Issue - meetings
Funding and Flight Path Update
Meeting: 21/06/2023 - Clwyd Pension Fund Committee (Item 63)
63 Funding and Flight Path Update 
PDF 116 KB
To update Committee Members on the funding
position, and the implementation of the Flight path and risk
management framework
Additional documents:
- Enc. 1 for Funding and Flight Path Update, item 63
PDF 466 KB
- Webcast for Funding and Flight Path Update
Decision:
The Committee considered and noted the contents of the report.
Minutes:
Mr Middleman opened with an overview of the Fund’s financial health and status of triggers in the framework. The framework and flightpath was providing funding stability and was performing well under volatile market conditions. Whilst the absolute performance figures of the flightpath were negative, this was offset somewhat by the changing liabilities, meaning despite ongoing and upcoming challenges, the framework was functioning as intended and has remained resilient despite the challenging market conditions.
The Pensions Regulator (TPR) had issued guidance around LDI and collateral requirements, and the Fund was well within these tolerances and can withstand significant market movements.
While the funding position remains healthy, overall monitoring will continue, particularly with persistent inflation which directly impacts the pensions liability risk. This includes monitoring of collateral levels in conjunction with Insight as the LDI manager.
With reference to paragraph 1.05, Mr Hibbert requested more detail on where the Fund would look for more liquidity following divestment from the existing collateral waterfall. Mr Turner explained that there is potential scope to move assets from the TAA portfolio if needed. He noted that the Fund’s minimum target for yield headroom is 3% and the Fund is currently approaching 6%, leaving a buffer, but liquidity is available to realise if needed. A thorough cashflow analysis will be discussed over the coming months to inform future planning for overall liquidity. Mr Hibbert asked if this decision making will integrate ESG issues, and Mr Turner explained that while cashflow tends not to be focussed on ESG issues, ESG considerations are integrated into all of Mercer’s investment thinking and advice to the Fund.
Mr Middleman acknowledged Mr Hibbert’s concerns for ESG relating to cash management. He explained that the ESG element of the flightpath is a core component and is being considered in how the hedges are supported taking into account all ESG objectives. This will be a decision for the Committee in due course on how it is delivered in the same way as the wider discussions on Responsible Investment. However the Fund will need to be mindful of the implementation side as implementation needs to be appropriate and practical to achieve the overall objectives.
RESOLVED:
The Committee considered and noted the contents of the report.