To comment on, amend and approve the Board’s work plan.
In response to a Board member question the Head of Pensions and Treasury, clarified:
· The housing transfer proposal is about making the borough’s assets work harder. The borough has been buying up properties in light of housing crisis and now has a total of 96. The proposal being considered is to use these for the benefit of the pension fund to help bridge the funding gap. This would mean a break clause in leases after a 40 year period allowing the properties to be gifted to the pension fund. As a result, the pension fund would be £140m better off in current terms in 40 years’ time. This would allow pension contributions to be managed in a more affordable manner. These employer contributions are currently 24.1%; and
· The borough is getting professional advice on the proposal (Croydon is not the first borough to do this). The meeting of the Pension Committee on 5 June 2018 outlined the proposal, looked at the options and described the risks. As a result, the Committee delegated the authority to Richard Simpson, Executive Director of Resources, to seek specialist legal advice. This is being taken from public sector legal experts, Browne Jacobson. The Committee is seeking feedback from the Board regarding its views on these arrangements.
In response to Board member questions, it was clarified that:
· This is about Croydon resolving its deficit and doesn’t affect the rest of the fund;
· This is a promise of holding assets in the future; the management of these properties until this point will be covered by the affordable housing company; and
· It is hoped to ask the Council for a resolution in January 2019.
Board members made the following key points:
· There is need to ensure this benefits the pension scheme. Arrangements need to be put in place in case the value of the properties declines rather than increases;
· Conflicts of interest need to be addressed and monitored going forward;
· Advice is needed although it is noted that the investment strategy of the pension scheme is positive about property;
· Regular updates would be required from the administrator; and
· The Board requested that it would have the opportunity to consider the proposal in detail before any decision is made.
In terms of the Board’s work programme, its desire to have training (possibly with the members of the Pension Committee) on climate change and its effect on investments was noted. A request for additional information about the Government Actuary Department Section 13 report was made. The Head of Pensions and Treasury clarified that this will come to the board at its January meeting.
It was noted that Teresa Fritz is now a member of the Pensions and Lifelong Savings Association Policy Board by virtue of being a member of the Pension Board.
It was clarified that reappointment to the Pension Board is at the gift of the Executive Director of Resources in his capacity as the scheme administrator and currently there is no need for this to be refreshed – the benefit provided by stability was noted. Terms of reference for the Board will be reviewed at the July meeting.
RESOLVED: to seek more information on the property transfer to allow the board to comment further before this decision is taken by Council.