Agenda and draft minutes

To approve the minutes of the meeting held on Tuesday, 11 June 2024 as an accurate record.

The minutes of the meeting held on Tuesday, 11 June 2024 as an accurate record subject to the following amendment being made:

·       The correction of any reference to the Head of Pensions and Treasury as the Acting Head of Pensions and Treasury.

Disclosure of Interests Members and co-opted Members of the Council are reminded that, in accordance with the Members’ Code of Conduct and the statutory provisions of the Localism Act 2011, they are required to consider in advance of each meeting whether they have a disclosable pecuniary interest (DPI), some other registrable interest (ORI) or a non-registrable interest (NRI) in relation to any matter on the agenda. If advice is needed, Members should contact the Monitoring Officer in good time before the meeting. If any Member or co-opted Member of the Council identifies a DPI or ORI which they have not already registered on the Council’s register of interests or which requires updating, they must urgently complete the disclosure form which can be obtained from Democratic Services at any time, copies of which will be available at the meeting for return to the Monitoring Officer.

Members and co-opted Members are required in general to disclose any relevant DPIs, ORIs or NRIs at the meeting –

• Where the matter relates to a DPI they may not participate in any discussion or vote on the matter and must not stay in the room unless granted a dispensation.
• Where the matter directly relates to the financial interest or wellbeing of an ORI they may not vote on the matter unless granted a dispensation.
• Where a Member or co-opted Member has an NRI which directly relates to or affects their or a relevant person’s financial interest or wellbeing, whether they can participate in any discussion or vote on the matter or stay in the room depends on the detailed rules in paragraphs 7 of Appendix B of the Members’ Code of Conduct.

The Chair will invite Members to make their disclosure of interests orally at the meeting and they will also be recorded in the minutes.

The Committee agreed that their register of interest forms was up to date.

To receive notice of any business not on the agenda which in the opinion of the Chair, by reason of special circumstances, be considered as a matter of urgency.

There were no items of urgent business.

This report summarises the results provided by the Government Actuary’s Department (GAD) of their review under Section 13 of the Public Service Pensions Act 2013 of LGPS fund valuations as at 31 March 2022.

The Head of Pensions and Treasury introduced the item and explained that the Government Actuary Department report was conducted under section 13 of the Public Service Pensions Act 2013. The Head of Pensions and Treasury informed the Committee that the report was essentially a health check of the 87 LGPS funds, to ensure that valuations were compliant with regulations, showed consistency and it was also a check on the solvency and long-term cost efficiency of the scheme.

The Head of Pensions and Treasury stated that the Government Actuary Department tried to standardise the assumptions that were applied across the LGPS funds as all the actuaries used varying assumptions when they did valuations.

The Head of Pensions and Treasury stated that the aggregate funding position, under the Government Actuary Department’s assumptions, came out as 119% funded, which was considered an excellent result.

The Head of Pensions and Treasury explained that there were three recommendations from the Government Actuary Department, the first recommendation was in relation to greater consistency; the second recommendation was in relation to emerging issues and greater consistency on climate risk and the third recommendation was in relation to more guidance being provided by the Scheme Advisory Board (SAB) for funds which were in surplus.

The Head of Pensions and Treasury informed the Committee that Croydon's results for 2022 on the SAB standard basis, the funding position was just under 110% funded which would place Croydon 58th in a comparison amongst the 87 LGPS funds. The Head of Pensions and Treasury stated that in 2016 the funding position was 81% funded which placed Croydon at 81st of the 87 LGPS funds, this showed that there had been demonstrable progress made by the fund.

The Head of Pensions and Treasury explained that the Fund had been given a green rating on solvency measures, the only slight issue was with the Fund’s long term efficiency measures where it was given a white rating was an advisory flag. The Head of Pensions and Treasury stated that his was due to the contribution rate decreasing mid valuation. 

In response to questions from Members officers informed the Committee that:

• There were four main actuarial firms in the LGPS and officers were unaware of them moving towards a more standardised service.
• Most LGPS funds used the same actuary as Croydon.
• Officers believed that it was not advisable that every fund used the same actuary as each fund had a different maturity profile and it may also lead to capacity issues for the actuary.
• Officers were looking at collaboration with other London funds in view of the call for evidence that the government had requested and to reduce costs, so if it could save the fund money on the actuarial side then it would be considered.
• The Government Actuary Department report was a health check to make sure that the Fund was consistent with the other LGPS funds. If there any major flags raised then officers would be concerned, however, following conversations with the actuary they  ...  view the full minutes text for item 150/24

The report sets out the Key Performance Indictors, measured against the legal requirements for the administration of the Local Government Pension Scheme for the three-month period up to the end of July 2024.

