Agenda and minutes

To approve as correct the minutes of the meeting held on 24 June, 2014 and authorise the Chairman to sign them.

The Minutes of the meeting of the Committee held on 24 June, 2014 were agreed as a correct record and signed by the Chairman.

To consider the attached report.

Officers advised the Committee that the net return on the Fund’s investments for the quarter to 30 June 2014 was 1.7%. This represented a performance in line with the combined tactical benchmark and an under performance of -1.3% against the strategic benchmark.

The overall net return for the year to 30 June 2014 was 9.2%. This represented an out performance of 1.1% against the annual tactical combined benchmark and an out performance of 0.7% against the annual strategic benchmark.

1.    Hymans Robertson (HR)

·         Market Summary

o   The UK economy continued to recover, with the Office for National Statistics announcing that revised data scheduled to be released in September 2014 would show the UK’s GDP had already passed its pre-recession peak. The unemployment rate fell over the three months to May 2014, now standing at 6.5%. As economic news flow continues to be positive, the Bank of England Governor, Mark Carney, announced over the quarter that the Bank may start raising interest rates by the end of the year. Credit ratings agency S&P also upgraded the UK’s rating outlook from negative to stable.

o   Over the quarter, Sterling appreciated against the US dollar, Euro and Yen. For the first time since January 2009, the $/£ exchange rate reached $1.70/£. In Sterling terms, Emerging Markets were best performing region for equities (5.0%) over the quarter with all other regions also delivering positive absolute performance. Conventional and index-linked gilts remained in positive territory as long-dated yields fell, returning 2.3% and 1.1% respectively. Credit spreads continued to narrow, resulting in corporate bonds returning 2.0% over the quarter. Property also continued to post strong returns.

·         Fund Performance

o   Assets were valued at £516.3m as at 30 June 2014, an increase of £12.2m over the quarter. The total return on the Fund’s assets over the quarter was 1.7%.

o   Performance from the Fund’s active equity manager, Baillie Gifford, detracted from performance as the mandate underperformed its benchmark by 2.2%. Performance from the Multi-asset mandates was mixed with the Baillie Gifford DGF outperforming their target, whilst Barings DAAF and the Ruffer Absolute funds both underperformed their respective benchmarks.

·         Investment manager changes

o   Following the quarter end, Barings had announced the departure of Percival Stanion (head of the Global Multi-Asset group and lead portfolio manager for the DAA Fund) together with Andrew Cole and Shaniel Ramjee, two other members of the team. Following this, Hymans Robertson had changed their rating of the DAA Fund to “1”- Sell immediately and had advised the Fund to disinvest. Disinvestment was made on the 29 August 2014 dealing date.

o   UBS had announced that the proposed governance changes for the Triton Fund had been overwhelmingly approved by investors at EGMs held in early June and accordingly, the proposed changes had been implemented. UBS had also announced that John Murnaghan, Assistant Portfolio Manager for Triton had resigned, leaving UBS in August. He would be replaced in this role by Jonathan Hollick, an existing member of the team.

·         Asset Allocation  ...  view the full minutes text for item 5.

To consider the attached report.

Officers had provided an extract of the Council’s Statement of Accounts for the year to 31 March 2014, showing the unaudited accounts of the Havering Pension Fund as at that date.

Key items to note from the statement were:

·         The Net Assets of the Fund had increased to £506m for 2013/14 from £461m in 2012/13, a net increase of £45m. 

·         The net increase of £45m was compiled of a change in the market value of assets of £24m, investment income of £9.2m and net additions of cash of £13m, and offset by management expenses of (£1.2m).

·         The overall return on the Fund’s investments was 7.0% (net of fees). This represented an out performance of 1.5% against the tactical benchmark and an out performance of 7.0% against the strategic benchmark.

·         A copy of the audited Pension Fund Accounts and the auditors’ opinion would be included in the 2013/14 Pension Fund Annual Report.  The statutory publication date for the 2013/14 Pension Fund Annual Report is 1 December 2014.

We have noted the report.

To consider the attached report.

The Council’s external auditors PricewaterhouseCoopers (PWC) had submitted their draft ISA 260 report.  The ISA 260 report was a joint report covering both the audit of the Council’s Statement of the Accounts and audit of the Pension Fund Accounts. Officers only highlighted the issues with regard to the Pension Fund.

