Agenda, decisions and minutes

Venue: Delyn Committee Room, County Hall, Mold CH7 6NA

Contact: Maureen Potter 01352 702321  Email: maureen.potter@flintshire.gov.uk

Items
No. Item

16.

Variation in Order of Business

Minutes:

The Chairman indicated that there would be a change in the order of the agenda and the item on Pooling Investments in Wales would be brought forward.

 

17.

Declarations of Interest (Including Conflicts of Interest)

To receive any Declarations and advise Members accordingly.

Minutes:

Councillor Stephen Wilson declared a personal interest as being a member of the Clwyd Pension Fund for all items.

 

Karen McWilliam declared a personal interest as an employee of Aon Hewitt who may submit a tender bid to become the CIV platform provider under the following item. 

 

Paul Middleman also declared a personal interest as an employee of Mercers who may submit a tender bid to become the CIV platform provider under the following item.   

 

Item 7: Pooling Investments in Wales

 

18.

LOCAL GOVERNMENT (ACCESS TO INFORMATION) ACT 1985 - TO CONSIDER THE EXCLUSION OF THE PRESS AND PUBLIC

Decision:

That the press and public be excluded for the following item by virtue of exempt

information under paragraph(s) 14 of Part 4 of Schedule 12A of the Local

Government Act 1972 (as amended).

 

Minutes:

RESOLVED:

 

That the press and public be excluded for the following item by virtue of exempt

information under paragraph(s) 14 of Part 4 of Schedule 12A of the Local

Government Act 1972 (as amended).

 

19.

Pooling Investments in Wales.

To consider the draft submission by the Wales Pool to the Department for Communities and Local Government (DCLG).

Decision:

That the draft submission be noted.

 

Minutes:

John Wright (Hymans Robertson) presented on the Welsh draft submission to DCLG for pooling of investments which included:

 

·         Background

·         Process

·         Structure

·         Aims

·         Potential impact on the Clwyd Fund

·         Expected results

 

A lengthy discussion took place throughout the presentation where John Wright answered a number of questions. The Committee noted a number of areas of detail that might benefit from being refined at the next stage of the project, such as the objectives of the Pool.

 

The Committee made it clear that they would want to be able to comment and approve the key decisions relating at the establishment of the Wales Pool, which included at least the following:

 

·         Terms of Reference for the Joint Governance Committee (JGC)

·         The specification for the potential operator

 

The Committee requested John Wright feed back to the Pool that the following should be included in the final submission to DCLG:

 

·         Consideration of Member Representation within the governance structure

·         Consideration of an Independent Chair on the JGC

 

The Committee asked John Wright to ensure they were also provided with information outlining the individual fund costs and savings for Clwyd Pension Fund.

 

John Wright assured the Committee he would deal with all the points they had made.  During the presentation he also made assurances to the Committee that the Pool and Operator were focussed on providing a structure that would deliver the investment strategy of each individual fund and therefore Clwyd Pension Fund would not be pressured to adapt their strategy to meet how the Pool is being operated.

 

RESOLVED: 

 

That the draft submission be noted.

 

20.

Funding Strategy Statement pdf icon PDF 90 KB

To provide Committee Members with the draft Funding Strategy Statement for 2016/17.

Additional documents:

Decision:

That the Committee approve of the Funding Strategy Statement and delegate the refinement of the document to Fund Officers in readiness for the consultation with the participating employers.

 

Minutes:

The Fund Actuary, Paul Middleman presented the key elements of the 2016 draft Funding Strategy Statement (FSS).  The Committee were asked to approve the draft FSS and delegate the refinement of the document to Fund Officers before it goes to consultation with employers.

 

In terms of the overall Fund governance it is a requirement to prepare, publish and review the FSS. It was noted as part of the presentation that Mr Middleman does not feel that the pooling of investments in Wales will have a major impact on the 2016 FSS. The Fund is duty bound to consult with participating employers before finalising the document but ultimately it is an Administering Authority decision on the how the funding strategy is implemented. The CIPFA guidance on preparing an FSS is currently being reviewed in light of the change in regulations/oversight and will be published in the coming weeks.  It was noted that the draft FSS incorporated the expected changes in the guidance but may need refinement depending on the final outcome.

