Agenda, decisions and minutes

To receive any Declarations and advise Members accordingly.

No new conflicts were declared.

To confirm as a correct record the minutes of the last meeting held on the 21^st February 2018.

It was agreed the minutes could be received, approved and signed by the Chairman.

The minutes of the meeting of the Committee held on 21 February 2018 were submitted. Cllr Bateman and the Chair wanted to emphasise the excellent quality of the previous minutes and congratulated Miss Fellowes on a job well done.

RESOLVED:

It was agreed the minutes could be received, approved and signed by the Chairman.

The Chairman introduced the PLSA conference session video on cost transparency and how to ensure value for money with investment management fees. The video can be found at https://www.youtube.com/watch?v=0SDtFo5AOhs. The video was in regards to the transparency of investment fees, with asset owners and regulators pushing for disclosure of manager fees across asset classes. Therefore, investors must continue to seek investment advice and so with new recommendations emerging from the Industry Disclosure Working Group, the video explained what the next steps are for investors, advisors and service providers.

The Chairman explained that, in terms of the Clwyd Pension Fund, they have always asked their fund managers to provide full investment costs for its annual report and so the session showed the Committee how this should become more consistent in the future across the investment community especially as some LGPS funds still do not publish the data.

He also advised the Committee that, as the Fund’s representative on the Joint Governance Committee (JGC) of Wales Pensions Partnership (WPP), he confirmed he would be ensuring that the Operator (LINK), who the board met at the last Committee, would be expected to require that managers comply with the new Cost Transparency Code where possible.  

After the video finished Mr Latham mentioned that the topic was close to the heart for the Fund as there has been a lot of work involved in providing cost transparency including gathering research and thoughts to input into the requirements. The work has included setting up a template for Funds.

1.    That the Committee members noted the progress made towards the Fund’s Business Plan during 2017/18

2.    That the Committee approved the Business Plan in Appendix 2 relating to the period 2018/19 to 2020/21

The Chairman introduced the main item on the agenda to the Committee and passed over to Mr Latham. Mr Latham asked the Committee for approval of the Business Plan for the upcoming 3 years and directed the room to page 24 of the papers where the bullet points emphasised the main purposes of the Business Plan.

The key points in relation to the Business Plan were;

• Page 19-21 showed the progress versus the 2017/18 business plan.  The vast majority was on target or complete.
• Page 25 showed the updated structure for the pool with the new WPP.
• There is a lot of business as usual tasks on the Business Plan which shows the amount of work needed to run the Fund; page 30 onwards outlined the 9 different areas of work and it was noted the Employer Liaison team tasks were a new addition.
• The bottom of page 32 highlighted the achievements over the past 3 years which were improvements on governance, risk management and the governance arrangements for the WPP.
• The main issues that would be faced over the next 3 years were defined on page 33 where pooling will dominate the Business Plan but there could also be implications from the outcome of the cost management process (probably from 2020).
• Page 35 shows the cost budget for 2018/19 and the 2017/18 budget versus estimate.
• In terms of governance of the Fund (page 41) key tasks included the implementation of the new GDPR data protection requirements and recognised the necessity for more training needs for the Committee as per the recent training needs analysis.

Mr Latham continued by stating that the section on Funding and Investment risks (page 47) showed that risks will always be high since the Fund is not 100% funded or able to hedge out all of the risks. The flightpath is the “plan” put in place in order for the Fund to move towards full funding and also minimise the risk of deterioration.  An interim actuarial review will be undertaken in 2018 to help with budgeting for employers and alongside this is the finalisation of the employer risk management framework.

Other risks take account of the administration and member communication. The administration involves training and supplementing that with the outsourcing of work to external parties to clear the backlogs etc. The communication with members is now more and more through the Member Self Service (MSS).

