Agenda and minutes
Venue: Committee Room One - Town Hall, Mulberry Place, 5 Clove Crescent, London, E14 2BG. View directions
Contact: Georgina Wills, Democratic Services. Tel: 020 7364 4881 E-mail: georgina.wills@towerhamlets.gov.uk
No. | Item |
---|---|
Appointment of Vice-Chair Minutes: The Chair proposed that Councillor Candida Ronald be appointed Vice-Chair of Pensions Committee for the duration of the municipal year. The proposal was seconded by Councillor Andrew Wood and, there being no other nominations, it was
RESOLVED:
That Councillor Candida Ronald be appointed Vice-Chair of Pensions Committee for the duration of the municipal year.
|
|
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: The Chair declared a personal interest in item 6.8, Pension Fund Administration Update by virtue of her being Chair of the Tower Community Housing Board. The Chair remained in the meeting and took part of the discussion whilst the item was being discussed.
|
|
MINUTES OF THE PREVIOUS MEETING PDF 130 KB To confirm as a correct record the minutes of the meeting of the Committee held on 16 March 2017
Minutes: The minutes of the previous Pensions Committee held on 16 March 2017 was approved as a correct record, subject to the following amendments.
Minute item 10, Election of Chair for the Pensions Committee – the word ‘some’ be included in the first bullet point to read:
Some Members expressed concerns about the need to re-elect to the position of Chair of the Committee on the grounds that previous Chair of the Committee Councillor Andrew Cregan had changed political groups’.
|
|
PETITIONS To receive any petitions relating to matters for which the Committee is responsible. Minutes: None received.
|
|
SUBMISSIONS / REFERRALS FROM PENSION BOARD Minutes: Suzanne Jones, Support to the Divisional Director Resources, provided the following feedback from the Pensions Board’s meeting held on Monday 31 July 2017.
The Board considered reports and held discussions about the Administration of the Pensions Funds and the quality of data received.
Members also reflected on their work programme, in particular how they conduct their business and agreed that their members should attend the Pensions Committee.
The Board has a vacant post, Representative for Admitted Bodies – Employers. Admitted Bodies will be contacted about the vacancy and requested to nominate a representative.
The Chair thanked Suzanne for the feedback and agreed that members of Pensions Committee should attend the Pensions Board.
|
|
REPORTS FOR CONSIDERATION |
|
Pensions Committee Terms of Reference, Membership, Quorum and Dates of Meetings PDF 84 KB Additional documents: Minutes: The Clerk presented a report which set out the Terms of Reference, Membership and Quorum of the Pensions Committee for the Municipal Year 2017/2018. The Committee agreed that 7pm was the preferred start time for their scheduled meetings.
RESOLVED:
1. That the contents of the report be noted.
2. That all scheduled meetings start at 7pm.
|
|
Investment Strategy Review
The Committee to receive a verbal presentation from Mercers.
Minutes: The Committee received a presentation from Steve Turner of Mercer, on the Investment Strategy Review. The aim of the review is to consider the allocation between asset classes; risk and returns, ensure that there is a reasonable balance between the two objectives and to identify improvements to the investment strategy to help achieve these objectives.
There are a number of reasons to undertake a review and these range from funding changes, legislation change, new solutions, consolidation, Liabilities change, outlook change, change to employee and providing a clear plan.
When making investment decision the Committee will need to remain cognisant of pooling and options that are available on the current Collective Investment Vehicle (CIV) platform. The review will be the key determinant of overall investment performance. The Committee during a question and answer session: Noted:
· That there was an opportunity to reduce risk and volatility of their past deficit by £26m or more. · That more diversification of their portfolio would potentially lead to better returns and reduce their exposure and that their Investment Policy must be aligned · The forward looking equity market returns were unlikely to be as strong as they have been over the last 7 years and that it was a good opportunity to address the equity risk; the reduction will help the funding position. · That Bonds accounted for 18% of their Portfolio and was divided into two distinctive types; return seeking bonds and liability hedging bonds. · The best estimate expected return for Gilts was + 4.1% p.a. and this return surpassed the requirements of their Actuaries. There is a 73% probability of achieving Gilts +2.0% · The Level of liability hedging was 7% and that currency hedging should be considered. · That their Asset Portfolio should be increased; this is linked to inflation. A long term strategy would need to be agreed and should be guided by the CIV, the asset allocation would need to be determined as this will have the biggest impact on the CIV. · That the current funding level had improved over a 5 year period and at current was at 86%, this was attributed to strong asset returns. As funding levels approach nearer to 100% this period should be used as an opportunity to decrease risks. · The assessed Value at Risk (VaR) indicates that there is a 5% chance that the current deficit £223m could be increased by at least £329m over a 1 year period to £552m. This is based on the deficit as at March 2017. · Equities are expected to provide 75% of the Funds excess returns and account for 56% of the Fund’s risk on the VaR. · That they consider reducing the allocation to equities by 10%, in light of strong performance, an increase in the funding level and level of risk concentration in equities. · That an increase in allocation to both Ruffer and Baillie Gifford be considered; they are ‘best in class’ managers and this would achieve additional diversification and would be relatively quick and easy to achieve. Members raised ... view the full minutes text for item 6.2 |
|
Update on Market Outlook and Investments by the Independent Advisor The Committee to receive a verbal report from Raymond Haines, Independent Advisor. Minutes: The item was deferred to the next meeting.