The Pension Manager introduced the item and explained that the report covered the administration team's KPI’s for the period May to July 2024.

The Pension Manager stated that as this period covered the summer months, a lot of the team and employers were on annual leave; the team were mainly focused on finalising their end of year update to produce their annual benefit statements and the care revaluation.

The Pension Manager informed the Committee that the team continued to perform well on most of their KPI’s, the leaver calculations were still below average, but the team had been able to work on the more challenging leaver calculations which they were unable to perform by bulk calculations.

The Pension Manager explained that the team had been able to go out and meet with some of the Fund’s employers to make presentations on the member self-service system. The Pension Manager stated that the team had received really good feedback from the attendees, and they had held some sessions with other teams within the Council as well.

The Pension Manager informed the Committee that the team had also been working with the payroll team to improve the Oracle payroll system, and they hoped to see benefits from this with improved data coming through on their reports.

The Pension Manager explained that they had started their user acceptance testing for the new Member self-service Portal and they hoped to go live with the portal in October.

In response to questions from Members officers informed the Committee that:

• During the summer period they had allocated one member of the team each week just focus on leaver calculations to continue chipping away at it. Members of the team had been handed final salary cases as they could not use automation to run those processes. The work had taken slightly longer this summer because they needed to get information from schools, employers who were also on leave.
• The team had conducted a review last week and had seen an uptick in the number of cases that they had been able to do since the start of September, so they were confident that they could level out the leavers before the valuation next March.
• The team had been on several workshops with Heywoods, the software provider, about automation. There was a lot that the team wanted to implement, but it would require the member self-service portal, so the plan was to implement the portal first and then coincide it with the changes needed for their workflow processes to fit with the new KPI reporting requirements for the annual report.
• The team wanted to use more of the capabilities of the software around automation to try and process the more standard cases, and Heywoods were looking into aggregation which was a key area for the team.
• Annual benefit statements were published before the 31st of August, and they had 100% for their active cases and just under 96% in total if they included their deferred cases. This was an  ...  view the full minutes text for item 151/24

This report presents the current Breaches of the Law log (in Appendix A) for the Pension Fund and highlights any changes made since the last review carried out at the Pension Committee meeting held on 11 June 2024.

The Head of Pensions and Treasury introduced the item and explained that

Officers had added the annual benefit statements as a breach because they did not do 100% in total. Officers had completed 100% active member cases, but the total overall was 96%, which is why it was recorded as a breach despite the figure being an improvement on the previous year.

The Head of Pensions and Treasury informed the Committee that two items had been removed from the list that they brought to Committee; however, they were not removed from the breaches log. The Head of Pensions and Treasury explained that officers stopped reporting breaches to Committee after three years or if they had been resolved. Officers have stopped reporting the breach relating to the fact that they missed the 100% on the annual benefit statements for 2021, and they also removed the item where they reported the Council's discretion policy which was now active.

The Head of Pensions and Treasury stated that the new government had proposed secondary legislation which required a backstop to be put in place by the 13th of December 2024.

The Head of Pensions and Treasury explained that they would have to have the accounts finalised for up to 2022/23 by the 13th of December. Officers

were aiming to produce and publish the 2021/22 and the 2022/23 accounts by the end of October. The Head of Pensions and Treasury stated that officers would then aim to produce the 2023/24 annual report and accounts by the 30th November.

The Head of Pensions and Treasury informed the Committee that they

were expecting auditors to sign off on the 2019/20 accounts with an opinion and for the 2020/21 to 2022/23 accounts, they expected the auditors to issue a disclaimed opinion. The Head of Pensions and Treasury stated that the auditors would then audit the 2023/24 accounts for the pension funds, and the backstop said that the date for publishing those accounts would be the 28th of February 2025; officers expected to receive at the modified audit opinion.

The Head of Pensions and Treasury explained that the reason why the auditors could not provide a clean audit opinion on the 2023/24 accounts was because they wouldn't have audited the previous year’s accounts.

The Head of Pensions and Treasury informed the Committee that they had moved the December Pension Committee meeting forward to the 3rd December because the auditor needed to give the accounts a disclaimed opinion. Officers would present the accounts up to 2022/23 to the Committee in December.

