Agenda and minutes

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.

No declarations of interest were made.

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 Friday 18^th September 2020.

No public questions were received. 

To answer any written members’ questions. The closing date/time for the receipt of questions is 10.00am on Friday 18^th September 2020.

No Members’ questions were received. 

The Chairman welcomed Cllr David Gray to the meeting as the newly appointed District Representative.  The Chairman on behalf of the Committee wished to thank to Cllr Nigel Cooper, District Representative, for his support and service to the Committee.  

Paul Blacker explained that an email had been circulated regarding the Local Government Association Pension Fundamentals Course.  He advised Members that it was a virtual course and there were three one hour sessions on investment frameworks, governance and oversight and it would be beneficial for members to attend.  

The Committee noted that Mark Spilsbury, the former Head of Pensions had retired from post in April.  The Director of Finance advised the committee that the first round of recruitment was unsuccessful.  As a result of a second round of recruitment he was pleased to report that Matthew Trebilcock, who currently works for BPP, had been appointed to the position and would start in due course. 

The Employee Representative requested a bio for the new Head of Pensions, in terms of his experience, etc.  The Director of Finance explained that Matthew had previously been heavily involved in investments with the Cornwall Pension Fund and was currently working for the Brunel Pension Partnership.  It was agreed that a pen portrait would be circulated in due course, once the position had been formally accepted.

To approve as a correct record the Minutes of the meeting held on 14^th February 2020. 

The minutes of the meeting held on the 14th February 2020 were approved as a correct record and signed by the Chairperson. 

Resolved

That the public minutes of the meeting held on the 14th February be approved as a correct record. 

To receive a presentation from Brunel Pension Partnership

The Director Finance explained that on previous occasions members expressed a desire to have further information on Brunel's approach to responsible investment and climate change. 

Laura Hobbs, Investment Manager & Helen Price, Engagement and Stewardship Manager gave an update on Brunel’s responsible investment work on behalf of the wider partnership. 

It was noted that Brunel brought together the assets of the ten like-minded funds and had embedded responsible investment throughout.  Brunel aimed to work closely with its clients to ensure that they we're meeting the investment and responsible investment outcomes. 

Brunel knew the COVID-19 pandemic had profound effects across economies, labour markets and the way that we go about our lives in general.   It had a huge impact on Responsible Investment and Environment, Social and Governance (ESG) investing, these were highlighted in the presentation.   It was noted that COVID-19 had highlighted some of the weaknesses that were present in the financial system, and had touched on all aspects from inequality to the environment, as well as the need for a sustainable recovery. 

The pandemic had highlighted the importance of capitalism as a force for good and had touched on pretty much all areas of Brunel’s responsible investment work.   The key responsible investment priorities undertaken by Brunel were explained in detail. 

Members were advised that climate change remained a key focus, as the Covid-19 Pandemic had wreaked havoc across the world, it was an example of what could happen if we didn’t actively address climate change.  It was evident that Governments could change policy and make policy decisions quickly when there was a crisis. 

Climate change heightened the importance of a sustainable recovery and adjustment recovery, in an effort to make sure that no one was left behind the COVID-19 crisis.  It was noted that Covid-19 had upped the spotlight on ESG, in particular the social aspects in terms of inequality, mental health, and labour standards, many of these aspects were highlighted within the presentation.   

The Committee noted that Brunel co-filed the first ever shareholder climate resolution at a major bank in December 2019, they asked Barclays to come up with a plan on how they would be phasing out lending to fossil fuel companies.  The Engagement and Stewardship Manager led to this piece of work.  Members were informed that this was an ongoing piece of engagement work, which would be followed up with Barclays Bank to ensure that come up with a plan on phasing out lending for fossil fuel companies that were not aligned with the goals of the Paris agreement. 

In addition, engagement work was taking place with BlackRock as the largest asset manager in the world.  It was noted that for a number of years, they agreed to incorporate sustainability and climate change into their investments and they were cited now as being one of the key drivers to making this change.  Members were advised that face to face meetings with Larry Fink, CEO had taken place and Brunel were pleased by their recent stance when they made  ...  view the full minutes text for item 19.

To receive an update report from Hymans Robertson

Julie West, Fund Actuary, Hymans Robertson summarised the key issues, which were detailed at page 23 of the report.    

