Agenda and minutes

Councillor Corthorne expressed his gratitude to Councillor Markham for his invaluable contribution to the work of the 2017/18 Pensions Committee during his time as Vice-Chairman.

There were no apologies for absence.

Councillor Philip Corthorne and Councillor Teji Barnes declared a Non-Pecuniary Interest in all agenda items because they were deferred members of the Local Government Pension Scheme. They both remained in the room during discussion of the items.

Councillor Tony Eginton declared a Non-Pecuniary Interest in all agenda items as he was a retired member of the Local Government Pension Scheme. He remained in the room during discussion of the items.

RESOLVED: That the minutes of the meeting on 28 March 2018 be approved as an accurate record.

It was confirmed that items marked Part I would be considered in public and those marked Part II would be considered in private.

Adrian Balmer of Ernst & Young presented the External Auditor Report on the Pension Fund Accounts. Consideration was given to the Draft Pension Fund Annual Report for 2017/18 which included details of the Pension Fund Accounts.

The Committee was informed that the London Borough of Hillingdon's Pension Fund Accounts were subject to a separate audit by the Council's external auditors. 2017/18 was the first year of the early close deadlines due to a change in legislation introduced through the Accounts and Audit Regulations 2015, which required the draft accounts completion date to move from 30 June to 31 May and the final approved audited accounts to be published by 31 July (previously 30 September).

With regard to the status of the audit, Members were advised that good progress was being made and no significant issues had been identified to date. The auditors were awaiting confirmation from the banks.

Members were informed that one area of the audit focus were 'significant risks'; it was reported that there was nothing to report in areas of significant risk. In terms of the other areas of audit focus, these were 1) Investment Manager Transition, 2) Valuation of Complex Investments (Unquoted Investments) and 3) the Earlier Deadline for production of the financial statements. The revised deadline had been noted and there was currently nothing to report regarding items 1) and 2); this was subject to final review.

Consideration was given to the Draft Audit Report. Members were advised that the pension fund financial statements for the year ended 31 March 2018 had been audited; it was found that the financial statements gave a true and fair view of the financial transactions of the pension fund and had been appropriately prepared in accordance with regulations. It was reported that it had been a clean audit with no issues identified.  No audit differences outwith the acceptable threshold had been identified to date. Data analytics had been used to enable the auditors to capture entire populations of the Fund's financial data; said data analytics helped to drive an efficient audit.

Members expressed concern regarding the reduced time window for the audit and sought reassurance that this had not affected the quality or the integrity of the report. It was confirmed that no significant difficulties had been encountered and nothing had been done differently despite the revised timescales.

Councillors requested further clarification regarding the figure of £15.3m as mentioned in the report under the heading of 'Audit Differences'. It was stated therein that any corrected misstatements greater than £15.3m identified during the course of the audit and corrected by management would be highlighted. Members were informed that there were no such misstatements to report as at the date of the report.

The Committee queried the IAS valuation figures in the table on page 102 of the report and were advised that the figures were in millions rather than thousands.

Mr Rodger Hackett informed the Committee that the Pensions Board had met and was now fully staffed; it would meet again  ...  view the full minutes text for item 5.

Andrew Singh, Senior Investment Consultant with KPMG, presented a training item to the Committee which covered Roles and Responsibilities within the Pension Fund, a Recap of the Fund's Investment Strategy and the Fund's Asset Classes. The report focused on the investment of the Fund's assets and included an overview of fund performance as at 31 March 2018, an update on strategy decisions made in March 2018, sub funds available within the London CIV, recent voting and engagement. 

The key objectives of the investment strategy were outlined and the Fund's asset allocation and managers were highlighted. Members were advised that the Actual Asset Allocation as at the end of June 2018 incorporated nine different classes including equity, property, diversified growth etc.

With regard to future plans, the Committee was advised that the Fund was required by regulation to move the assets to a pooled vehicle (such as the LCIV) over time. Benefits of this approach should include lower management fees and greater overall investment governance. In terms of the agreed evolution of the Investment Strategy, the plan was to:

·         Reduce equity exposure, adjust regional weights and consider a 'resource efficient' or low carbon indexation;

·         Increase exposure to long dated inflation-linked assets;

·         Consider LCIV diversified credit options (recently launched);

·         Consider options for maintaining strategic allocation to illiquid credit (LCIV recently launched a strategy).