We have noted the report and the responses of officers to the issues raised in the report with regard to the Pension Fund.

To note the attached report.

As a result of the changes in the Local Government Pension Scheme Regulations (LGPS) 2013 and the Local Government Pension Scheme (Transitional Provisions and Savings) Regulations 2014, Scheme employers participating in the LGPS in England and Wales had to formulate, publish and keep under review a Statement of Policy on certain discretions which they have the power to exercise in relation to members of the Career Average Revalued Earnings (CARE) Scheme.

At the meeting on 24 June 2014 we delegated to the Group Director of Resources, the Director of Human Resources and Organisational Development and the Council’s Monitoring Officer, acting jointly the power to set the discretion decisions and Policy Statement.

We have noted the final employer discretion decisions and the Policy Statement for the London Borough of Havering as submitted to us.

To consider the attached report.

a)    Charging Policy

Officers submitted for our approval a draft charging policy. This set out the proposed Pension Fund policy relating to charges for specific areas of work carried out directly for scheme employers, together with other issues that may give rise to employer charges such as strain costs, poor performance and late receipt of contributions. The policy would improve Scheme Employer’s knowledge and understanding of their obligations and liabilities in the scheme and ensure a consistent approach to the monitoring of employer performance.

With the increase in the number of Scheme Employers, together with a significant increase in the information employers were required to retain and provide to the Pension Administration Team as a result of the Local Government Pension Scheme Regulations 2013 and the Transitional Regulations 2014, there was an increased requirement to control the risk of employers failing to meet the requirements.  Setting out a comprehensive Charging Policy was currently the most appropriate way to minimise employer risk of failing to comply with the information requirements and ensure the fund was not placed at risk of increased costs in supporting the growth in employers.

We have:

a.    Noted the draft Charging Policy; and

b.    Delegated to the Group Director, Resources and Strategy the approval of the final Charging Policy following consultation with Scheme Employers.

b)   Administrative Team workload

Due to the implementation of the new Local Government Pension Scheme 2014, together with the impact and pending impact of the Public Service Pension Act 2013, there was a considerable pressure on existing resources within the Pension Team and management of Transactional Services.  The delivery of the work plan would be completed within existing resources, subject to engaging the Fund Actuaries to support with specialist advice and guidance. Delivering the work plan within existing resources would            have an impact upon measured performance indicators in 2014/15. 

A plan of work had already started and would be delivered by the end of March 2015. This would be brought back to us and monitored during the current year.

We have;

a)          Noted the Administrative Team work plan for 2014/5: and

b)          Noted that further progress updates monitoring the work plan would be brought back to Committee.

To consider the attached report.

Officers have advised that under the Local Government Pension Scheme (LGPS) regulations the London Borough of Havering, as the administering authority of the Havering Pension Fund, have been given some responsibilities and discretions.  Some of these discretions had last been reviewed in March 2010 and had now been updated following the regulations introduced with the LGPS 2014 scheme.  A complete review of all the required Administrative Authority discretion decisions and policies had also been undertaken with support for the Fund Actuaries.

The new scheme had been operational from 1 April 2014 and there was a regulatory requirement under the LGPS 2013 (Regulation 60) and Transitional Regulations 2014 (Schedule 2, Paragraph 2) for the administering authority to agree the new and revised discretion decisions and a Policy Statement before the 1^st July 2014.  It had been also understood that where the 1^st July was not achievable the Pension Regulator would only seek assurance that the employer or Administrative Authority were working towards completing the review of the Policy Statement and discretions. 

An in-depth review of the of the discretion decision requirements in following regulations had been carried out:

-       Local Government Pension Scheme Regulations 2013;

-       The Local Government Pension Scheme (Transitional Provisions and Savings) Regulations 2014 (The Transitional Regulations);

-       The Local Government Pension Scheme (Administration) Regulations 2008 (The Administration Regulations);

-       The Local Government Pension Scheme (Benefits Membership and Contributions) Regulations 2007 (The Benefits Regulations);

-       The Local Government Pension Scheme (Transitional Provisions) Regulations 2008;

-       The Local Government Pension Scheme Regulations 1997;

-       The Local Government Pension Scheme Regulations 1995.