In response to questions from Members officers informed the Committee that:

• The risk of not having audited accounts was low to the pension fund, as the majority of the pension fund was really an asset statement.
• The auditors would audit the 2023/24 opening balance, the closing balance of the 2022/23 accounts, to enable them to audit the 2023/24 accounts property.
• Investment advisors tracked investments quarterly.
• Once the situation with the outstanding accounts had been managed, the reputation could begin  ...  view the full minutes text for item 152/24

This report presents the current Risk Register (in Appendix A) for the Pension Fund and highlights any changes made since the last review carried out at the Pension Committee meeting held on 11 June 2024.

The Head of Pensions and Treasury introduced the item and explained that officers had added two risks to the risk register, officers had slightly modified a risk in relation to the levelling up agenda however since the change in government this risk was on hold.

The Head of Pensions and Treasury informed the Committee that risk 18 on the register related to more reporting requirements for the annual report.  these are. The Head of Pensions and Treasury stated that this would add to the teams’ pressures in terms of resourcing and keeping up to date with being able to report on those items.

The Head of Pensions and Treasury explained that risk 17 was in relation to investments going forward and the government's view on more consolidation and looking at mergers with other funds. The Head of Pensions and Treasury stated that their external legal advisors believed that if this was to come to fruition, it would have major legal implications.

The Head of Pensions and Treasury informed the Committee that the government issued a call for evidence on the 4th September, this posed 10 questions in relation to defined contribution and local government pension schemes. The Head of Pensions and Treasury stated that whilst there were 10 questions, only five were related to the LGPS.

Robbie Sinnott stated that the government had either mentioned directly or referred to things that would impact the LGPS quite frequently. Robbie Sinnott explained that the first thing the government did was change the name of the department, so it was no longer referred to as Department for Levelling Up, Housing and Communities (DLUHC) it was now the Ministry of Housing, Communities and Local Government (MHCLG).

Robbie Sinnott explained that Mercer had discussed with their colleagues in Canada about their approach and found that they were having similar conversations to the LGPS about trying to get Canadian pension schemes to invest more in Canada.

Robbie Sinnott stated that the new government had a similar agenda to the previous government, however they had more urgency and were promoting more pooling and consolidation in an attempt to drive the LGPS to invest in UK assets.

Robbie Sinnott explained that there was a pensions review, with regards to the LGPS it was highlighted that it was going to tackle fragmentation and inefficiency through consolidation and improved governance and focus on outcomes rather than costs.

Robbie Sinnott believed that this was slightly unfair on the LGPS who overall had focused more on outcomes rather than costs, and if there had been a focus on cost it that had potentially come from statements made by the government.

Robbie Sinnott stated that in order to assess how successful the LGPS asset pooling had been they had to look at the initial aims of pooling which was to drive down costs and to increase investment in other asset classes, specifically infrastructure that were more difficult for LGPS funds to access. Robbie Sinnott informed the Committee that there was evidence that the  ...  view the full minutes text for item 153/24

This report asks the Committee to agree the Representation Policy (attached as Appendix A) and to comment as appropriate.

The Head of Pensions and Treasury introduced the item and explained that

the representation policy was brought about by the SAB’s good governance review. The Head of Pensions and Treasury stated that the fund introduced a representation policy 23rd September 2023, which officers had now updated.

The Head of Pensions and Treasury informed the Committee that the changes had been brought about as officers had updated the Constitution to reflect that one staff side member will now be voting. The Head of Pensions and Treasury stated that they would be appointing a non-voting employee representative from outside of the Council to the Committee.

The Head of Pensions and Treasury explained that officers were looking at the EDI implications would make sure there was fair representation. 

In response to questions from Members officers informed the Committee:

• The trade union member was now a voting member of the Committee as from February 2024, when the Constitution was updated. Officers were working on the equality’s implications for the appointment of the employer representative.

Resolved:

1.1  To review and agree the revised Representation Policy.

This report advises the Committee of the matters currently being considered by the Local Government Pension Scheme Advisory Board and The Pensions Regulator which are relevant to the Fund. Any implications for the Fund have been noted and are being addressed in consultation with Fund advisers.

The Head of Pensions and Treasury introduced the item and explained that the report presented the Committee with the updates from Scheme Advisory Board and the Pensions Regulator. The Head of Pensions and Treasury highlighted updates such as the change of government and the call for evidence as well as other updates which were considered during earlier agenda items such as the section 13 report.

Resolved:

1.1  To agree to note the contents of this report.

The report updates Pension Committee on the Fund’s Investments and current Funding position for the quarter to 30 June 2024.

The report provides an update on the Fund’s performance for the quarter to 30 June 2024.  The report falls into four parts.  Section 1 addresses performance against strategic goals.  Section 2 considers the asset allocation strategy and how that is being applied, specifically current and planned investments.  Section 3 deals with risk management and section 4 summarises updates from any recent investment manager meetings.

