Agenda and minutes
Venue: Committee Room C1, 1st Floor, Town Hall, Mulberry Place
Contact: Antonella Burgio, Democratic Services. Tel: 020 7364 4881
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Councillor Motin Uz-Zaman, Vice-Chair in the Chair |
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APOLOGIES FOR ABSENCE To receive any apologies for absence. Minutes: Apologies for absence were received from the Chair, Councillor Zenith Rahman and Councillor Craig Aston. Councillor Peter Golds attended as substitute for Councillor Aston.
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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 Chief Executive. Minutes: Councillor Marc Francis declared an interest in that he was a member of the Council’s pension scheme.
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UNRESTRICTED MINUTES PDF 67 KB To confirm as a correct record of the proceedings the unrestricted minutes of the ordinary meeting held on 15th November 2012.
Minutes: The minutes of the meeting held on 15th November 2012 were presented for approval. John Gray advised of an error in that his attendance and that of Frank West had not been recorded and asked that the minutes be amended to reflect this. No other factual corrections were requested.
RESOLVED
That, subject to the above amendment, the minutes of the Pensions Committee held on 15 November be approved.
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UNRESTRICTED REPORTS FOR CONSIDERATION |
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Report on Fund Liquidity PDF 109 KB To approve the recall of dividend and rental income from two of the Fund’s managers (GMO and Schroders) into the LBTH Pension Fund.
Minutes: Alan Finch, Service Head, Financial Service, Risk and Accountability and Interim Section 151 Officer presented to the report which asked Committee to give delegated authority to officers to withdraw cash as required.
Mr Finch advised the Committee that during the forthcoming 12-18 months the balance of the Council’s pension fund transactions would move towards collecting less cash and paying out more cash. This was a normal progression as the fund moved toward maturity and Members were advised that the pension fund, presently, was maturing faster than previously anticipated, causing a shift in the fund's cash-flow position.
To meet the anticipated cash short-fall, the Fund, in the short-term, would require access to funds to pay out benefits and, in the long-term, a review of the investment strategy would also be required.
The options available to improve short-term fund liquidity were presented at paragraph 6 of the report. Of these, the option to use income generated from invested assets was preferred as its impact on the fund was least. It was proposed to access cash through two streams of income; by recalling the dividend from GMO mandate and using rental income from Schroders property fund.
These two fund managers had been selected as the pension fund received rental income from Schroders and GMO was not a pooled fund therefore equities could be easily withdrawn and fees avoided.
In considering the proposal, Members noted the following matters:
· the maturity of the fund had been accelerated by a reduction in contributions from its members; this had brought forward the date of movement towards negative cash flow. In previous years, projected maturity calculations had indicated maturity 3-4 four years hence. In the last year, numbers contributing to the pension scheme had decreased and those drawing pensions had increased accelerating the move towards negative cash-flow. At present it was estimated that this would occur in 12 - 18 months’ time. · the transition from positive cash flow to negative cash flow was a natural part of the life cycle of pension funds. In this case fund maturity was approaching sooner than had been anticipated and therefore the time was appropriate to approach the committee to request authority to release cash. · the rationale for the choice of fund managers (GMO and Schroder) was not connected with the underperformance of these managers. Mr Finch noted that these managers had been reviewed by the Investment Panel recently and it had been concluded that they were doing what they were supposed to as part of the overall pension fund strategy. These managers had been chosen however, because they provided a ready source of cash and avoided transaction costs that would be incurred if other options of cash release were selected. · Noting that diverting this income from the fund would affect the balance of the fund, the Committee enquired how equilibrium in the fund strategy would be re-established and was advised that it would be necessary to review the funding strategy in the longer term. However in the shorter term ... view the full minutes text for item 4.1 |
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Review of Internal Control Reports in 2012/13 PDF 105 KB To note the report.
Minutes: The Chief Financial Strategy Officer presented the report which summarised the findings of a review of the adequacy of internal control measures put in place by Fund Managers which hold the Council pension fund's assets in management.
Members noted the review undertaken which was highlighted at a paragraph 6 of the report. The Chief Financial Strategy Officer reported that exceptions which had been revealed in the review had been investigated with the relevant Fund Managers. Officers were satisfied that these had not revealed any significant change in risk to the pension fund.
RESOLVED
That the report noted.
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Report of Investment Panel for Quarter Ending 30 September 2012. PDF 171 KB To note the report.