The upcoming tasks for the administration team (including communications) are displayed on page 52 where most of the items are already familiar as ongoing work; however these tasks would take time to implement. These tasks are as follows;

1. Improvement on the quality of member data which is critical for the Fund through various initiatives e.g. GMP reconciliation (which has been outsourced to Equiniti) and the aggregation project (some assistance from Mercer).
2. The data improvement plan (which would be completed on the back of the Pensions Regulator guidance).
3. The implementation of iConnect for the Fund for a wider number of employers  ...  view the full minutes text for item 109.

1.  That the Committee note the report and discuss progress being made by the Wales Pension Partnership

Mr Latham guided the Committee to page 65 where this section of the agenda is a report which is for information purposes.

The key points Mr Latham made were that;

• There was positive progress in the setting up the sub-funds with the current focus being on the Global Equity Funds.  There had been a lot work by officers to ensure this met the objectives of the Fund. The sub funds should be agreed at the next JGC.
• The WPP budget was discussed and it was noted it covered all the Host Authority costs.
• The information and agenda for the next JGC is on the Carmarthenshire website.
• The Minister had written to the Chair/Vice Chair of the WPP welcoming the appointment of an operator but noting the work to be done. This illustrates the ongoing level of scrutiny.

Mrs McWilliam noted that the WPP budget covers areas such as staffing, legal services and operator services fees for Link and Russell.

Mrs Fielder confirmed that she had increased the fees relating to pooling compared to those incorporated within the budget as she believed more work will be needed to implement the sub funds than first thought.  However it is difficult to predict the level of costs currently.

Mr Hibbert noted that there are concerns in the pools generally regarding two tier workforce due to different pay/conditions and TUPE issues and asked whether there were any problems in Carmarthenshire. 

Mrs McWilliam replied that the concerns tend to be in relation to staff being transferred from local authorities to the pool but this is not the case for WPP as it is an external operator.

Mr Everett asked whether they were all Carmarthenshire employees. Mrs McWilliam confirmed that the employees operating the pool were Link and Russell employees but the staff and hires relating to the Host Authority work will be Carmarthenshire employees.

Mr Everett wanted confirmation of how running costs are proportioned. It was confirmed that they are split equally, i.e. 1/8^th to each Fund. 

Mrs Fielder added that any costs relating to Link and Russell are in relation to the size of assets that are pooled.  These had been estimated and included in the separate budget figures in the business plan although it was noted for 2018/19 it will only be part year costs as the assets have yet to be transitioned.

Mr Latham asked whether any of the Committee members will attend the JGC. Mr Hibbert confirmed he will try to attend.

Mr Latham said that there are ongoing discussions regarding the fact that the Committee and Board would not be entitled to sit in the JGC for parts of the meeting due to confidentiality reasons at this stage e.g. due to ongoing discussion over manager fees. It was commented that this is not an ideal situation and the hope is that over time Committee members could attend the meeting as they would be bound by the same level of confidentiality as the JGC members.

RESOLVED:

1.  That the Committee  ...  view the full minutes text for item 110.

1.  It is recommended that all Committee members note this report and make themselves aware of the various current issues affecting the LGPS, some of which are significant to the operation of the Fund

The Chairman passed over this item of the agenda to Mr Middleman to highlight key points regarding the LGPS current issues. Mr Middleman noted the comments regarding the slowdown in life expectancy improvements based on the 2017 analysis by the Continuous Mortality Investigation Bureau (CMI) which has continued into 2018 based on the latest information. This is of course not a good thing for individuals but is positive for Fund finances.

Mr Middleman added that there could be a reduction in the liabilities of 1-2% which could lead to a fall of around £40 million off the deficit.

He commented that also in the press is the event of the Northamptonshire County Council (NCC) section 114 notice. This was in relation to the spending controls at NCC reflecting a severe financial strain on the county council. This was the first time Mr Middleman had seen this since he had been an Actuary, but he thought that it reinforced the need for a robust employer management framework. This situation highlights the need to be aware that these things happen to even the strongest employers.