The Head of Pensions and Treasury introduced the item and explained that

Pension fund increased by just under £48 million and returned 1.87% over the quarter.

The Head of Pensions and Treasury informed the Committee that the assumption in the valuation stated that the fund assumed to return 9.2%, the fund had now returned 10.4% since the valuation date which meant that they had a positive effect in terms of the funding level.

The Head of Pensions and Treasury stated that officers had updated the Hyman's tool that they used to track the funding level, at the end of March the funding level was at 126% and at the end of June it stood at 132% percent. It would currently require an asset return of 4.3% to be 100% funded.

The Head of Pensions and Treasury explained that in April they moved £100 million from the LGIM Global equity fund to the LCIV Multi Asset Credit fund, this went smoothly, and officers had now rebalanced the portfolio.

The Head of Pensions and Treasury informed the Committee that they were closer to their balance target allocation in terms of fixed interest, they stood just below 20% and the target allocation was 23%.

The Head of Pensions and Treasury stated that at the last committee meeting they agreed to transfer the Aberdeen Standard Life corporate bond holdings and the Wellington corporate bond holdings to the new LCIV All Maturities Credit Fund, the launch of this fund was delayed, and the launch was now set to take place on the 9th October, so those funds would be moved across.

The Head of Pensions and Treasury stated that following discussion during the last Committee meeting about employing a transition manager, officers looked at the underlying holdings in the Wellington Fund and the underlying holdings in the Standard Life Corporate Bond Fund and found that there wasn't enough crossover to warrant the transition. The Head of Pensions and Treasury stated that officers decided that the best option is just to sell down those assets and investing the new fund.

The Head of Pensions and Treasury explained that by going into the funds on the launch date, they would save on the dilution levy that the LCIV applied, which would save on costs.

The Head of Pensions and Treasury informed the Committee that whilst they had agreed to transfer across the Absolute Return Fund across over a year ago, officers had delayed the transfer because the fund had performed better than the other bond funds over the past year. The Head of Pensions and Treasury stated that they would now be looking to move the fund across in stages with a target date of the 31st of March 2025, which was in line with the government's expectations and ahead of a lot of other funds.

The Head of Pensions and Treasury informed the Committee that he had a meeting with Access Capital Partners on the 6th November, and as he knew Committee were keen to go  ...  view the full minutes text for item 156/24

The following motion is to be moved and seconded where it is proposed to exclude the press and public from the remainder of a meeting:

“That, under Section 100A(4) of the Local Government Act, 1972, the press and public be excluded from the meeting for the following items of business on the grounds that it involves the likely disclosure of exempt information falling within those paragraphs indicated in Part 1 of Schedule 12A of the Local Government Act 1972, as amended.”

RESOLVED that members of the Press and Public be excluded from the remainder of the meeting under Section 100A(4) of the Local Government Act 1972 on the grounds that: (i) it involved the likely disclosure of exempt information as defined in Paragraph 3 (Information relating to the financial or business affairs of any particular person (including the authority holding that information)) of Part 1 of Schedule 12A of the Act: and (ii) that the public interest in maintaining the exemption outweighed the public interest in disclosing the information.

That, under Section 100A(4) of the Local Government Act, 1972, the press and public be excluded from the meeting for the following items of business on the grounds that it involves the likely disclosure of exempt information falling within those paragraphs indicated in Part 1 of Schedule 12A of the Local Government Act 1972, as amended.

RESOLVED that members of the Press and Public be excluded from the remainder of the meeting under Section 100A(4) of the Local Government Act 1972 on the grounds that: (i) it involved the likely disclosure of exempt information as defined in Paragraph 3 (Information relating to the financial or business affairs of any particular person (including the authority holding that information)) of Part 1 of Schedule 12A of the Act: and (ii) that the public interest in maintaining the exemption outweighed the public interest in disclosing the information.

That, under Section 100A(4) of the Local Government Act, 1972, the

press and public be excluded from the meeting for the following items of

business on the grounds that it involves the likely disclosure of exempt

information falling within those paragraphs indicated in Part 1 of

Schedule 12A of the Local Government Act 1972, as amended.

RESOLVED that members of the Press and Public be excluded from the remainder of the meeting under Section 100A(4) of the Local Government Act 1972 on the grounds that: (i) it involved the likely disclosure of exempt information as defined in Paragraph 3 (Information relating to the financial or business affairs of any particular person (including the authority holding that information)) of Part 1 of Schedule 12A of the Act: and (ii) that the public interest in maintaining the exemption outweighed the public interest in disclosing the information.