Discretion was taken to include where the Administering Authority was required to carry out a task but an element of choice was seen to exist as to how the task was completed.

A number of the discretions were subject to the formulation and publication of a written policy, but there were many more where there was no requirement for a written policy but where there might be an element of choice.  The proposed discretion statement included those discretions which required a written policy and those were there might be an element of choice. 

We have noted that not all discretions needed to be published; however, it was the intention, for reasons of transparency, to publish the decisions taken in relation to all the available discretions.  If the discretion decisions and policies were approved, the discretions would be published on the Havering Pension Fund’s website and would be circulated to Employer’s participating in the Fund.

Our attention was brought to the following discretion areas, i.e. abatement, Employing authority defunct and Additional Pension contributions.

1.    Abatement

There was a regulatory change to a previously written discretion relating to the policy to abate (reduce) pensions following re-employment, this was now Regulation 3(13), The Transitional Regulations and was previously Regulation 109 of the Local Government Pension Scheme Regulations 1997 and regulation 70(1) of the 2008 Administration Regulations. 

Previously the Council Policy had been to abate the retirement pension when a  ...  view the full minutes text for item 10.

To consider the attached report.

We were advised that the Public Services Pensions Act 2013 (‘the Act’) had outlined new governance structures for Pension Funds to take effect from 1 April 2015. Under the new structure it was proposed that a Fund Manager should be advised by a Pensions Board which was to consist of a proportionate number of employer and member representatives.

The Act further provided for explicit regulatory oversight of pension schemes by the Pensions Regulator whose role would be to issue Codes of Practice on the governance standards of conduct and general practices expected of local government pension schemes (LGPS).

The changes to the Local Government Pension Scheme came into effect from 1 April 2014 and the Havering Pension Fund had successfully implemented the changes to the scheme.

The stated aim of the whole reform of public sector pensions was to raisethe standard of management and administration of public servicepension schemes and to achieve a more effective representation ofemployer and employee interests in that process.

The Government had issued a consultation paper on 23 June 2014 with aresponse deadline of 15 August 2014.  The Council had not submitted a response to the consultation due to the timing of the Committee and the complex issues that would need to have been considered. 

Section 4 of The Act required that each pension scheme had a Scheme Manager who would be responsible for administering and managing the Scheme.  It had been confirmed that the Scheme Manager would be the Administering Authority and would have the ultimate responsibility for the scheme.

The Scheme Manager was a function which could be delegated under S101 of the Local Government Act 1972.  Further, the Act also provided that the two roles of administration and management could be undertaken as separate functions by two scheme managers.

The Scheme Manager would be assisted by the Pensions Board.

Tin the summer of 2013 the Secretary of State for Culture and Local Government had created a Shadow Advisory Board to provide advice to Scheme Managers and Pensions Boards in relation to effective and efficient administration for the scheme. The Shadow Advisory Board has a Governance and Standards Sub-Committee which was currently working with The Pensions Regulator to develop the Code of Practice and subsequently an LGPS specific code.  Once the final regulations and the final Code of Practice were published the Administering Authority would have a number of decisions to make in relation to future governance arrangements, including:

•        Whether membership of the Pensions Committee and the Pensions Board could be combined or must be separate;

•           How to ensure compliance with TPR Code of Practice in particular with requirements for knowledge and understanding of Board members;

•           Whether to introduce the new arrangements in advance of the statutory date (assumed to be April 2015) in order to test the appropriateness of the arrangement for the Havering Fund; and

•           The extent to which these decisions would be informed by consultation with employers within the Fund and scheme  ...  view the full minutes text for item 11.

To consider the attached report.

Officers advised that the contract for the Pension Fund Actuary (with Hymans Robertson LLP) was due to expire on 31 March 2015, having been extended for one year from 1 April 2014 as per the original tender for the contract that commenced in April 2010.

Having considered the report we have:

1.    Delegated to officers the authority to undertake the procurement of the actuarial service provider; and

2.    Delegated to the Group Director Strategy and resources the authority to award the contract at the completion of the procurement process.