 

Paul Middleman stated the key areas to be addressed in the FSS:

 

·         Aims and purpose

·         Treatment of Employers (funding and contributions)

·         Solvency target

·         Risk control and management (including Flightpath)

·         Other policies (new and leaving employers)

 

Paul Middleman discussed the key points of the FSS and main funding objectives which will confirm the employer’s contribution requirements for 2017/2020.  These were detailed in the separate report and draft FSS and supporting presentation.  An additional consideration of this valuation is the scrutiny under Section 13 of the Public Service Pensions Act 2013, which is performed by the GAD on behalf of the Government.  It was noted that whilst this should be a consideration it should not drive funding decisions. Section 13 valuations are simply a mechanism to ensure that all LGPS Funds are setting sufficiently robust funding plans in absolute terms and relative to others.  

 

The key parameters which are proposed to be changed versus the existing FSS from the 2013 valuation were as follows:

 

·         Linking the discount rate to the investment returns above CPI - this is the key driver of liabilities

·         Remove allowance for 50/50 benefit take-up other than where a member has already opted for it (for the 2013 valuation, 5% of the membership were assumed to opt for this but the experience does not support it)

·         Life expectancy update – initial analysis for CPF suggests there has been a tailing off of life expectancy improvements versus expected which would reduce liabilities

·         Reducing recovery period deficit where possible with the total Fund average possibly reducing by 3 years – this will also be a key measure under GAD’s Section 13 assessments under the Long Term Cost Efficiency requirements,

·         Update/development of related policies – examples were the termination and admission policies.  A critical addition at this valuation was the implementation of an employer covenant review framework.

 

Steve Hibbert queried why the 50/50 option take-up was so low and whether it had been communicated fully.  It was confirmed that this is a  ...  view the full minutes text for item 20.

21.

Initial Impact of EU Referendum Result

To consider the initial impact on the Fund following the market volatility as a result of the EU Referendum

Decision:

That the update and the potential implications be noted.

 

Minutes:

The Fund Consultant, Kieran Harkin and Fund Actuary, Paul Middleman discussed the initial impact on the Funds’ investments and risk management framework following the market volatility as a result of the EU Referendum.

It was noted:

·         FTSE 100 stable but significant movement of capital to UK bonds

·         Financial Services legislation may change (in due course)

·         Pooling follows, some decisions required how

·         Sterling has weakened against major global currencies

·         Fund Asset value increased between end of May to end of June

·         Possible changes required for uncertainty ahead (Flightpath de-risking)

·         Knee jerk reactions not required

·         Expect continuing volatility

·         Opportunities can be found through  volatility

 

Remembering there is still a lot to emerge on the long term implications of BREXIT, Mr Middleman confirmed funding had actually improved since the valuation date even if we adjusted the real discount rate to reflect the possibility of a marginal reduction in expected returns.  This is predominately due to the positive effects of the LDI mandate and the fall in the value of sterling on certain overseas investments.  However, further analysis is needed including testing of potential BREXIT scenarios to ensure we remain comfortable with the position.

 

Paul Middleman and the Clwyd Pension Fund Manager, confirmed that the flightpath and strategy will need to be discussed and reviewed sooner than initially expected in the Business Plan due to the changes in outlook.

 

The Clwyd Pension Fund Manager requested the Committee authorise delegation to take actions in a timely manner. Karen McWilliam suggested that an emergency meeting may be required. The Clwyd Pension Fund Manager drew attention to other major developments (US presidency) and asked what impact that might have. Mr Middleman suggested that the valuation outcomes will likely have been completed by then but if there was a major shift in the outlook it would be something to consider and inform employers about after the valuation.

 

Steve Hibbert asked if there was any documentation that he could be reviewing in advance in order to raise questions. Kieran Harkin said it was hoped that the initial modelling on investment strategy will be produced in August with the final results ready for September Committee meeting (following receipt of finalised liabilities data). Steve Hibbert requested to be kept up to date about future developments that are known beforehand and suggested email.

 

RESOLVED: 

 

That the update and the potential implications be noted.

 

22.

Clwyd Pension Fund Draft Accounts 2015/16

To receive the draft accounts of the Clwyd Pension Fund for 2015/16.

Decision:

The Committee considered and noted the draft 2015/16 accounts.

 

Minutes:

Debbie Fielder, Pension Finance Manager presented the draft Annual Accounts for consideration by the Committee before approval by County Council.

Debbie Fielder reported the main changes in the accounts as:

·         Classification of Fund expenses

·         Increase in investment assets

·         Decrease in cash balances

·         New note to identify agency charges

 

Explanations were given to questions raised by Members relating to the bulk transfer included in the accounts and the changes in net asset values of some investments.

 

RESOLVED: 

 

The Committee considered and noted the draft 2015/16 accounts.

 

23.

Atendance by Members of the Press and Public

Minutes:

There were no members of the press or public in attendance.