Members are reminded to consider the categories of interest, identified in the Code of Conduct for Members to determine: whether they have an interest in any agenda item and any action they should take. For further details, see the attached note from the Monitoring Officer.

Members are also reminded to declare the nature of the interest at the earliest opportunity and the agenda item it relates to. Please note that ultimately it is the Members’ responsibility to identify any interests and also update their register of interest form as required by the Code.

If in doubt as to the nature of an interest, you are advised to seek advice prior the meeting by contacting the Monitoring Officer or Democratic Services.

There were no Declarations of Disclosable Pecuniary Interest.

To confirm as a correct record the unrestricted minutes of the meeting of the Committee held on 13^th and 22^nd March and 3^rd July 2023.

The unrestricted minutes of 13^th and 22^nd March, and 3^rd July 2023 were agreed to be an accurate record of the meeting and were approved by the Committee.

The Pensions Committee heard from Mr John Gray, Union representative and Ms Julie Richie, employee at Riverside Housing Association.

Mr Gray informed the Committee that staff who had been TUPED over to the Housing Association in 2005, from the Council, had been informed that the Housing Association wanted to withdraw from the LGPS scheme.

Mr Gray explained Riverside Housing Association was formerly known as One Housing / Clarion Housing and Toynbee Housing Association. Riverside Housing Association had recently launched a consultation exercise, asking employees for their views to withdraw from the LGPS scheme.

Mr Gray said this change would have a detrimental effect on employees approaching retirement. He said employees with long-term service would be affected, as it would decimate their retirement plans.

He asked the Committee to take note of this and said the Council must do what it can to protect staff who had been TUPED but wanted to remain part of the LGPS scheme. He said it was disappointing that the Housing Association was reneging on promises it had made staff when they joined their employment.

In response to comments of the Committee the following was noted:

o   ACTION: Officers were asked to draft a letter to Riverside Housing Association, asking the Housing Association to investigate the terms and conditions of the original TUPE agreement and provide an explanation as to the alternative options they had considered for employees who wanted to remain part of the LGPS scheme. Members of the Committee to have sight of the letter before it is circulated.

o   ACTION: Members stated they wanted to see the original admission agreement and asked that this be presented to the Pensions Committee at its next meeting. The Committee also wanted to know what enforcement options were available to them.

Ms Miriam Adams, Interim Head of Pensions and Treasury addressed the Committee on behalf of Mr John Jones, Independent Chair of the Pensions Board.

Ms Adams explained the Board’s meeting of 11^th September 2023 did not take place owing to the Board not having representation of an employer and employee representative in the room. Nevertheless, the Board did receive training on Real Estate investment from Schroders which they found very useful.

The Board will report back on its activity at the next Pension Committee meeting.

Mr Jack Bladon and Ms Naomi Green from Schroders provided Committee Members with an overview of the portfolio administered on behalf of the Fund and the performance of the fund. Ms Green explained the strategy used when making investments and how the fund measures up against sustainability targets.

In response to comments and questions from members the following was noted:

o   ACTION: In response to a question, Ms Green stated that the managers of the underlying funds would be asked to provide a list of assets held and which are located in Tower Hamlets, and these could be sent to the Committee in a separate email.

·       Ms Green stated they were working with partners to achieve the net zero target. She said every manager had a checklist to collate sustainability data.

·       Mr Colin Robertson, Independent Adviser, asked how much remained to be invested in “Distressed” real estate. Ms Green responded stating £2.8M cash had been left over for further distressed opportunities and it was hoped purchases could be made at a 7% - 10% discount. Mr Robertson pointed out that this was greater than the 3% discounts which had been achieved to date. It was explained that this was because some property managers needed to make sales.

·       Additional allocations had been made to the Unite UK Student Accommodation Fund, the Industrial Property Investment Fund and the Schroders Capital UK Real Estate Fund (page 13 of presentation).

The Chair thanked the representatives from Schroders for their presentation.

Ms Miriam Adams, Interim Head of Pensions and Treasury presented the report on the proposed Pensions Overpayment Policy. She said the policy set out the steps the Council’s Pension Fund would take on discovering an overpayment of pension made to a retired member of the LGPS, a beneficiary or estate of a retired member of the LGPS.

She referred members to page 34 of the agenda which set out the scope of the policy.

In response to comments and questions the following was noted:

• Ms Adams stated that data on how the LBTHPF compared with other funds relating to overpayment was not available. However this was an area that the Fund wanted to improve and so LBTHPF was aiming to achieve this with this policy.
• Ms Adams said there were approximately 300 cases of overpayment which did not include National Fraud Initiative (NFI) records. She said the Pension Service aimed to contact the named person on a death certificate to establish if overpayment had occurred.
• In respect of what the LGPS can do to minimise the risks of an overpayment, Ms Adams referred members to paragraph 3.1 which listed the steps it would take.