|
|
Draft Pension Fund Annual Report and Accounts 2016/17 PDF 112 KB Report to follow Additional documents: Minutes: Bola Tobun, Investment and Treasury Manager, presented a report which updated members on the arrangements for the preparation of the Pensions Fund Annual Report and Accounts 2016/17 in accordance with regulations and the arrangements for the separate audit engagements, opinion and certificate for the Fund. Members were informed that assets had increased by over £200 million in the year and that funding levels had increased from 83% to 86%. The Committee was advised that an updated version of the report will be circulated to members, prior to the report being submitted to Audit. The Pensions Fund Accounts are subject to the normal audit of accounts process; which is carried out in July and August 2017.
RESOLVED: 1. That the contents of the report be noted 2. Approve the Draft Pension Fund Accounts prior to submission foraudit; 3. Agree publication and distribution to interested parties onceapproved; and 4. Delegate authority to the Corporate Director, Resources to make any amendments to the Pension Fund Statement of Accounts that arise as a result of the audit, in advance of the publication of the accounts.
|
|
Future Pension Administration Options PDF 146 KB Report to follow Minutes: George Bruce, Interim Pensions Manager presented a report which detailed the current Pension Administration Services to the Tower Hamlets Pension Scheme, the advantages and challenges to the current arrangements and compared these with alternative arrangements.
Members sought clarification on whether the item should be considered by the Pensions Committee and was advised that initial feedback was being sought.
The current administrative service in place for Tower Hamlets Pension Scheme has been in operation since the Borough was established. At current services are delivered by the Council’s HR and Finance Departments and comprises of small teams. This in-house service enables the direct control over the quality of service, ensures there is a direct relationship with scheme managers, avoids conflicts of needs of other clients and ensures certainty of staff.
The LGPS is becoming increasingly complex due to frequent changes in regulation and best practice guidelines and is now under greater scrutiny. Maintaining awareness of and implementing new regulations is a challenge to a small team; in conjunction the size of the current Team faces inherent risks from losing key staff.
Two main alternative means of delivering pension administration services to the scheme have been identified, co-operation with other Local Authorities or appointing an external third party administrator. The former option will grant the Pension Scheme access to more resources, access to a larger and diverse pool of specialist staff, encourage standardised client reporting and reduce IT cost.
The above mentioned will enable more focus to be given to daily tasks and also be adaptive to the needs of the Scheme. The Committee noted the risks of switching from an in-house to a local authority grouping could result in the reverse of advantages that are found in retaining an in-house team.
The third option, appointing a third party administrator would be undertaken via a commercial tender. An appointment of a third part administrator will magnify both the advantages (cost and resilience) and disadvantages (compromise and loss of control) of local authority groups. Third Party administrators can be accessed through the National LGPS Framework.
Members noted all the proposals presented and the size of the administrative team and specialties of officers. The option to collaborate with other Local Authorities was discussed further and Members preferred this option to over the other options presented and agreed that further research be undertaken to ascertain what administrative systems were in place in neighbouring boroughs. Members agreed that if the option to co-operate with other Local Authorities is chosen; the other scheme participants should have a shared interest with Tower Hamlets.
Members were advised that the Pension Board had recommended that all options are fully explored and that resilience of the service remains paramount. The Committee were informed established networks would be used to gage views and experiences. Members can forward comments about the various options to Lead Officers.
RESOLVED:
That a further detailed evaluation of the options outlined in the paper, including discussion with other local authorities is undertaken and that the findings are analysed and ... view the full minutes text for item 6.5 |
|
Investment Performance Review for Quarter Ending 31 March 2017 PDF 558 KB Report to follow. Additional documents: Minutes: Bola Tobun, Investment and Treasury Manager presented a report which informed Members of the Performance of the Fund and its investment managers for the quarter and year ending 31 March 2017.
The fund delivered a positive return of 4.4%, by outperforming its benchmark return of 3.6% by 0.8% for the reporting quarter. In addition 7 out of the 9 mandates matched or achieved returns above the benchmark in the quarter end. Ruffer and Goldman mandates lagged behind their respective benchmarks. Overall the Fund performance was ahead of its benchmark.
