Agenda and minutes
Venue: Committee Room 1, 1st Floor, Town Hall, Mulberry Place, 5 Clove Crescent, London E14 2BG
Contact: Georgina Wills, Democratic Services. Tel: 020 7364 6695 E-mail: georgina.wills@towerhamlets.gov.uk
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DECLARATIONS OF DISCLOSABLE PECUNIARY INTEREST PDF 67 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: None.
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MINUTES OF THE PREVIOUS MEETING(S) PDF 140 KB To confirm as a correct record the minutes of the meeting of the Pensions Committee held on 24 July 2018.
Minutes: The minutes of the meeting held on 24 July 2018 were confirmed as a correct record subject to the following corrections.
Item 2 Declarations of Disclosable Pecuniary Interest
The Chair advised the Committee that Mr Andrew Schneider had visited his Surgery and had held discussions about the London Borough of Tower Hamlets commitment towards disinvestment in Fossil Fuels and requested that this be recorded in the minutes.
Item 4 Minutes of the Previous Meetings - Matters Arising / Items 6.1 Revised Investment Strategy Statement And Investment Options Considerations.
Councillor Wood commented that there was an inaccurate recording in the minutes. Councillor Wood advised the Committee that he had offered to assist with the interviews for the Independent Advisor but was unable to attend and confirmed that he did not take part in the process. . Matters Arising
Item 3 Petitions
Members noted that the Council had advocated its strong commitment to disinvesting in Fossil Fuels and questioned how this objective was to be monitored. Officers advised the meeting that a report will be brought to the next Committee and that it would contain information about the Fund’s current level of exposure to Fossil Fuels and how it compares to contemporaries. The level of exposure will also be reviewed on an annual basis and future reports will provide information on available products with low carbon outputs and the Fund’s position. The Committee will be requested to give a steer and make a decision about products
Item 6 Update On Equity Protection Provider Search
Officers advised the Committee that the Equity Protection Strategy had been implemented and also added onto the Committee’s Work Programme.
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PETITIONS To receive any petitions relating to matters for which the Committee is responsible. Minutes: None received. |
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SUBMISSIONS / REFERRALS FROM PENSION BOARD Minutes: The Committee received an update from John Jones, Chair of the Pensions Board.
The Pensions Board met on 18 September 2018 and raised concerns regarding voting at Investors Meetings. The Board has written to the London CIV and requested that Officers also make enquiries on a number of London wide issues. There were concerns raised with regards to Tesla’s failure to engage with American Trade Unions and the Company Health and Safety practice. Presently Baillie Gifford has a large holding in the mentioned company.
The Board also held discussions about the Pensions Administration Team and had welcomed the Team’s improving performance and proposal for maintaining its stability. There were also discussions held about ‘Class Actions’ and the importance of ensuring that the Fund is able to recover losses from management, agencies and contractors.
RESOLVED
To note the update.
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PRESENTATION AND TRAINING FROM HYMANS Training on Valuation Minutes: The Committee received a presentation from Douglas Green and Barry Dodds of Hymans Robertson LLP on Valuation. Members were reminded that the Fund had three major components, investment returns, Member contributions and Employer contributions. The objective of the Fund is to provide benefits to members and dependents. The Fund is determined by its investment strategy, manager performance and LGPS Regulation and must meet balance of cost over longer term. The ‘Valuation’ calculates the latter. The Committee noted the following.
· That there is a full actuarial valuation of all Fund Members’ liabilities. This forms the baseline for all employer contributions and Fund calculations. These valuations are triennial and were last calculated on 31 March 2016. The next valuation will be on 31 March 2019. · That the Pensions Administration Team provides data to the Actuaries, who will then review and make estimates on how much money is needed to pay the pensions. The data is also used to check the financial health of employers. The contribution rate for the next three years can then be set. These estimates are based on assumptions. · That assumptions include looking at financial assumptions and demographic assumptions. The former looks at the economic outlook and expected investment returns on the actual scheme assets and historical pay growth and the latter population trends and past scheme mortality experience. The Investment returns are a critical component in the evaluation. The Funding level is very dependent on the ‘Discount Rate’ assumed. · The assumptions need to be realistic to ensure that a sensible plan is devised and the contribution rate is set correctly and is affordable. These decisions need to be timely and involve a wide range of parties. A miscalculation of the ‘Discount Rate’ would affect the contribution rate; in these instances, contribution rates might need to be increased. There are different school of thoughts on how to calculate the value of the liabilities. · That there was increased attention towards the governance of funds and that external government bodies also needed to be satisfied with the solvency of all LGPS Funds. · That it was aimed for the Council to stop subsidising schools deficit contributions through stabilised increases in total contribution rate. Members raised questions about schools transferring into Academies and noted that the contribution rate by these institutions was 33%. · That previous valuations of the Fund and those made by the LGPS Scheme Advisory Board were on a par. The Assumptions are compared to past estimates and there are annual evaluations which take into consideration factors such as members who are due to retire, ill health retirements and deaths. Other factors which are reviewed are life expectancy (based on postcodes), gender, dates of birth and earnings. · Members raised questions about ‘improbable events’ such as Brexit and queried whether these factors were taken into considerations when making valuations. The Committee was advised that it was expected that markets would move up and down and that returns from investments in the long term were more important. The Committee was reminded that the ... view the full minutes text for item 5. |
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REPORTS FOR CONSIDERATION |
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London Collective Investment Vehicle (CIV) Update PDF 334 KB Minutes:
Bola Tobun, Investment and Treasury Manager, presented a report which provided an update on the latest developments in respect to the London CIV The LCIV has adopted a new governance framework and has disbanded the Pensions Joint Committee. A ‘Disbanding Agreement’ will be signed by all Local Authorities.