The Pensions Committee RESOLVED to:

1. Consider and review the Policy on Pension Overpayment (the Pension Overpayment Policy)
2. APPROVE the policy and delegate to the Corporate Director of Resources the authority to update the Pensions Overpayment Policy as required from time to time to reflect changes in working practices and/or the law.
3. APPROVE the publication of the policy on the Pension Fund website; and
4. AGREE the policy be reviewed every three years by the Pensions Board.

Ms Miriam Adams, Interim Head of Pensions and Treasury stated the report covered the updates to the Funding Strategy Statement and Academy Funding Policy in light of the recent policy issued by the Education and Skills Funding Agency (ESFA) regarding the operation of the DfE Academy Guarantee and its application to academy outsourcings issued in May 2023. Ms Adams said the Pensions Committee had received the Funding Strategy Statement in October 2022 and the final post employer consultation was in March 2023, following completion of the triennial valuation.

Ms Adams referred to paragraph 3.1 to 3.4, which set out the additional liabilities.

In response to comments and questions from members the following was noted:

• In answer to how the LGPS mitigates against an agreement/contract prior to staff being TUPED to another organisation, Ms Adams stated that it would be for Human Resources/Legal to ensure the contract had the right clauses in the commercial document, as the Fund is only administering the employer benefit.

The Pensions Committee RESOLVED to:

1. Note the content of the report; 
2. Approve the revised Funding Strategy Statement as set out in Appendix A, which included the updates to Academies; and
3. Approve the revised policy on Academy Funding as set out in Appendix B.

Ms Miriam Adams, Interim Head of Pensions and Treasury stated the report presented the findings of the review undertaken to review the adequacy of internal control measures put in place by the London CIV and their review of underlying fund managers controls.

She said officers had reviewed the available AAF 01/06 and SSAE3402 for investment managers who the Fund had a direct relationship with. She said the internal control reports signified that service organisations had their control objectives and control activities examined by an independent accounting and auditing firm.

She said the third-party internal controls oversight summary report from the LCIV concluded that there were no significant changes in the internal control environment for the period 1^st April 2022 to 31^st March 2023. Bridging letters were provided by the LCIV in respect of underlying managers to 31^st March 2023, not covered by the internal controls report.

Ms Adams referred members to page 83 of the agenda, paragraph 3.7 which set out the list of managers for each underlying fund and referred to the table at paragraph 3.8 page 84 of the agenda, which reported on the internal control reports.

In response to comments and questions the following was noted:

• Ms Adams said investment managers were continuously monitored and page 92 and 93 of the agenda showed when each fund manager had been reviewed. It was observed that in some cases the last onsite due diligence exercise had been carried out in 2020.
• Mr Turner from Mercer stated that he would expect the LCIV to carry out a due diligence exercise for all managers every  12 months but acknowledged the London CIV had stated they had ‘resource constraints’ to do this.

• ACTION: Members requested Officers to write to the LCIV to express their concern about the regularity of their reviews of the internal controls of the underlying managers.

The Pensions Committee RESOLVED to:

1. Note the content of the report; and
2. Note the London CIV’s third party controls and oversight summary report at 31^st March 2023, appended at Appendix 1.

Ms Miriam Adams, Interim Head of Pensions and Treasury stated the funding update illustrated the estimated funding position from 31^st March 2022 to 21^st June 2023.

Ms Adams said the projected benefit payments used in this calculation were based on the membership data and the financial and demographic assumptions used for the 2022 formal valuation and in line with the Funding Strategy Statement (FSS) dated March 2023. She said the estimated funding position took into account the actual pension increases since the valuation and changes in future long-term inflation expectations derived consistently with the approach in the current FSS.

The funding ratio had improved from 123% to 155%.

In response to comments and questions from members the following was noted:

• Members had no questions for Ms Adams.

The Pensions Committee RESOLVED to:

1. Note the content of this report.
2. Note that any investment decisions taken which fail to provide the desired returns will impact estimated funding levels.

Ms Miriam Adams, Interim Head of Pensions and Treasury presented the quarterly update report, which provided members with information relating to the administration and performance of the Fund over the last quarter as well as updates on key LGPS issues and initiatives which impact the Fund.

In response to comments and questions from members the following was noted:

• Members had no questions for Ms Adams.