Members were advised at the start of the summer there were changes to the exit credit regulations which allowed funds to repay any surpluses back to any employers when they leave the fund, this was also detailed at agenda item 8, Exit Credit Policy.  

The McCloud judgement referred to when schemes were changed out from final career average and protections were put in place for any members within 10 years of retirement to make sure they were not any worse off when they came to retire.  So if a person were age 55 or over at 31st of March 2012, when they came to retire they would receive the better of the either the benefit in the care scheme or what they would have earned in the final salary scheme.   It was evident that most members would benefit in the care scheme because of the scheme generosity. 

It was explained the case went to court and the transitional protections applied to all of the public service schemes.  The Committee was advised that it was a member of the firefighter scheme that took the government's to court to state that the transactional protections were age discriminatively. 

It was a long process and the Government lost the initial case, the government appealed and lost, they sought to appeal again and there were no further grounds for appeal.   So that case remained and the proposed remedy for that case,  was to make those transitional protections in place for all of the staff in the scheme at 31st March 2012, so they would get the better of that benefit.   From an actuarial point, in terms of the pension fund liabilities Hymans expected the impact to be small.  Obviously there was an increase in benefit and because they didn’t expect there to be that many cases and did not expect a significant impact on pension fund liabilities.  

However, there would be an impact on  the administration of the scheme.   Every member of the scheme who was eligible for that benefit, when they come to retire there would have two benefit calculations carried out.  The Actuary didn’t feel this was an issue for the Gloucestershire fund, but would be an issue for many funds throughout the country.  Since the care schemes had been in place there was no requirement to collect some of the data that's was necessary to calculate that benefit underpin. There was now a large admin task to go back and seek that data from employers and this was  expected to be a significant project for pension fund admin teams, probably for the next two years with some dedicated resource required to resolve this issue alone. 

The Chairman appreciated the actuaries’ explanation of the McCloud ruling but questioned what the impact would truly be on the Pension Fund.  The Chairman suggested that perhaps the newly appointed Head of the Pension Fund could be tasked  ...  view the full minutes text for item 20.

The Director of Finance advised the Committee that the policy was required to ensure that all employers who actually decide to leave the fund were treated in a fair and consistent way.  It was important to note that this policy was only applicable to people who joined the scheme after 2018.  The Actuary was involved in advice on if a payment was due and how much. The Policy  required the Committee ‘s approval.  

The Actuary provided further context to the report.  It was explained that prior to these regulation changes, the funds and would charge a debt if anyone was in deficit when they left the scheme and after that, if there was any surplus leftover and then it would remain in the scheme.

On being put to the vote, the Committee agreed to approve the Exit Credit Policy. 

Resolved

That the Exit Credit Policy be approved. 

Paul Blacker, The Director of Finance introduced the risk register explaining that the risk register was a live document and therefore it was important for it to reflect the discussion carried out by the committee.

Members were informed that since the risk register was last considered by the Pension Committee in February 2020, a number of changes had been made, these were highlighted in yellow and the new narrative was shown in bold red, in the risk register.

The Committee noted that a new risk A/R5 had been entered on the risk register specifically relating to the COVID-19 pandemic. This was:

-           COVID-19 pandemic having a detrimental impact to the Pension Fund service provided to members and/or to the collections of pension fund contributions and implementation of new investments.

It was explained that a combination of home working and socially distancing working was taking place within the office on a rota basis, the two pensions teams had been able to continue to deliver the core service.

All of the risk ratings within the risk register had been reviewed and the residual risk ratings for risks F1, relating to investment returns, F2, relating to the implementation of the long-term investment strategy, and F4, relating to the Pension Fund deficit, had been increased due to the impact of COVID- 19.

The Committee noted that risk G5, related to the lack of relevant expertise, knowledge, skills and resources at officer and member level in relation to administering the LGPS, had also increased with the residual risk rating of 16, i.e. a high residual risk.  It was noted that this change had been made because the Head of Pension post was vacant when the report was produced but this will reduce again once the new appointee is in post.

The Director of Finance referred to the challenges ahead in terms of administration, therefore it was necessary to ensure that all our staff were well trained and understood these implications. 

In response to a question, the Director of Finance added the two members of the Pensions Team were appointed prior to the lockdown, were proving to be valuable assets.  He added the consequences of the potential changes that government might introduce were unknown at this stage, however GCC was actually in quite a good position because good records retained for past employees and employers.  It was noted that the risk should not be increased at this stage but officers were actively looking at it as more details evolved. 