RESOLVED:
That the contents of the report be noted.
|
|
LGPS Latest Development and Update PDF 358 KB Minutes: Bola Tobun, Investment and Treasury Manager presented a report which provided an update on the general developments in the Local Government Pensions Scheme arena and the progress of the London CIV
Members commented and welcomed the Local Government Pension Scheme (LGPS) Scheme Advisory Board issue of the LGPS Investment Code of Transparency. The purpose of the Code is to improve the reporting and understanding of investment management charges and costs.
The Committee noted that the LCIV during the first quarter of 2017/18 was positive and that a majority of their quarterly KPI targets had been met.
RESOLVED:
That the contents of the report be noted.
|
|
Pension Fund Administration Update PDF 158 KB Report to follow. Additional documents:
Minutes: George Bruce, Interim Pensions Manager, presented the report which covered current issues affecting scheme members and employers participating in the Tower Hamlets Pension Scheme.
The Committee was advised that Anant Dodia, Pensions Manager had retired In the interim, Team Leaders will be responsible for overseeing the daily operation of the Team; in addition an experienced Pensions Manager from Surrey Council will provide support to the Service and act as a Mentor. Suzanne Jones, Deputy to the Divisional Director, will continue to attend Committees and assist with employee matters and act as link to team management. The Project Team will continue to work on the Member Self-Service Project.
The following Admin data was reported:-
During the period between April - May 2017 service standards increased and improved from 78% to 86% from the previous quarter. There has been steady progress made in relation to compliance.
Internal Disputes Resolution Procedures, an outstanding appeal has gone to an external reviewer; this is due to contractual information.
The Committee were advised that at their meeting in December 2016 they had discussed and agreed the recommendation to admit Energy Kidz into Pension Scheme and that the discussion and committees resolution was not included in the minutes meeting of 7 December 2017. This recommendation has again been repeated.
Members were advised that Compass Catering had recently advised that that they had employed over a dozen staff in September 2015 and that their request for admitted body status had not been processed. The meeting was informed that deductions from employees have been made since 2015 and that Compass Catering was to be granted admitted body status.
Internal Audit are scheduled to return and will be reviewing the service as part of the 2016 /2017 agreed internal audit plan. Members were advised that the earnings of Active Members will need to be checked to ensure that benefits received are correct. The addresses of these individuals have been checked.
The Actuary has issued a report on the quality of data that was provided during the triennial actuarial valuation in March 2016. A total of 700 members were noted as not having a home address; to rectify this, a company has been commissioned to undertake searches to identify addresses. A charge of £12 will be levied for each address; this cost was viewed as justifiable and good use of budget. The Inland Revenue Service was liaised with.
At the recent Pensions Board, discussions were held about undertaking a formal review of data control and also a benchmarking exercise.
The Committee were reminded that two data matching exercises are carried out on annual basis to ensure that pensions are only paid to surviving scheme members; these include the National Fraud Initiative for UK pensioners and Life certificates for overseas pensions.
The HMRC will be writing to all persons who are entitled to a GMP (Guaranteed Minimum Pensions) to advise what amount and pension scheme will be paid. The GMP is part of the LGPS pension; the government pays the annual ... view the full minutes text for item 6.8 |
|
TRAINING EVENTS Minutes: None |
|
ANY OTHER BUSINESS CONSIDERED TO BE URGENT Minutes: None. |
|
EXCLUSION OF THE PRESS AND PUBLIC In view of the contents of the remaining items on the agenda the Committee is recommended to adopt the following motion:
“That, under the provisions of Section 100A of the Local Government Act 1972, as amended by the Local Government (Access to Information) Act 1985, the press and public be excluded from the remainder of the meeting for the consideration of the Section Two business on the grounds that it contains information defined as Exempt in Part 1 of Schedule 12A to the Local Government Act, 1972.”
EXEMPT SECTION (Pink Papers)
The exempt committee papers in the agenda will contain information, which is commercially, legally or personally sensitive and should not be divulged to third parties. If you do not wish to retain these papers after the meeting, please hand them to the Committee Officer present. Minutes: The Chair moved and it was
RESOLVED
That press and public be excluded from the remainder of the meeting in that under the provisions of Section 100A of the Local Government Act 1972, as amended by the Local Government (Access to Information) Act 1985, the press and public be excluded from the remainder of the meeting for the consideration of the Section Two business on the grounds that it contains information defined as Exempt in Part 1 of Schedule 12A to the Local Government Act, 1972.” which relates to information relating to a particular employee, former employee or applicant to become an employee of, or a particular officeholder, former office-holder or applicant to become an office-holder under, the authority.
|
|
Pension Fund Procurement Plans and Update 2017/18 |