Agenda and minutes

Pension Committee - Friday 14 August 2015 10.00 am

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

Items
No. Item

39.

Minutes - pdf icon PDF 118 KB

To approve as a correct record the Minutes of the meeting held on 15 May 2015.

Minutes:

The minutes of the meeting held on 15 May 2015 were approved and signed by the Chairman.

40.

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:

Cllr Cooper made a non-prejudicial declaration as a member of Stroud District Council and governor at Archway School.

 

Cllr Hay made a non-prejudicial declaration as a member of Cheltenham Borough Council.

 

Cllr Stowe made a non-prejudicial declaration as a member of Cotswold District Council and UBICO.

 

Cllr Theodoulou made a non-prejudicial declaration as a member of Cotswold District Council.

 

Cllr Parsons made a non-prejudicial declaration as a member of Cotswold District Council.

 

41.

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 7 August  2015.

 

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.

42.

Members' Questions -

To answer any written members’ questions. The closing date/time for the receipt of questions is 10.00am on 7 August  2015.

Minutes:

No members’ questions were received.

43.

Training Update

Minutes:

43.1    Members were reminded of the upcoming training event for the Pension Committee on 5 November.

 

43.2    Details of further training opportunities such as Standard Life half day seminar in October would be circulated to members.

44.

Market Valuations and Quarterly Performance Review of the Fund 2nd Quarter 2015 pdf icon PDF 162 KB

To note the report

Minutes:

44.1                The committee considered the second quarter report to 30 June 2015. Vicki Morgan, Pension Accountant, presented the report. The total fund value at the quarter end was £1.66bn a reduction of £45.6m since quarter 1.

 

44.2                During the second quarter, the total fund had out-performed target by 0.6% with six mandates beating negative benchmarks, albeit with negative returns themselves. Both property funds and the WAMCO Main Fund failed to achieve their target benchmark for the three month period.

 

44.3                The total fund achieved a return of 8.9% for the 12 month period, matching the targeted figure.  This was accomplished via a varying range of returns including positive performances from Hermes, Standard Life and both Blackrock mandates. The rolling three year position resulted in a 1.9% total fund outperformance with only WAMCO GMS failing to beat its target.

 

44.4                The  supplementary table presented to members showed that the GMS fund beat WAMCO’s internal benchmark over quarter 1 and Standard Life GARS beat its cash target over the 12 months to the end of June. The Standard Life performance figures for quarter 2 were a combination of the previous FTSE Allshare target and 1 month of the new 2% capped FTSE index, as agreed by the Committee in May.

 

44.5                Members were shown the rebalancing of surplus cash, as per the Fund’s agreed strategy. With £5.28m being distributed equally between the BlackRock Emerging Market Fund and the two WAMCO mandates.

 

44.6                Steve Tyson explained that Standard Life’s performance during a transition period was very good and that this was reassuring.

 

44.7                One member queried the accuracy of the figure of -2.9% total return on the fund across the portfolios, suggesting that the figures for each individual mandate would suggest a larger overall figure. In response it was explained that each mandate had different weightings and that the figure was correct.

 

45.

Pension Fund Annual Report pdf icon PDF 50 KB

To note the report.

Additional documents:

Minutes:

45.1                Graham Burrows introduced the annual report which included the Pension Fund accounts for 2014/15. The accounts were subject to audit and would be considered by the County Council’s audit committee on 25 September 2015. In response to questions, it was explained that the pension deficit was included within the County Council accounts.

 

45.2                One member commented that one of the hardest areas for people to grasp was in relation to the actuary valuation taking into account interest rates. It was suggested that the report could provide greater emphasis on how contribution rates were set to ensure long term solvency. It was suggested that a reference in the introduction to the relevant information within the report might be helpful.
ACTION                     Cllr Ray Theodoulou\ Graham Burrow

 

45.3                One member queried whether Freedom and Choice should have been detailed as a risk. In response it was explained that this was picked up in the risk register but would not have been included in the annual report given the time period it covered.

 

45.4                One member queried the figures around management expenses on page 92 of the agenda pack. Officers would clarify how this figure was made up.
ACTION                     Graham Burrow

 

45.5                Members expressed concern at the lack of attendance by the staff representative. Officers explained that trade unions were in the process of nominating a new staff representative. Members asked that clarification be sought on a number of points:

 

·         Could the role be advertised more widely in future?

·         Could a rule be introduced that if a staff representative did not attend a set number of meetings without sufficient reason they would be removed from the committee?

·         Could there be a named deputy/ substitute member (similar to planning committee)

·         What percentage of our staff were trade union members.

 

Officers explained that the constitution detailed that the staff representative was cop-opted onto the committee following nominations by the unions. Any change to this process would have to be agreed by the committee and then considered by the Constitution Committee and full Council. Members asked that officers seek clarification on the current processes and historical arrangements and explore whether changes could be made.


ACTION                     Stephen Bace

 

46.

Communications Policy Statement pdf icon PDF 59 KB

To agree the revised policy statement

Additional documents:

Minutes:

46.1                Graham Burrow introduced the written statement setting out the policy concerning communications as required under the Local Government Pension Scheme regulations. The policy was required for review every two years with it last being received by the committee in August 2013.

 

46.2                Once the draft communications strategy had been agreed by the committee there would be a period of consultation with interested parties. The results of the consultation and any necessary changes would then be considered by the Strategic Finance Director under delegated powers with consultation with the Chairman.

 

46.3                Members noted the changes shown in italics in the document relating to: invitations to the Funds Annual Meeting being put in pensioner pay slips, details of all the policy documents, and a reference to the newly formed Pension Board.

