Agenda and minutes

To elect a Chairperson for the ensuing civic year.

Councillor Stowe was duly elected as  Chairperson for the ensuing civic year.

To elect a Vice Chairperson for the ensuing civic year.

Councillor Hay was duly elected as Vice Chairperson for the ensuing civic year.

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

Councillor Bloxsom declared he was a fellow of the Institute of Chartered Housing and was previously a board member of a local housing association. 

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 8th June 2023.

No public questions were received.

To answer any written members’ questions. The closing date/time for the receipt of questions is 10.00am on 8th June 2023.

No member questions were received.

To approve as a correct record the Minutes of the meeting held on 2nd March 2023.

Resolved

That the Committee approved the minutes of the meeting held on the 2nd March 2023.

The Committee is asked to note the draft Pension Board minutes from the 26th April 2023 meeting.

Resolved

That the Committee noted the draft Pension Board minutes of the meeting held on the 26th April 2023. 

The committee is asked to note the report.

22.1       The Head of Pensions presented the report which detailed the Fund’s funding position, market value, asset allocation, investment performance for the quarter ending 31 March 2023.

22.2       Members noted that by the end of the quarter to 31 March 2023, the Fund’s total market value had increased by £103.5m to £3,051.4m and over the quarter, total Fund assets produced a positive return of 3.4%, compared to a target of 2.8%, outperforming the strategic benchmark by 0.6%. It was reported that performance over the 3 years to 31 March 2023 was 9.9% annualised which is 0.8% ahead of benchmark. The fund was still regarded to be in a healthy position. 

22.3       In response to a question, members were advised that the average carbon intensity was a complex issues and would be addressed in a training session.  It was summarised that it considered the gases produced and weighted the average in relation to carbon, as defined in the Kyoto protocol. 

22.4       The Independent Adviser (IA) drew the committee's attention to page 29 of the report, which detailed the performance summary.  In the IA opinion, in terms of investment returns he felt it had been a positive quarter and the market had moved through peak inflation.  He added that energy prices were falling and the cost of food would decrease over time.  It was recognised that during Covid the majority of the population had saved money but he was cautious of a hard recession.  The IA recognised that inflation was a tax on the less well off, both in global and social terms and it needed to be brought under control as it could result in a polarised society. 

22.5       The IA continued to give a detailed presentation of his report and advised the committee that he expected interest rates to remain high.  It was noted that the long term assumptions would be updated in time for the Autumn meeting, overall he felt there were relatively good returns.

22.6       The Committee remarked that it appeared to be a positive quarter for Brunel and discussed the chart on page 79 of the report, it was noted that UK equities performance was mediocre.  The IA would continue to monitor its performance.  In response to a question, it was explained there was no intention to engage a third manager within the portfolio. 

22.7       A member wished to know if private debt/equity was a viable opportunity to consider.  The IA explained that was an interesting area and it was currently in a strong position but would require careful manoeuvres through choppy waters as the returns would be low for possibly two years

22.8       During the discussion it was noted that low interest rates by the banks had created a false environment and the situation could potentially get worse.  Members recognised that a potential government change in the next few years could have political ramifications.  It was suggested if there were any benefits in the fund looking at investments in UK assets, in an effort to get  ...  view the full minutes text for item 22.

The Committee is asked to note the Fund’s draft financial statements for 2022-23. 

23.1       The Head of Pensions advised the Committee that the report provided the opportunity to consider the draft year-end financial statements of the Gloucestershire Pension Fund. It was explained once the audit had concluded they would be presented to the Audit Committee for approval as part of Gloucestershire County Council's Accounts. 

23.2       It was noted that the Pension Fund Annual Report would be published on or before the 1st December, the Committee noted the process for the approval of GCC Accounts and the publication of the Pension Fund Annual Report. 

23.3       In response to a question, the Pensions, Investment & Accounting Manager explained that further management fees were now being included as they were previously deemed to not be material. This will be an area of focus for the external auditor in relation to good governance.  The Chair requested that the reconciliation of management fees were circulated to committee by email for information.  (Action MT)

23.4       Members also requested that further information on each of the asset classes be presented at the next meeting.  (Action MT)

23.5       In response to a question, the Head of Pensions advised the committee that management fees were monitored closely to ensure there were no hidden costs. 

23.6    Resolved

That the Committee noted the Fund’s draft financial statements for 2022-23, which had been prepared in accordance with accounting regulations and subject to external audit review.

The Committee is asked to note and approve the Fund’s Cash Management Strategy for 2023-24.

24.1      The Head of Pension presented the report which provided the opportunity for the Pensions Committee to consider and approve the proposed Cash Management Strategy for the Pension Fund for 2023-24. 

24.2       It was noted the Gloucestershire Pension Fund maintained a balance of cash arising from the receipt of employer and employee contributions, income received back from the Fund’s investments, and capital distributions from the Fund’s private market commitments. This cash balance was used to pay member benefits, private market capital calls, and other outgoings.

