit appropriately skilled staff) being reduced. Officers replied that there was not. The Head of Business, Finance and Pensions said that recruitment and retention remained difficult; this was a problem throughout the LGPS. The Service Director – One West asked whether Brunel was fully staffed, as Brunel had intensified the level of risk by attracting staff from the Fund. The Head of Business, Finance and Pensions said that Brunel was now fully staffed and had taken on staff on temporary contracts in order to complete the transition process. It had taken investment staff from the Fund, but not administrative staff. It took 2-2½ years to fully train a pensions administrator, and it could be difficult to retain people because the salary the Council was able to pay was uncompetitive. There were currently two posts for Head of LGPS funds being advertised as well as Investment Manager and Investment Officer posts at other funds The Fund had put in some protections to improve, staff retention and a fundamental review of the grading structure was due to take place. The Service Director – One West asked whether any consideration was being given to sharing services with other authorities. He understood that Devon and Somerset co-operated on pensions administration. The Head of Business, Finance and Pensions said that was a special arrangement; no further co-operation arrangements were being explored at present and it was unlikely that they would be while pooling was absorbing so much management time. At the end of transition in 20/21 or 21/22 and pooling is a success, thought might be given to pooling arrangements for administration, particularly since the SAB wanted to increase the independence of the funds from local authorities.

 

After discussion the Board RESOLVED to note the report.

 

 

35.

TRAINING AND WORKPLAN UPDATE pdf icon PDF 53 KB

Additional documents:

Minutes:

The Chair asked for Members’ views on the note he had circulated the previous day.

 

One Member said he found the formal meetings useful, because he was able to ask questions about the contents of reports. He suggested that an hour at a meeting could be dedicated to a particular topic. He also thought it would be worthwhile to revisit the relationship between the Board and the Committee. It would be also worthwhile to consider what other Local Pension Boards were doing.

 

The Service – Director said that although he had put four formal meetings in next year’s workplan, that could be changed. He noted that all but one of the items on today’s agenda were recurring standard items. Should these items be reported at Committee or shared with Members in some other way?

 

A Member said that it was sometimes difficult to follow the minutes of meetings at which he had not been present, but he thought it was part of the role of Board Members to see them.

 

The Head of Business, Finance and Pensions suggested that the work of the Board centred on testing the compliance of Fund with various requirements and judging whether that was improving.

 

A Member said that he felt there was sometimes information overload, and that it was not always easy to see the wood for the trees. He suggested that the Board should, with the help of officers, review the information that it needed and the areas it should focus on.

 

The Chair said that the quality of the service provided to members of the Fund, which was the prime concern, depended on many different factors. The Board needed to understand these factors and, where they were under the control of the Fund, judge if the Fund was performing efficiently and cost-effectively. He asked whether formal meetings should be preceded by workshops, from say 10.30-12.00. A Member recalled that previous workshops had only been 15 or 20 minutes long. The Service Director – One West asked Members whether for the February meeting the agenda should be pared back to allow the formal meeting to be completed in an hour so that it could be preceded by a two-hour workshop on the administration strategy? Members indicated that they would find this useful.

 

The Chair asked how the valuation and other emerging issues would be factored into the Board’s workplan. The Head of Business, Finance and Pensions said that they would go into the Pension Committee’s workplan and as a product of that it can be decided when they should come to the Board. Online access to information, currently being rolled out to the Committee, could be made selectively available to Board Members.

 

A Member suggested that governance and the Administration Strategy should be the topics for early workshops. The Head of Business, Finance and Pensions proposed that there should also be an early workshop on Brunel, as being the biggest single change in the administration of the Fund. The Member suggested that Brunel  ...  view the full minutes text for item 35.