Cllr Bateman queried whether the auto-enrolment review was still happening. Mr Middleman responded by saying that it was complete and the implementation is mid-year of 2020. The impact in the long term could be that auto enrolment could capture a bigger population.  However, it would not be expected to be significant for the Fund.

RESOLVED:

1.  It is recommended that all Committee members note this report and make themselves aware of the various current issues affecting the LGPS, some of which are significant to the operation of the Fund

1.  That the Committee considered the update and provided comments on the format of the graphs.

Mrs Burnham stated that there was nothing specific to highlight in this report but  that on page 91 the caseloads under appendix 1 (day to day tasks) for the member case levels were in new graphic form as opposed to just figures. This gives more of an idea of what work has been completed, added and the amount of work coming into the office as well as the historical levels and peaks in case levels.  It also shows the level of activity for the 3 Councils separately.

The trend shows that there has been an increase in the monthly number of tasks.  Some of this relates to the amount of work caused in the creation of new admitted bodies on transfers of staff, for example, when 400 staff was transferring to new admitted bodies (NEWydd and Aura). 

Mrs Burnham also noted that the were in excess of 700 unknown joiners notified due to the iConnect implementation which would lead to more work in the busy interim review period and this would have a knock on effect of other tasks. However, this would be expected to settle down and going onto iConnect is a very positive step going forward for the Fund in terms of data quality and meeting the statutory deadlines.

Mr Hibbert pointed out that on page 91 whether there was a scaling issue that the Fund needs to be looked at as it is a concentrated amount of information. Mrs Burnham confirmed the format of the graph would be reviewed and the underlying statistics are available in tabular format.

Mrs Burnham commented that on appendix 2 from page 94 onwards which showed the performance against KPIs, this was also done in a graphical format for clarity showing the three different areas of legal requirement, internal turnaround times and the overall experience i.e. end to end process.  TPR is interested in the legal requirements but it is important to look at this from different perspectives.  It covers 7 key process areas.

The Chairman asked if Mrs Burnham could explain the new graphs from appendix 2.

Mrs Burnham explained that on page 94 the thick line showed the % number of completed cases (right hand axis) and the bar chart showed the number of cases completed (left hand axis).  It was noted that some of the legal obligations were not being met and it was explained that the various initiatives (iConnect, Data Improvement plan etc.) are part of the plan to assist in meeting the targets but noting that 100% compliance in every area may not be possible as it relies on 3^rd parties supplying the data in a timely way e.g. employers. 

Mr Hibbert commented that for the graphical presentation it was clear to understand the ones where the Fund hadn’t achieved compliance.  However with the ones where the Fund has exceeded the legal requirement it was difficult to see e.g. why the thick line on the graph looks way above the bars on page 97.  ...  view the full minutes text for item 112.

To provide Committee Members with a verbal update from Fund Officers and Consultants

The Chairman noted that there is no written report for this item on the agenda as the areas were covered at the February Committee but passed over to Mr Middleman, Mr Harkin and Mrs Fielder for a verbal update on Investments and Funding.

Key points were;

• Responsible Investment is becoming more of an issue across pools and getting consistency of application as view differs.
• Pooling implementation is at different stages for the pools but the structures are set up.  Some pools are transitioning assets at a greater pace than others depending on their underlying asset strategies.
• Risk Management – The flightpath is functioning well and other Funds are moving in the same direction around LDI, Equity Protection and de-risking especially given the improvement in funding levels.   The officers and Mercer/JLT had met that morning regarding the implementation of a new equity protection strategy for the Fund and this will be reported on at the June committee.
• The value of assets in January to February went down by around £14 million; Mrs Fielder noted that the Fund is still above by £1.8 billion in total assets.
• Mr Middleman added that the funding level is around 90% which is still ahead of target.

The Chairman introduced the final PLSA training session video about Pension Risk which can be found at https://www.youtube.com/watch?v=Xwx3MfQzeuY. The video included a panel of senior investment figures discussing macro and thematic risks to determine which they see as most threatening. Examples include risks from geopolitical developments, climate change risks, and stranded assets.