Members commented that the content of the Investment Training item was both readable and digestible and provided a useful contextual background. They were informed that the training framework would be available in the Autumn of 2018.

Members requested clarification regarding the testing of the funding position evolution model and were advised that a team of people designed it and assessed it using hard data which was loaded onto a system and rolled forward using liability terms. The tool would not replace the actuary but was intended to give an indication and act as an early warning system. 

The Pensions Committee Members were presented with a second report which considered the alternative approaches to implementing an allocation to long dated inflation-linked income. The Committee had previously reviewed the investment strategy and agreed to a strategic allocation of 5% to assets that provided a long dated income stream linked to inflation. KPMG had been asked to analyse the possible implementation options available for this allocation, noting a preference for new mandates to be accessed via the London Pension Collective Investment Vehicle (LCIV) if possible.

Members were informed that the LCIV did not currently offer a long dated inflation-linked income fund. However, they had indicated that they may be able to help access to an LLP fund in the short term although would not be on the platform; they planned to develop a long dated inflation-linked blend over the next few years. Details were unclear at this stage.

The Committee had also asked KPMG to identify the LLP funds which were best aligned with the Fund's requirements. KPMG had identified three funds which they believed could offer appropriate exposure. Members considered the  ...  view the full minutes text for item 6.

The Committee was provided with an update on the administration of the London Borough of Hillingdon Fund of the Local Government Pension Scheme, both in relation to Surrey, and internally at Hillingdon.

The Committee was informed that the Pension Administration system used by Surrey County Council as administrators of the fund included a task management system which allowed the progress of all case work to be managed and monitored on a daily basis. It was confirmed that Surrey County Council had continued to maintain and, in some areas, improve their performance against the reportable KPIs.

Members were advised that active members Annual Benefits Statements were now available on individuals' records, well before the original deadline of August 2018.. All LBH staff had been informed via the all staff email of the need to register onto the 'mypension' online. 29% of staff had now registered to use the 'mypension' facility. The Team Leader from Surrey CC and one of the internal team had attended the latest Schools' Forum meeting to discuss any issues arising from schools in relation to provision of pensions. Schools were offered the opportunity of requesting a site visit and, since April 2018, five schools had been visited.

Members enquired whether officers were satisfied with the progress made regarding schools and were informed that this was much improved and the main payroll provider for schools was now on-board.

RESOLVED:

1.    That the information contained in the report be noted;

2.    That the appointment of JLT to carry out GMP reconciliations work for the Fund be ratified.

The purpose of the report was to identify to the Pensions Committee the main risks to the Pension Fund and enable them to monitor these. There were currently seven significant risks which were being managed and reported on.

Members enquired about the cyber security risk element and were informed that this was being dealt with within the Council; however a large amount of data was held in Surrey. It was agreed that the matter of cyber security risk be covered in future reports.

RESOLVED:

1.    That the Committee considered the Risk Register in terms of the approach, the specific risks identified and the measures being taken to mitigate those current risks;

2.    That the Committee noted there were no risks rated as red;

3.    That the matter of cyber security be included in the Risk Register going forward.

This item was discussed as a Part II item without the press or public present as the information under discussion contained confidential or exempt information as defined by law in the Local Government (Access to Information) Act 1985.  This was because it discussed ‘information relating to the financial or business affairs of any particular person (including the authority holding that information)’ (paragraph 3 of the schedule to the Act).

The Committee received confidential information on the current market update which covered details on the current market climate and performance of various investment vehicles, updates on Managers' reports, an update of the London CIV.

RESOLVED: That the information be noted, together with the performance of Fund Managers.

This item was discussed as a Part II item without the press or public present as the information under discussion contained confidential or exempt information as defined by law in the Local Government (Access to Information) Act 1985.  This was because it discussed ‘information relating to the financial or business affairs of any particular person (including the authority holding that information)’ (paragraph 3 of the schedule to the Act).

The Committee received confidential information seeking authority to accept a tender to award the contract for Investment Consultancy Services and extend the existing contract for Actuarial Services to the London Borough of Hillingdon Pension Fund.

RESOLVED: That the recommendations as set out in the Part II report be agreed.