24.3       The main purpose of this strategy was to provide a framework that ensured that the Pension Fund had an effective process in managing its cash balances and that these were maintained at the appropriate levels to meet future financial obligations and commitments both for the payment of pension benefits and external investments.

24.4       The Head of Pensions explained the cash balance was regularly monitored and reviewed as part of a quarterly fund rebalancing exercise undertaken by officers and the Independent Financial Adviser. As set out in the strategy, it was proposed that a target balance of approximately £30 million would be retained in money market funds, to meet cash flow requirements and investment commitments.

24.5       Resolved

That the Committee note and approve the Fund’s Cash Management Strategy for 2023-24.

The Committee is asked to approve the report recommendations.

25.1       Daniel Kanaris, AON, explained they had been commissioned to undertake a review of the current administration service and Key Performance Indicators (KPIs) of the Fund, as part of the agreed governance review.  Additionally, in response to the challenge from Committee at their recent meetings in relation to the performance against the current Key Performance Indicators (KPIs) of the Fund which had not been achieved constantly for a long period of time and Committee wished to understand the drivers behind this.

25.2       AON’s full report provided detailed observations, the committee proceeded to discuss and debate the findings.  Members were interested in the staffing levels as detailed on page 204 of the report. 

25.3       A member questioned why proactive steps hadn't been taken years ago.  The Head of Pensions explained that a fully formed induction programme had now been devised for new starters, as this wasn't previously in place.  It was noted that historically there had been no investment in the Pension Team in Gloucestershire for a considerable time, compared to other authorities.  Members were advised that in the past, the scheme was much simpler to administer and a number of factors, including academisation, regulation changes, the rule of 85, etc. had changed, which had increased the complexities and demands on the service.. 

25.4       It was reported that it had also taken nearly two years to recruit new resources agreed by Committee in 2021, however the membership of the fund had continued to increase as it now involved over 60k members and 200 employers.  Management were now trying to overcome historical issues due to the lack of investment in the administration team and it would take time to train staff and fully resource the team. 

25.5       The lack of staffing resources had impacted on development work, which meant that Gloucestershire was behind in its peers in terms of the system development.  It was noted that the majority of other Funds were already utilising the software and that had been beneficial for their members.  It was noted that Gloucestershire's full time equivalent (fte) was currently 22.5 posts, compared to Cornwall at 31fte posts and other comparable Funds who had even more resources.  It was necessary to be pragmatic to ensure an improved journey. 

25.6       Members were advised that out of the 66 funds who use the same software, there were only 6 that weren't operating member self service, and Gloucestershire was one of them and officers were seeking support from the committee to make the service more proactive, in order to deliver communications, direct to its members. 

25.7       The Head of Finance explained that the new Head of Pensions didn't commence at GCC until 2021 and it was clear the performance issues had been inherited.  He agreed there had been no investment in the service for a number of years and since the new Head of Pensions had started the service journey was beginning to improve.  He recognised that the team needed to be resourced effectively to bring about a positive change.  ...  view the full minutes text for item 25.

The Committee is asked to note the Risk Register and the current elevated risks and the risk that have moved back to target. 

26.1       The Head of Pensions explained that in accordance with the Risk Management policy, progress and activity in managing risks would be monitored and recorded on a risk register and key information would be provided on a quarterly basis to the Pension Committee and the Pension Board, as part of the regular update reports on governance, investments and funding, and administration and communications. 

26.2       The Committee were advised that two risks had returned to  target and will remain to be tracked through the dashboard.  The risk register was a live document and would continue to evolve and be reviewed by Committee and Board each quarter.

26.3       Resolved

That the Committee noted the risk register and the current elevated risks and the risk that have moved back to target, as outlined in this report.

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.

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.

To approve as a correct record the exempt minutes of the meetings held on 2nd March 2023.

Resolved

That the Committee approved the exempt minutes of the meeting held on the 2nd March 2023

The Committee is asked to note the draft exempt minutes of the meeting held on the 26th April 2023.

Resolved

That the Committee noted the draft Pension Board exempt minutes of the meeting held on the 26th April 2023.

The  committee is asked to consider and approve the report recommendations.

30.1      The Committee received a detailed presentation on Social/Affordable Housing. 

30.2       Resolved

That the Committee considered and approved the report recommendations. 

The  committee is asked to consider and approve the report recommendations.

31.1       The Head of Pensions presented the report in conjunction with the Independent Adviser and explained that the report was designed to be read in conjunction with the Part 1 report, which provided more detailed analysis and commentary on the Fund’s asset allocation, investment performance for the quarter ending 31 March 2023. 

31.2       Resolved

That the Committee noted the detailed performance reports for the quarter ending 31 March 2023 and the employer, Brunel and future investment activities of the Fund.

The Committee approved the additional 2% allocation to Infrastructure, approved as part of the revised Strategic Asset Allocation, be allocated to the Schroders-greencoat, Local Impact Fund, subject to appropriate due diligence of the investment capability of Schroders-greencoat and the legal structure of the proposed investment vehicle to be undertaken by officers and overseen by the Independent Advisor.