Agenda and minutes
Venue: Committee Room C1, 1st Floor, Town Hall, Mulberry Place, London E14 2BG
Contact: Antonella Burgio, Democratic Services. Tel: 020 7364 4881 E-mail: antonella.burgio@towerhamlets.gov.uk
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COUNCILLOR ZENITH RAHMAN IN THE CHAIR
INTRODUCTIONS The Chair welcomed Ms Coventry of The WM Company who was in attendance to speak to the committee on the annual performance of the pension fund.
ORDER OF BUSINESS To facilitate the discussion of the report, the Chair moved that the order of business be varied. The Committee approved the motion and accordingly Item 5.1 Annual Update from WM was taken as the first item of business. Following discussion of this item, the Chair moved that the order of business be resumed. The Committee approved and consideration of business resumed, as printed in the agenda, from item 1.
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APOLOGIES FOR ABSENCE To receive any apologies for absence. Minutes: No apologies for absence were received. |
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DECLARATIONS OF DISCLOSABLE PECUNIARY INTEREST PDF 56 KB To note any declarations of interest made by Members, including those restricting Members from voting on the questions detailed in Section 106 of the Local Government Finance Act, 1992. See attached note from the Monitoring Officer.
Minutes: No declarations of disclosable pecuniary interests were made. |
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UNRESTRICTED MINUTES PDF 71 KB To confirm as a correct record of the proceedings the unrestricted minutes of the ordinary meetings of the held on 13 June 2013.
Minutes: The minutes of the meeting held on 25 June were approved as a correct record. The minutes of the meeting held on 25 June were approved, without amendment, as a correct record of proceedings.
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DEPUTATIONS & PETITIONS To receive any deputations or petitions Minutes: No requests to address the Committee without prior notice (deputations) or to present petitions were received by the Chair
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UNRESTRICTED REPORTS FOR CONSIDERATION |
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Annual Update from W M To receive an annual update on the performance of the Pension Fund. Minutes: Ms Coventry of The WM Company tabled the report "London Borough of Tower Hamlets performance review period ending 31 March 2013." She introduced herself and advised that The WM Company tracked the performance of 90% of local authority pension funds. She advised that her presentation would comprise the following elements: · financial returns, strategies and trends · the annual performance of Tower Hamlets pension fund, · the performance of Tower Hamlets pension fund compared with other local authorities
Financial returns, strategies and trends: Ms Coventry advised that returns on equities in the period 2012 – 13 had been favourable. Active managers had done well against benchmark and there had been above index return in all markets except USA. She advised that equities performance had been volatile (page 5) but returns were above average over 3, 5, 10 and 20 years. Performance of bonds had been less volatile but returns were lower especially over 10 and 20 years.
She advised that: · annual returns in respect of alternatives (page 6) were 9.2% over 20 years but this did not apply to all categories of alternatives · average returns in both cash and alternatives categories were below equities · annual returns for property were in line with quoted levels but presently still negative · average total assets returns for local authorities had achieved benchmark Therefore returns had been achieved but liabilities were higher.
Asset allocation performance (page 8) tended towards reducing risks and, to achieve this, portfolios were more diversified. As funds were restructuring there was a move towards global markets; UK equities comprising 30% and the remainder comprised of overseas equities. Mr Woodman enquired and Ms Coventry confirmed that Investec were an absolute return category of fund. She noted that the Council's decision to invest in these funds was ahead of trend.
The Chart ‘Performance Range Relative to Benchmark’ (page 9) indicated the performance range over 1, 3, 5 and 10 years compared to its own benchmarks. Ms Coventry advised that most returns had exceeded their benchmark and that some benchmarks are being measured against cash which had rendered it easier to outperform benchmark. However, most 5-year investments had underperformed. Mr Gray enquired and Ms Coventry confirmed that the performance reported was gross of fees.
Annual performance of Tower Hamlets pension fund: Ms Coventry provided the following information in relation to total fund performance against strategic benchmark: · The total Fund value summary (page 11) indicated the fund composition across the fund managers and was valued at £929 million at 29 March 2013, 63% of this was allocated to equities. · Relative fund returns (page 12) were 11.8% in 2013; these were ahead of benchmark within the year. Performance over 20 years was 0.5% below the benchmark. This low return was due to exposure to UK equities. · Mr Shonola advised that manager, Martin Currie and Aberdeen Asset Management had been dismissed two years ago and the Fund moved to a passive mandate for UK equities. · The Fund had underperformed over the last five years, however other local authorities funds ... view the full minutes text for item 5.1 |
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2012/13 Local Government Pension Fund Annual Report PDF 107 KB To consider the report at item 5.2
Additional documents: Minutes: Mr Shonola presented the report circulated at agenda item 5.2 which gave an overview of activity of the scheme and of the fund over the year and stated that the report was for noting only. He advised that the auditors have given an unqualified opinion of the accounts following the audit of the statement of accounts.
Referring to paragraph 6.3 the report, he advised that the fund was presently cash flow positive and it was estimated that the fund would become cash flow negative in a two-year range, dependent all the numbers joining and leaving the scheme.