The Pensions Committee RESOLVED to:

1. Note and comment on the contents of this report and appendix.
2. Agree the admission of Nourish Catering.

Ms Miriam Adams, Interim Head of Pensions and Treasury said the LBTHPF was open to new entrants and, while several council services were insourcing in 2023/24 and 2024/25, the Fund was maturing fast. She said the report provided an update on the Pensions Fund’s projected cash flow forecast for 2023/24 to 2025/26. Ms Adams said the Fund was projecting a £8.4m positive net cash flow by 2025/26 without any cash draw down from investments.

In response to comments and questions from members the following was noted:

• Mr Colin Robertson said that the income generated by the LCIV investments was reinvested by the LCIV. It was agreed to pursue the possible future distribution of part of this income to the Fund.
• Ms Adams stated the table at Appendix A reflected the operational cash available to the Fund and not what had been invested. She said the draw down policy was reviewed 2-3 years ago and that this could be updated to see what can be added to it.

The Pensions Committee RESOLVED to:

1. Note the cash flow forecast from operational activities (Appendix A)

Ms Miriam Adams, Interim Head of Pensions and Treasury stated the work plan for the committee showed the reports that were coming to the Committee. She said the TCFD report and Climate Risk Register were coming to the next meeting.

Ms Adams said there was also a training session scheduled for October 23 on Climate Change Scenario Analysis and said it was vital for members to attend the training. She said a log of attendance was kept and this was reported in the annual report as well as to auditors.

In response to comments and questions from members the following was noted:

·       Ms Akintunde stated she attended the annual conference of the LCIV and said it would have been useful for others to have attended too.

There was no other business to be discussed.

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/Confidential (pink) papers for consideration at the meeting 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 Democratic Services Officer present or dispose of them in the confidential bins.

The Chair MOVED and it was:

RESOLVED

“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.”

To confirm as a correct record the restricted minutes of the meeting of the Committee held on 13^th and 22^nd March and 3^rd July 2023.

The restricted minutes from the meeting of 13^th and 22^nd March, and 3^rd July 2023 were agreed to be an accurate record of the meeting and were approved by the Committee.

Ms Miriam Adams, Interim Head of Pensions and Treasury presented the report which provided an update on the stewardship activity carried out by the Tower Hamlets Pension Fund’s investment managers and on its behalf by Local Authority Pension Forum (LAPFF) in the quarter ending June 2023.

The Pensions Committee RESOLVED to:

1. Note content of this report and appendices.

Ms Miriam Adams, Interim Head of Pensions and Treasury stated the LGPS Code of Transparency (set up by SAB) helped LGPS clients gather costinformation in a consistent format. Ms Adams explained that the cost information must alwaysbe viewed in context of risk and return, and these factors should form part of any overallvalue for money assessment.

The Pensions Committee RESOLVED to:

1. Note and consider the report and appendices;
2. Note that the London CIV is working on reducing investment management fees where possible for under-performing managers or better and efficient fund structures; and
3. Note that investment management fee rates may be fixed however these are calculated based on value of assets during the period.
4. Consider appointing investment cost benchmarking supplier.

Ms Miriam Adams, Interim Head of Pensions and Treasury informed members that the report provided an update to the Board and Committee on the changes made to the Fund’s risk register since June 2023.

The Pensions Committee is RESOLVED to:

1. Note and comment on the detailed Risk Register (Appendix 1)

Ms Miriam Adams, Interim Head of Pensions and Treasury explained that the presenter who was to make the presentation on Investment benchmarking, was unable to join the Committee meeting due to technical issues. As such this would be presented at the next meeting of the Committee.

Ms Miriam Adams, Interim Head of Pensions and Treasury stated the report informed members of the performance of the Pension Fund investments and its investment managers for the quarter ending June 2023.

The Pensions Committee RESOLVED to:

1.    Note the performance for June 2023 quarter;

2.    Note the progress made on implementing agreed strategic investment actions from March meeting;

3.    Consider and agree Mercers recommendation to top up the underweight Index-Linked Gilts allocation and delegate implementation to Corporate Director Resources;

4.    Agree a temporary solution to continue with existing manager Schroders;

5.    Consider and agree recommendation that Mercer review alternative passive managers for Index Linked Gilts; and

6.    Note the Independent Adviser quarterly commentary (Appendix 1).

The Department for Levelling Up, Housing & Communities (DLUHC) had issued a consultation on the 11^th July 2023 on the Local Government Pension Scheme entitled “Local Government Pension Scheme (England and Wales) Next Steps on Investments”.

She said the consultation ran until 2^nd October 2023.

The Pensions Committee RESOLVED to:

1. Consider, comment and agree the draft consultation response (Appendix 1).
2. Note the summary report by Mercer (Appendix 3).
3. Agree that the Corporate Director Resources formally respond on behalf of the Committee.