A member questioned the impact of COVID on investment valuations.  The Director of Finance explained this would be covered in more detail in the Independent Advisor Report.  

The Chairman wished to extend his thanks to the Director of Finance for covering the role in the meantime. 

Resolved

That the Committee noted the risk register, and supported the inclusion of new risk A/R5 and the increase to the residual risk scores for risks F1, F2, F4 and G5.

The Director of Finance, Paul Blacker, gave an update on the Gloucestershire Local Government Pension Fund Business Plan 2020-21.

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 March 2020, the Gloucestershire Local Government Pension Scheme (LGPS) had 55,901 members, consisting of 19,121 active, 20,713 deferred and 16,607 retired (pensioner/dependent) members

He referred the Committee to Section 4 of the report, as it detailed the key targets for 2020-21.  Member’s attention was brought to the Pension Strategy Statements that were due to be updated, in terms of the communication strategy, the governance compliance strategy and the government governance policy strategy.  It was noted these were being reviewed and the new head of pensions would be tasked with analysing those reviews. 

 Members noted that Section 5 lay out the budget for the financial year, Members attention was drawn to the two large changes in the budget.  It was explained that the external fund manager fees had increased slightly compared to 2019-20. Members noted that the fees were still lower than in 2018-19. 

Members were reminded that the LGA fundamentals course would be beneficial if they were able to attend online. 

 A member of the committee felt that as the business plan sets out GLGPS objectives and the funding strategy, he felt it would be beneficial to incorporate the pension fund and Brunel's commitment to ESG.   The Committee welcomed this suggestion. 

Resolved

That the report be noted and recommended the GLGPS and Brunel’s commitment to ESG should be incorporated within the Plan. 

The Director of Finance explained that it had been an incredibly difficult time during the pandemic and the team had responded to the challenge very well.  He wished to personally thank the Pension Team for their hard work and the fact that they’ve continued to provide an effective and efficient service during this time.  It was noted that in some cases the team had improved on performance, compared to previous years. 

In response to a question regarding retirements, lump sums and death grants performance were below target.  Members were advised that performance on retirements had to be viewed in the context of higher volumes, it was noted that in 2020-21 the number of retirements were 983, that was increase of 15% compared to 2019-20. 

 The Team was actively trying to increase its resources given the increasingly technical nature of the role, however it was necessary to limit how many new staff was brought in at any one time because of the need to work shadow officers.  The staff appointed in February were unable to work shadow during the lockdown period. However they were now working well.

 The Pension Administration Manager explained that there were teams working on a shift system either from the office and home working.   It was necessary to have some presence in the office because there was a lot of paperwork involved in pension’s administration – for example when a scheme member wants to transfer between GCC and another pension schemes, all the documentation needed to be scanned, which created a lot of pressure resource wise.   

The Chairman asked officers to ensure that they flag up any resource issues immediately so they can be attended too given the importance of the service area.   The Committee wished to thank the Pension Team for all their efforts and for providing what was a very efficient and effective service during this difficult time. 

Resolved

That the report be noted.

To receive a summary of Quarter 1 & 2

The Director of Finance presented an overview of market valuations and an update on the performance of the Gloucestershire Local Government Pension Scheme, (LGPS), as at 30 June 2020.

Members noted that by the end of Quarter 2 the majority of value lost in Quarter 1 had been recovered.   However, given the situation they expected some kind of volatility in the next six to twelve months.     It was noted that the Independent Advisor would look at the performance in more detail during his report. 

Resolved

That the performance report was noted.

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 14^th February 2020.

The exempt minutes of the meeting held on the 14^th February 2020 were approved as a correct record and signed by the Chairman. 

Resolved

That the exempt minutes of the meeting held on the 14^th February 2020 be approved as a correct record.

At this juncture in meeting, the Chairman called for a brief adjournment at 12:12pm. 

The Committee reconvened at 12:17pm.

Independent Advisor, John Arthur, provided members with an update on current investments.   The Committee were referred to the detailed Performance and Executive Summaries contained within the report.  

Resolved

That the report be noted.

To receive a presentation from Brunel Pension Partnership.

The Committee received a detailed presentation by Chris Crozier and Richard Fanshawe from BPP.  

Resolved

That the Committee received a presentation.