Agenda and minutes

To approve as correct the minutes of the meeting held on 9 November 2011 and authorise the Chairman to sign them.

The minutes of the meeting held on 9 November 2011 and of the two special meetings held on 15 December and 16 December 2011 were agreed as a correct record and signed by the Chairman. Councillor Ramsey asked that his refusal to accept that the minutes of the meetings on 15 and 16 December were correct be recorded.

To consider any other item in respect of which the Chairman is of the opinion, by reason of special circumstances which shall be specific in the minutes that the item should be considered at the meeting as a matter of urgency.

Pursuant to Section 100(B)(4)(b) of the Local Government Act, 1972 the Chairman agreed that this report be taken as urgent business as delay until the next meeting of the Committee would adversely affect the pension rights of a member of staff.

The Committee were advised that Volker Highways had won the contract to provide Public Lighting services to the Council. The contract was for two and a half years and commenced on 1 November 2011, replacing the previous contract which was provided by May Gurney.

When the Public Lighting service was transferred from StreetCare’s in-house team to May Gurney on 1 March 2005 the contracts of employment of a number of employees were transferred from the Council to May Gurney. The Transfer of Undertakings (Protection of Employment) Regulations (“TUPE”) applied to the employment terms and conditions of the relevant employees. One of the employees concerned was a member of the LGPS.

In accordance with Government policy for Local Government employers, Volker Highways were required to provide pension benefits for future service which were broadly comparable to those provided under the LGPS or to participate in the LGPS for the provision of pension benefits for the transferring employees.

Volker Highways did not have a broadly comparable pension scheme and had applied to become an admitted body to Havering’s Pension Fund, solely for the benefit of the transferred employee. If agreed, Volker Highways would be admitted under a ‘closed’ agreement, whereby only those employees transferring at the time the contact was effective would be admitted to the scheme; any new or existing employees of Volker Highways would not be eligible to join.

The Pension Fund’s Actuary had assessed the level of indemnity bond required as £90,000 although this would need to be finalised.  The contribution rate set by the Actuary for membership was 27.7% of pensionable pay.

The Committee AGREED to admit Volker Highways to Havering’s Pension Fund, as an Admitted Body, to enable the member of staff who transferred from the Council under TUPE to continue membership (or have the right of membership) of the Local Government Pension Scheme (LGPS) subject to:

1. All parties signing up to an Admission agreement; and
2. An indemnity or insurance bond in an approved form with an authorised insurer or relevant institution being put into place to protect the pension fund.

Report attached.

 The Committee received a report from officers on the performance of the Havering Pension Fund investments for the quarter ending 30 September 2011. The net return on the funds investments for the quarter was -8.8%, an outperformance of -2.1% against the combined tactical benchmark and an under performance of -20.7% against the strategic benchmark. The overall net return of the Fund’s investments for the year to 30 September 2011 was -2.2%, this represented an under performance of -2.0% against the annual tactical combined benchmark and an under performance of -14.3% against the annual strategic benchmark.

a)            Hymans Robertson (HR)

HR advised the Committee that during the quarter a number of major threats to the global economic and financial system had eroded investor confidence. Although the Greek debt crisis dominated the headlines, concerns over the level of sovereign debt extended to other countries, including Spain, Italy, and even the USA. In July the world witnessed the unedifying spectacle of the USA coming close to ‘default’ as politicians clashed over whether and how to extend the country’s debt ceiling.

The sovereign debt crisis was accompanied by evidence of a slowdown in global economic growth and talk of a ‘double dip’ recession. Downgrades to economic forecasts became the order of the day, culminating, in September, with a warning from the International Monetary Fund that the global economy had entered a ‘dangerous new phase.’ The Fund’s prognosis for developed economies was one of weak and bumpy expansion, with recession a possibility if issues relating to the US and Eurozone economies were not dealt with.

Investor caution was expressed by a preference for ‘safety.’ Equity markets had fallen sharply during the quarter, in contrast, government bonds of countries spared the worst of the debt crisis (e.g. UK, US, Germany) fared well. The price of gold and other precious metals rose sharply.

Key events during the quarter were:

Global Economy

·        Published data pointed to decelerating economic growth in UK, US, Euro-zone and Japan.

·        The US central bank launched ‘operation twist’ in an effort to stimulate economic growth.

·        Short-term interest rates were raised in the Euro-zone to counter inflationary pressures. No changes had been made in the UK or US.

·        Disharmony amongst Euro-zone members over Greek debt crisis had led to criticism by US.

·        Emergency liquidity was provided by leading central banks to support the banking sector.

Equities

·        Bank shares fell sharply on concerns over exposure to ‘at risk’ sovereign debt.

·        The strongest sectors relative to the ‘All World’ Index were Technology and Health Care (both +9.4%) and Telecommunications (+8.8%); the weakest were Basic Materials (-10.4%) and Industrials (-7.1%).

Bonds

·        The yield on 10 year US Treasuries fell below 2%, its lowest since the early 1940s.

·        Greece moved closer to defaulting on sovereign debt despite rescue packages.

The outlook for the global economy remained unclear, with more risk apparent on the ‘downside’ than the ‘upside’. Further monetary stimulus was on the agenda  ...  view the full minutes text for item 49.