The following issues were discussed:
Impact of auto-enrolment regulations on Pension Scheme membership - Mr Holme advised it was too early to quantify the effects; however a significant number of staff that were auto-enrolled have already opted out. Mr Dodia suggested that present economic hardships may have led lower paid employees choosing to opt out of the scheme as contributions had a significant impact on available cash in households where income was low. It had been noted also that some members had opted out almost immediately and this had influenced some other longer-term members to opt out also. However the Council still promoted enrolment. Mr Holme advised that a three months analysis would be undertaken to investigate un-enrolment.
Cause of differential performance: Councillor Jackson noted that the Fund had made better than average returns over 20 years but returns had been less favourable in the latter 10 years, and enquired what had caused the better performance in the earlier part of the period. Mr Woodman advised that equities always outperformed bonds over 20 years; however the differential performance had arisen because equities were very strong in the first part of the 20-year period but weak over the latter part.
RESOLVED:
That the report be noted
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Report of Investment Panel for Quarter Ending 31 March 2013 PDF 167 KB To consider the report at item 5.3
Minutes: Mr Shonola presented the report at item 5.3 which informed the Committee of Fund performance in the 4th quarter 2012 – 13. He advised that: · equities performance was strong · seven of the eight managers had outperformed their benchmarks · GMO had had a good return but had not performed outperformed benchmark · asset allocation was in line with the funding strategy · many of the data and matters reported had been discussed by the Committee at agenda item 5.1
Mr Gray noted that the figures at page 28 and 29 of the agenda did not match and was advised by Mr Shonola that the statement of accounting was that of the last actuarial evaluation. Since that time, more bodies had been admitted to the Fund and hence the difference in the figures reported.
RESOLVED:
That the report be noted
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General Update on Emerging and Developing Pension Fund Issues PDF 120 KB To consider the report at item 5.4 Minutes: Mr Shonola presented the report circulated as agenda item 5.4 which advised the Committee of emerging issues affecting the pension fund. He advised that, further to the findings of the Hutton commission on public sector pensions, the Government enacted new legislation to impose changes on Local Government pension schemes. These proposals (Local Government Pension Scheme 2014) were given at paragraph 6 of the report. The following points were also noted:
In response to Members’ questions the following information was provided
Concerning the Academy's pension fund deficit guarantee councillor Gardner stated that the Council should endorse its current approach to admitted bodies because of the level of risk being taken on.
Concerning a likely publication date of Government guidance relating to the powers and constitution of local government pensions boards, the Committee was advised no date had yet been indicated.
Councillor Gardner noted that the administration of an independent board or panel would add costs to the pension fund and suggested that a combined pension body approach would be a preferred option.
Concerning the degree of Fund exposure to bankruptcy risks, Mr Shonola advised that were several admitted bodies to become insolvent, the risks of failure would be borne by the remaining solvent bodies and ultimately by the Council therefore the risk to the Council was the greater. It was noted that these risks related to non-teaching staff as teachers’ pensions were covered by other schemes.
Noting the proposed transition to an average contribution arrangement and higher contribution levels, Councillor Jackson argued that these had contributed to the higher opt out rate and suggested that in future the fund will find it more difficult to generate income because the Fund cash or value base would be degraded. Mr Holme advised that the forthcoming actuarial assessment would consider this matter and to counteract decline it was necessary to continue to promote the Fund. Mr Woodman noted that because the accrual rate would be higher, conditions would remain consistent in the main.
Mr Gray noted that, compared to other pension schemes available, local authority schemes still offered better benefits to low paid and part-time workers and was advised that the contribution rate was variable depending on the earnings of each member of the fund.
Concerning future fund structure, Mr Shonola advised that there might be a Government call for merger to form a super fund. In view of this the London Councils undertook a survey of interest in the possibility of setting up a common investment vehicle that would enable London boroughs to pool assets while retaining local accountability. Mr Holme advised that, on the whole, London boroughs were not in favour of ... view the full minutes text for item 5.4 |
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TRAINING EVENTS To note opportunities to attend the following training events: Minutes: The following general matters were discussed:
Mr Haynes noted that:
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LGPS 2100 Training and Investment Seminar This training event will be hosted by Baillie Gifford and held on 3rd and 4th October 2013. Minutes: The training information was noted and Members who wished to attend were asked to contact the clerk to the Committee.
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Introduction to Investments for Trustees PDF 1 MB This training event will be held by UBS on 6 November 2013 Minutes: The training information was noted and Members who wished to attend were asked to contact the clerk to the Committee.
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Investing to meet your liabilities PDF 2 MB This training event will be held by UBS on 27 November 2013
Minutes: The training information was noted and Members who wished to attend were asked to contact the clerk to the Committee.
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Local Authorities Pension Fund Forum Annual Conference This event will be held by LAPFF from 4 to 6 December 2013. Minutes: The training information was noted and Members who wished to attend were asked to contact the clerk to the Committee.
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London Borough of Merton – Learning and Development Agenda PDF 37 KB These training events will be held at the London Borough of Merton on the following dates:
Topic: Actuarial methods, standards and practices
Friday 25th October, 09.30 – 13.00
Topic: Financial markets and products knowledge
Friday 13th December, 09.30 – 13.00
Topic: Investment performance and risk management
Friday 28th February, 09.30 – 13.00
Minutes: The training information was noted and Members who wished to attend were asked to contact the clerk to the Committee.
Action by: AntonellaBurgio, Democatic Services Officer – Chief Exec’s
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ANY OTHER UNRESTRICTED BUSINESS CONSIDERED TO BE URGENT Minutes: Nil items. |