Minutes: The Chief Financial Strategy Officer noted that figures reported were for the quarter ending 30th September 2012 and advised that the latest position would be reported verbally. He and Mr Woodman spoke to the report.
Members were advised that:
· overall, the fund was outperforming by one base point. · six of the eight managers had outperformed. The two underperforming managers had previously been reported to the Committee and reasons for the underperformance reviewed. · part of the fund management strategy was to diversify the fund therefore some underperformance was anticipated. · Fund performance in the quarter was solid and targets had stayed in line with what was expected in the strategy. · the Fund value was £854 million. · only Schroeder had not outperformed benchmark during the quarter.
RESOLVED
That the report noted.
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Report on Pension Fund Work Plan PDF 109 KB To agree the work plan attached at item 4.4.
Additional documents: Minutes: The Chief Financial Strategy Officer presented the report which gave Members forward notice of reports to be presented to Committee and the decisions required. Paragraph 6 of the report outlined the action plan.
Co-opted Member, John Gray noted that Lord Hutton’s Report arising from the work of the Independent Public Service Pension Commission was presently being read by the House of Lords. He advised that subject to its outcome, this might generate training requirements for the Pensions Committee. The Vice-Chair noted this matter and asked that a review report be brought to each future meeting to advise Members of any changes arising from the Lord Hutton’s Report.
RESOLVED
1. That the report to be noted
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Recovery of Pension Fund Deficit Contribution - Academy Conversion PDF 118 KB To agree a deficit recovery period for active transferring members. Additional documents:
Minutes: Jill Bell, Head of Legal Services - Environment presented the report advising the Committee that two maintained community schools which have received an Academy order have applied to join the Council’s Local Government Pension Scheme (LGPS). Members were advised that, because academies were scheduled bodies, admission to the pension scheme for non-teaching staff was mandatory; however the Council could exercise discretion on the length of recovery deficit to period it wished to set and whether to allow pooled arrangements.
It was noted that the Old Ford and Culloden Primary schools would convert from maintained community schools to a Multi-Academy Trust. Members were asked to note the actuarial assessment and actuary’s recommendations contained in the appendices to the report and were advised that a representation had been submitted by each of the schools; these were circulated as a supplementary agenda.
Mr Barry McKay, actuary on behalf of Hymans Robertson addressed the Committee. He spoke on issues discussed in the appendices to the report and responded to the issues raised in the schools’ representations.
He advised the Committee that in November 2011, two other schools had converted to academies at which time the Committee had agreed a 14 year deficit recovery period. This period was chosen as a compromise between the 20 year deficit recovery period normally applied to councils and the seven-year Government backing given for school academies.
Noting the projected future working lifetime of these new organisations he advised that it was appropriate to look at the age profile of academy non-teaching staff noting that, by design, academies will have more independence from the local authority and are therefore deemed more risky. In view of these factors it would be more prudent to recoup the debt more quickly. Mr Finch, (Interim S151 Officer and Service Head Financial Services, Risk and Accountability) also noted that Government guidance on this matter, whilst suggesting support, did not guarantee liabilities. Since, academies were independent schools, the local authority would no longer be in a position to guarantee liabilities. The normal twenty-year recovery period enjoyed by the authority was a concession by the actuary based on the authority’s tax raising powers.
In regard to risk. Cllr Golds argued that having created academy schools the Government would inevitably ensure that they were guaranteed. Ms Bell advised that, as trustee, the Pension Committee was charged to consider the interests of the pension fund members noting that admission of this new body would have an impact on the pension fund. She advised that academies could furthermore stipulate their own pay policies which would bring risk to the fund should an academy become insolvent. Additionally the Secretary of State had had opportunity to give a guarantee but had not done so. Mr Mckay advised that non-teaching staff were exposed other risks noting that if an academy should become insolvent these staff would not automatically be employed by a successor body and so exposure to risk was greater. Cllr Golds maintained that the Government would inevitably guarantee education and, ... view the full minutes text for item 4.5 |
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ANY OTHER UNRESTRICTED BUSINESS CONSIDERED TO BE URGENT |
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To note training opportunities offered.
Minutes: The Chief Financial Strategy Officer highlighted forthcoming training opportunities circulated at agenda item 5.1 that were available to Members of the Pensions Committee.
RESOLVED
1. That the training opportunities be noted
2. That this item be included as a standard item in all future agendas
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