 

46.4                One member commented that it would be useful to include within the document a note that the Pension Board meetings were open to the public.

 

46.5                One member suggested that there needed to be greater balance in the document between employers and wider scheme members. It was suggested that moving the paragraphs currently under scheme employers starting: ‘ An Annual Meeting…’ and ‘ The Funds Annual Report…’ to the Employee Representation section would create this balance.

 

46.6                It was agreed that the policy would revised taking account of these points.
ACTION                     Graham Burrow

 

47.

Stock Lending Report pdf icon PDF 68 KB

To note the report

Minutes:

47.1    Vicki Morgan explained that the paper described the stock lending arrangements of the fund and reported on the associated activity which had taken place during the one year period to the end of March 2015. The main points highlighted were:

·         Lending could only take place within segregated portfolios i.e WAMCO Main Fund and Standard Life

·         Borrowers were limited to those shown in the papers on page 193

·         The load was secured with collateral and

·         Earnings are split 60:40 between the Fund and the Custodian respectively

The figures for the period to the end of March showed an overall increase in stock lending activity on the previous period with the Fund earning £24,871, which was up on the previous year’s income.

 

 

47.2                Members discussed the list of borrowers within the paper and asked who decided the banks that were on the list. It was explained that the Custodian made that decision. Members asked that a request be made to the Custodian to bring the list up to date.

ACTION                     Graham Burrow

 

47.3                Members asked whether the 60:40 split was reasonable and was informed that this was an area where stability was important and it was suggested that large earnings in this area might indicate large risks were being taken.

 

47.4                One member requested that a comparison be provided with previous years to show a trend over 3 years.

ACTION                     Graham Burrow

 

48.

Pension Fund Risk Register pdf icon PDF 57 KB

To review and agree the Risk Register.

Additional documents:

Minutes:

48.1                Graham Burrow introduced the risk register explaining that the significance of individual risks was measured by a scoring system which multiplied the likelihood of the occurrence with the potential impact of such an occurrence. The committee noted the risk at F/D8 ‘transfers out of the Fund into DC schemes due to introduction of ‘Freedom of Choice ’resulting in a change to funding level’.

 

48.2                Members asked that in future the covering report clearly identify any new risks that had been added, or any adjustments made.
ACTION                     Graham Burrow

 

48.3                One member asked, in general terms, at what level (in terms of risk score) did the Council believe the risk register should be at. For example, would a risk score that was low indicate that the council was too risk adverse, or would the lowest possible risk level be the aim? In response it was explained that in general you would look to put measures in place to lower risk as far as possible.

 

48.4                Some members queried whether cyber crime was considered as a risk, querying where the pension fund data was stored and whether there was a risk of it being ‘hacked’. In response it was clarified that the data was stored on servers by Steria the Council’s ICT provider and that controls were put in place to ensure there was adequate protection. Members asked whether there were ISO accreditations and officers agreed to inquire.
ACTION                     Graham Burrow

 

48.5                One member queried how market volatility was picked up with the risk register. In response it was explained that this was part of ‘F2 Inappropriate long term investment strategy. The member suggested that volatility should be detailed more clearly.

 

 

49.

The Actuary's report on the Fund at 30 June 2015 pdf icon PDF 50 KB

To note the report.

Additional documents:

Minutes:

49.1                Julie West, Hymans Robertson, presented the funding update report for the Gloucestershire Fund as at 30 June 2015, providing comparisons between funding levels and financial market data. It was explained that the report represented a ‘point in time’ measurement of the funding position and was made up of a set of assumptions.

 

49.2                Since March 2013 the funding level had increased to 72.7% from 70.1% with the surplus (deficit) rising in cash terms to £621m. The increase in the deficit had been driven by an increase in liabilities, resulting from the drop in government bond yields, however this had been offset by strong investment performance.

 

49.3                It was explained that the results did not directly impact on the contributions paid because of the agreed stabilisation strategy. Members were shown a graph showing the change in contribution rate demonstrating how volatile it could be and the importance in contributions being affordable over the long term.

 

49.4                Members queried the information explaining that often they were approached by people suggesting that there was a large deficit the equivalent of a ‘black hole’.  In response it was explained that there was a long term plan in place.

 

49.5                In response to questions it was explained that the 72% figure for equities on page 6 included capital returns on assets.

 

49.6                There was some discussion on the differences between this funding update and a full actuarial valuation. The update did not take into account changes to individual members’ data since the last valuation. In addition, the contribution rate detailed on page 4 of 36.9% would be subject to dampening in order to create stability.

 

50.

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:

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.

 

51.

Exempt Minutes

To approve as a correct record the exempt minutes of the meeting  held on 15 May 2015.

Minutes:

The exempt minutes of the meeting held on 15 May 2015 were agreed as a correct record and signed by the Chairman.

 

52.

Admission Body Request

To note the request(s)

Minutes:

RESOLVED

 

That the requests for admission to the Fund be approved.

53.

Cash Flow position - Hymans Robertson

To note the report.

Minutes:

RESOLVED

 

To note the report.  

54.

Freedom and Choice - Hymans Robertson

To note the report.

Minutes:

RESOLVED

 

To note the report.

55.

Investment Report - Western Asset

Commencing at 12:00 for 45 minutes

Minutes:

Western Asset gave a presentation on their performance over the last 12 months and set out their strategy going forward.

 

RESOLVED

 

That the presentation be noted.

56.

Fund Performance Review - WM

Commencing at 1:15 for 45 minutes

Minutes:

WM gave an annual performance review on the fund’s performance to the end of March 2015.

 

RESOLVED

That the presentation be noted.