The LCIV employee pensions agreements are provided through the City of London Pension Fund and LCIV and City of London have been working together to formalise these arrangement. The LCIV has a Recharge Agreement and City of London required Guarantee Agreement for admitting LCIV into their Local Government Pensions Scheme. Members were advised that Legal Services and Finance will be reviewing the above agreements to ensure that terms and conditions are favourable to the LBTH Pensions Fund. The Committee noted that the City of London was expecting the LCIV to provide a Bond if the ‘Guarantee Agreement’ does not become effective. There were concerns about the former being unlimited.
Members noted the membership of the LCIV Shareholder Committee had been agreed and commented that the LBTH contribution to the LCIV was above 20% and stressed that the Local Authority should either have a Councillor or Officer on the Body. The LCIV is currently considering whether their Shareholder Committee membership should include a Trade Union Representative. The Committee was advised that the Pensions Board had raised various concerns over the governance arrangement at the LCIV in particular the lack of Independence between some committees.
The Committee held a brief discussion about disinvestment in fossil fuels and queried whether the LCIV could be requested to undertake the above and if they could remove funds if request was unmet. Officers reminded Members that LCIV was a ‘Pooled Fund’ and that they were legally obliged to be part of a Pool. The LCIV can be requested to look at ‘sustainable Equities’; these products would need to be in demand and also available on the Market. At present there is not a wide choice on ‘low carbon products’. Members requested that Officers approach the LCIV about ‘low carbon investments’ and provide feedback at the next Committee. Members were reminded that LCIV chose Fund Managers for each Asset Class and other Funds may desire alternative Products.
RESOLVED
1. To note the content of this report;
2. To approve the signing of the Notice of Dissolution of the Pensions CIV Joint Committee (PCSJC), issued by LCIV;
3. To delegate to the Corporate Director, Resources and the Monitoring Officer to review and agree suitable terms of conditions for Tower Hamlets Pension Fund and the Council in regards to the LCIV Pension Cost Recharge Agreement and LCIV Pension Guarantee Agreement for the City of London;
4. To approve the agreements to be sign when recommendation c above has been achieved in consultation with the Chair and Vice Chair of the Committee;
5. That Officers make enquiries about the Council having a representative on the LCIV Shareholder Committee; and
6. That Officers approach LCIV about ‘Low Carbon Products and provide feedback ... view the full minutes text for item 6.1 |
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Minutes:
Colin Robertson, Independent Advisor, presented a report which detailed the performance of the markets and the Pensions Fund investment managers for the first quarter of 2018/19.
The Committee was advised that the Financial Markets regained their composure in the 3 months to 30 June 2018. The developed equities have recaptured their losses from the last quarter. The USA Market is performing well but Emerging Markets have underperformed significantly. The other Markets (Europe and Japan) are forecasted to have reasonable economic growth. There are still concerns over ‘Trade Wars’ and their effects on supply chains.
With regard to Emerging Markets, Turkey’s political leadership and Argentina’s high borrowing of dollars have contributed to the lpoor performance. Members held discussions on the poor performance of the Turkish Lira and noted that this was attributed to the economic policies pursued by the current government and that there had been a loss of confidence in the Country’s Markets. Following questions from Members, Officers advised the Committee that it was unlikely that the United Kingdom would mirror the same economic policies as Turkey.
Despite strong corporate earnings, equities continued to remain expensive from an historical perspective. The Committee noted that they had purchased ‘equity protection’. Members were advised that at this time the Fund should invest in ‘assets’ which were dependent on the skills of Fund Managers rather than being very sensitive to equity market levels. At present the Fund has a high exposure on equities, preferably this should be reduced.
