Agenda and minutes

Pension Committee
Friday 11 May 2018 11.00 am

Venue: Meeting Room 1&2 - Shire Hall, Gloucester. View directions

Items
No. Item

18.

Declarations of Interest -

Members of the Committee are invited to declare any financial or pecuniary interest related to specific matters on the agenda.

 

Please see note (a) at the end of the agenda.

Minutes:

Councillor Hay declared he was no longer a member of Cheltenham Borough Council. 

19.

Public Questions -

To answer any written questions about matters that are within the powers and duties of the Committee. The closing date/time for the receipt of questions is 10.00am on 3rd May 2018.

 

To answer any oral question(s) put by members of the public.

 

Depending on the nature of the oral questions asked it may not be possible to provide a comprehensive answer at the meeting, in which case a written answer will be supplied as soon as reasonably possible after the meeting.

Minutes:

No public questions were received. 

20.

Members' Questions -

To answer any written members’ questions. The closing date/time for the receipt of questions is 10.00am on 3rd May 2018.

Minutes:

No member questions were received.   

21.

Minutes - pdf icon PDF 142 KB

To approve as a correct record the Minutes of the meeting held on 9th February 2018.

Additional documents:

Minutes:

Resolved

 

The public minutes of the meeting held on 9th February 2018 were approved as a correct record and signed by the Chairman. 

22.

Market Valuations & Quarterly Performance Review Qtr 1 2018 pdf icon PDF 524 KB

11:00am -11:15am

 

Please note the Gloucestershire CC – NET Manager Report is for information purposes only. 

Additional documents:

Minutes:

Head of Pension Fund, Mark Spilsbury, presented the report outlining the overview of market valuations and gave an update on the performance of the Gloucestershire County Council Pension Fund, as at 31 March 2018.

 

Members attention was drawn to the market value by manager table on page 14 of the report, from which it was noted that the fund had decreased in value over the quarter to March 2018.  The Head of the Pension Fund explained this was primarily due to a fall in the value of equity investments. The committee discussed the report in considerable detail. 

 

The committee also discussed the overall performance of the fund as set out in the chart on page 15 of report. This showed that, over the long term the funds performance was slightly higher than the funds strategic performance target.

 

John Arthur, Independent Advisor to the Fund, added that performance had been managed against the target and overall the fund was in a good position. 

During the discussion it was noted that fund managers reports should be provided to State Street in a timely manner, so that the report to the Committee was reflective of the current position. 

 

In response to a question, the  Head of the Pension Fund informed the Committee that the passive portfolio mandates had now been awarded and that transition of assets would commence in July 2018, and that a report on the transition would be brought back to the Committee in due course.

 

Once again, the Committee requested that the Risk v Return chart on Page 19 of the report, be amended as it was difficult to read the current symbols and they were not reflective of the footnote.  Officers explained that in time, this chart would be replaced by BPP and a more user friendly version was anticipated. 

 

Resolved

 

That the report be noted.

23.

Funding Update pdf icon PDF 190 KB

11:15am – 11:30am

Minutes:

The Head of the Pension Fund, Mark Spilsbury presented the report in detail.  The Committee’s attention was drawn to the funding levels which had steadily increased since 31/12/16, however a slight decrease was reported on the 31/3/18 primarily due to the fall in equity values. 

 

Members were advised that since the 2016 formal valuation, the net effect of the following positions were reported:

-           Falling gilt yields had led to a lower discount rate, which increased the value placed on past service liabilities;

-           Inflation had risen which increased the value placed on past service liabilities, as benefits were linked to the Consumer Price Index. 

-           The combined impact of the change in market conditions was an increase in the deficit of £295m;

-           This had been offset by investment performance being significantly better than expected (26.4% vs 8.2%) leading to a gain of £307m;

-           Contributions received by the fund had a positive impact on the deficit, but these had been offset by the cost of benefits accruing  (leading to a loss of £19m). 

           

The Committee were advised that the net effect of the above changes had led to an improvement in the overall funding level since the 2016 valuation.  Members noted that next fund valuation was due in April 2019.  Members felt the report terminology could be clearer. 

 

Resolved

 

That the report be noted. 

24.

Pension Fund Business Plan Update 2017/18 pdf icon PDF 82 KB

11:30am – 11:40am

Minutes:

Head of Pension Fund, Mark Spilsbury, gave an update on the Gloucestershire Local Government Pension Fund Business Plan 2017-18.  Members were advised that the report had been produced at the request of the Pension Board. 

 

The Committee noted the report contents and requested that all training opportunities be circulated to Pension Committee members for their consideration. 

 

Resolved

 

That the report be noted. 

25.

Pension Business Plan 2018/19 pdf icon PDF 119 KB

11:40am – 11:55am

Minutes:

Head of Pension Fund, Mark Spilsbury, gave an update on the Gloucestershire Local Government Pension Fund Business Plan 2018-19.  

 

The Business Plan was prepared in accordance with the Department of Communities and Local Government best practice guidance for the governance of pension funds. The business plan confirmed that, at 31 Mar 2018, the Gloucestershire Local Government Pension Scheme (LGPS) had approximately 53,400 members, consisting of 18,600 active, 19,400 deferred and 15,400 retired (pensioner/dependent) members.

 

The  Head of the Pension Fund clarified that the costs set out in the business plan were borne by the Fund and not by the County Council. Estimated costs within the proposed budget for 2018/19 were at £9,268 million.  It was explained that the main budget change between the 2017/18 budget (£8,856m) and 2018/19 was an £328,000 increase in other external costs in relation to Gloucestershire anticipated share of company costs under the Brunel Pension partnership (BPP).   External Fund Manager fees were forecast to remain the same for 2018/19 with the expectation that budget reductions would arise following the BPP becoming fully operational. 