Members were advised that inflation was being better controlled and that Central Banks were pleased that inflation in the major economies were converging on the widely held 2% inflation target. The Committee was advised that while a Central Bank has the option to raise and cut interest rates to regulate the economy, there were other measures which could be put in place to help such as ‘Quantitative Easing or Tightening’ This had all led to gilt yields being fairly stable although US yields had risen.
The Baillie Gifford equity fund was noted to have performed well and had surpassed its Benchmark once again during the quarter, be it only marginally on this occasion. The relative performance of the LCIV Baillie Gifford and LCIV Ruffer DGF funds in the quarter to 31 March was reversed in the latest quarter. Absolute Return Bonds Funds underperformed and would require continual monitoring. The Schroders Real Estate Capital Partners Fund beat its benchmark by 0.2%.
Following questions from Members, the Committee was advised that they would be required to make decisive action if Funds were not being managed according to specification.
RESOLVED
That the contents of the report be noted.
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Investment and Fund Managers Performance Review for Quarter Ending 30th June 2018 PDF 220 KB Additional documents:
Minutes:
Bola Tobun, Investment and Treasury Manager presented a report which outlined the performance of the Pensions Fund and its investment managers for the first quarter of 2018/19. The Fund performed in line with its benchmark return of 2.95% for the quarter and the Fund value has increased by £40m during the last quarter.
During this quarter seven mandates matched or achieved returns above the set benchmark. Members were advised that two Managers had underperformed over both the quarter and the longer term and the Committee will be requested to make a decision on what course of action should be taken. Members were reminded that Fund Managers were employed to outperform set Benchmarks over a period of three years and they could be changed if performance was unsatisfactory. The Committee noted that ‘Infrastructure’ and ‘Private Debt’ were alternative investment products. Investment returns were important in helping to address funding gaps.
Members requested that the future Tables which detail Managers Investment Performance relative to benchmark be presented separately on an A4 Sheet. Officers also requested that the graphs which illustrate the portfolio value movements of each mandate for the Quarter also includes the transfers between Funds. This information should be depicted explicitly on the graph.
RESOLVED
1. To note the contents of the Report;
2. That the Table which details the Managers Investment Performance Relative to Benchmarks is displayed on an A4 Sheet; and
3. That the graphs which illustrate the portfolio value movements of each mandate for the Quarter includes transfers between Funds and this be depicted explicitly on graphs.
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Pension Fund Annual Report For 2017/18 PDF 99 KB Additional documents: Minutes: Kevin Miles, Chief Accountant, presented the final Pensions Fund Annual Report for 2017 / 2018. The Committee were reminded that their Draft Annual Report was presented at their meeting in July following the audit of KPMG. Members were informed that KPMG had no issues to respond.
RESOLVED
1. To note the contents of this report;
2. To approve the Pension Fund Statement of Accounts (Appendix 5 of Annex 1);
3. To approve the Pension Fund Annual Report and give delegated authority to s151 to finalise and publish this in order to meet the statutory publication deadline of 1 December2018 (Annex 1); and
4. To approve publication and distribution to interested parties.
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Pension Scheme Administration Update PDF 85 KB Additional documents: Minutes: Tim Dean, Pension Team Leader presented a report which covered the activities and performance of the Pensions Administration Team. The Committee was advised that Green Spring Academy had joined Mulberry Schools Trust from 1 September 2018 and that Accent Catering Services Limited had taken the contract for Mulberry Trust Schools and will be an Admitted Body. This is subject to contracts being agreed by Accent’s Legal Advisors.
The Pensions Administration has identified 1200 deferred members who could potentially claim payment of benefits with immediate effect. The Team has made contact with over 100 of these members. A ‘cash flow analysis’ has been carried out and potential payments are not expected to affect the Funding Level.
A data quality review is to be scheduled and will be undertaken by Altair Pensions.
Members noted that vacancies within the Pensions Administration Team was affecting its performance and was advised that the new structure which was currently being put in place would help to improve the Teams Performance Indicators. The Pensions Administration Team is now located within the Finance Service Area; there are currently Secondments within the Team.
RESOLVED
To note the information provided in the report in respect of the scheme administration and the performance metrics.
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TRAINING EVENTS Minutes: Members were advised that they will be receiving training on Infrastructure at the next Committee.
A list of LGA Training for Pensions Committee Members will be circulated to Members. Members are to inform Bola Tobun if they wish to attend any of the training events.
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ANY OTHER BUSINESS CONSIDERED TO BE URGENT Minutes: None. |
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DATE OF FUTURE MEETINGS · 29 November 2018 · 13 March 2019 Minutes:
· 29 November 2018 · 13 March 2019. |