 

The committee was advised the fund was making good progress under the Brunel Pension Partnership.

 

Some members requested to know if the savings would be delivered ahead of the Business Plan.  The Head of the Pension Fund explained that the Brunel Business plan was due to be reviewed in 2018/19 and an update would be provided to the Committee in due course. 

 

During the discussion it was suggested that BPP should be invited to do a presentation at the Pension AGM, in an effort to inform members of the LGPS.   

 

The Committee noted the key targets and major milestones for the Pension Fund for 2018/19, as detailed on page 47 of the report. 

 

One member suggested that a training session on triannual valuation and choosing the actuary would be beneficial to the Committee.  Officers agreed to look into this further and would report back in due course. 

 

The Director of Finance explained that training opportunities would be discussed with BPP.  The Independent Advisor informed the Committee that in terms of MiFIID II, the opt up depended on the knowledge and experience of members.  Therefore it was important to monitor member training attendance and keep an accurate training record. 

 

Resolved

 

The report was noted.

26.

Pension Administration Report pdf icon PDF 173 KB

11:55am – 12:15pm

Minutes:

Head of Pension Fund, Mark Spilsbury, presented the report in detail and highlighted the key areas. Member’s attention as drawn to Table 2 (Page 53 of the report) which showed that there was a significant improvement in performance in 2017/18 compared to 2016/17.  Officer’s added that staffing levels had increased, which had contributed to the improvement.   It was hoped that next year all of the targets would be achieved.  The Director of Finance added that GCC Pension Fund benchmark remained in the lowest quartile in terms of cost. 

 

The Committee were advised that the Guaranteed Minimum Pension (GMP) Reconciliation had HMRC implications.  Officers were pleased to report that the total figure still to be reconciled had now been reduced to £2.2m.  As there were members of staff who had technical knowledge to undertake the reconciliations internally, this work would continue to decrease the reconciliation figure.  During the discussion, the Director of Finance agreed that GMP should be included on the Risk Register. 

 

In addition, it was noted that GDPR would have an impact on  individual members of the Pension Fund, therefore information would be made available to members in accordance with guidance issued by the LGA. 

 

Resolved

           

That the report be noted.  

27.

Risk Register pdf icon PDF 60 KB

12:15pm – 12:30pm

Additional documents:

Minutes:

Head of Pension Fund, Mark Spilsbury, gave an update on the Gloucestershire Fund Risk Register. It was confirmed that all of the issues raised at the Pension Committee in February 2018 had been addressed in the register.

 

During the discussion, the committee agreed that risk F9 could be removed from the Risk Register, as all Fund managers had confirmed that the Gloucestershire LGPS Fund be classified as a professional investor under MIFID II. 

 

The Committee asked that the GMP  risk outlined in the previous item be added to the risk register. 

 

It was noted that the Pension Board meeting in April 2018, had requested that a new risk be included on the Risk Register, this being the “Transition of assets to new investment managers under the Brunel Pension Partnership results in manager under performance and/or transition costs in excess of those included within the BPP Business Case, resulting in reduced savings being delivered by the BPP”.

 

Resolved

 

That the new risks as identified by the Pension Board and Committee be included on the Risk Register and the F9 risk be removed. 

 

That the report be noted. 

28.

Pension Board Update

12:30pm – 12:40pm 

 

To receive a verbal update.

Minutes:

Councillor Nigel Moor presented a verbal update to the Committee.  It was noted that the next Pension Board meeting would take place on the 17th October 2018. 

 

Resolved

 

The report be noted

29.

Exclusion of the press and public

Resolved

 

 That in accordance with Section 100 A (4) of the Local Government Act 1972 the public be excluded from the meeting for the following agenda items, because it is likely that if members of the public were present there would be disclosure to them of exempt information as defined in paragraph 3 of Part 1 of Schedule 12 A to the Act and the public interest in withholding the information outweighs the public interest in disclosing the information to the public.

 

Minutes:

It was resolved that: 

 

In accordance with Section 100 A (4) of the Local Government Act 1972 the public be excluded from the meeting for the following agenda items, because it was likely that if members of the public were present there would be disclosure to them of exempt information as defined in paragraph 3 of Part 1 of Schedule 12 A to the Act and the public interest in withholding the information outweighed the public interest in disclosing the information to the public.

30.

Exempt Minutes

To approve as a correct record the exempt minutes of the meetings held on 9th February 2018.

Minutes:

Resolved

 

The exempt minutes of the meeting held on 9th February 2018 were agreed as a correct record and signed by the Chairman. 

 

 

 

31.

Employer Update

12:40pm – 12:55pm

 

To receive a verbal update.

Minutes:

The Head of the Pension Fund, Mark Spilsbury, updated members on the issues raised and outlined the current position.  

 

It was agreed that officers should primarily discuss the issue with the Head of Legal Services, in order to agree a way forward.  An update would then be given at the next Committee meeting. 

 

In addition, the Committee requested a short report on high risk employers within the Fund.

 

Resolved

 

That the verbal report be received.  

32.

Report from Independent Advisor to the Fund

12:55pm – 13:15pm

Minutes:

Independent Advisor, John Arthur, provided members with an update on current investments.  It was reported that the Pension Fund underperformed against its performance target in Q1 2018.  The level of underperformance was within risk tolerances, it was reported that the fund was close to achieving its performance target over the medium and longer term.  The Committee were referred to the detailed Performance Summary. 

 

Resolved

 

That the report be noted. 

 

33.

Pooling Update

13:15pm – 13:30pm

Minutes:

The Head of the Pension Fund, Mark Spilsbury presented the report in detail. Members were advised of the current position. 

 

Resolved

 

That the Committee noted the report and approved the recommendation.