Agenda item

Annual Report attached.

DF explained that the annual report had been published earlier than normal as this had enabled the former Council auditors to sign off the full Council accounts within the given deadline.

All statutory policy documents included in the report were being revised and would be submitted to the Pensions Committee in November. The report layout was in line with CIPFA guidance.

It was noted that six new employers had joined the scheme in the previous year, resulting in a lot of extra administration work for the pensions team. Overall administration costs had decreased however as the prior year included licensing fees.

A board member asked the difference between scheduled and admitted bodies. Officers explained that in the case of scheduled bodies such as schools, the Council had no say over whether these organisations were admitted to the Pension Scheme. An admitted body providing for example outsourced services, could also not be refused but admission but admittance was subject to signing the necessary agreements. A designated body such as a Voluntary Aided School could designate staff to be admitted to the Pension Scheme but this did not happen in reality.

The Board discussed Collective Investment Vehicles in light of the recent announcement by the Chancellor that pension fund assets should be pooled. The London Collective Investment Vehicle should lead to management and procurement cost savings but managers had not been appointed to the vehicle at this stage, prior to FCA approval. There would be a consultation on pooling models in the autumn but it would be mandatory to join a pooled vehicle. 

The scheme currently held an increased amount of cash due to needing to make payments as a result of restructures but cash flow policy would be reviewed. MJT added that all oneSource restructures were now scheduled to take place in the second year of oneSource and that there were also 12 school restructures in progress. DF added that only staff over 55 years of age affected by the restructures would impact on the pension fund.

Whilst many administration targets had not been met in the year under review, DF confirmed that these had been met in the past and felt that they were still achievable. Many of the problems had been due to the introduction of the Career Average Related Earnings scheme and MJ explained that problem with  the software did not fully reflect the new Regulations, resulting in a lot more manual work for the pension team.

The team’s caseload was shown in the report and MJ would supply the average time taken for the notification of deferred benefits and other indicators. For legal reasons, priority was given to retirements, death benefits and estimates related to divorce cases.

It was noted that it was sometimes difficult to recruit and retain staff in the pensions team. Apprenticeships had been used in the past but the scheme was now very complex in nature. The administration performance indicators were the industry standard and officers did not wish to amend these. The future plans for the size of the pensions team were not known at this stage and the Chair suggested that perhaps this could be presented to a future meeting of the Board. It was also not known at this stage if there were any plans to merge the pensions team with that of Newham or Bexley, the other oneSource partners.

It was confirmed that monitoring and performance information on fund managers was presented to the Board on a quarterly basis. One or two fund managers also attended meetings of the Committee to answer questions about their performance. Each fund manager was rated by the Council’s investment adviser.

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The board asked if the Pensions Committee asked had access to the fund manager transaction reports. DF explained that they did and agreed to send to the Board the reports on this area but reminded members that these were confidential and could not be shared with anyone else. The Committee Officer would confirm that all Board members were on the distribution list for Pensions Committee agendas and if this also applied to exempt items.

Of the £2.5 million paid in management fees, it was confirmed that £797,000 related to transaction fees. Officers confirmed that most fees were paid to active fund managers and this was now dealt with in a more transparent way. It was not known how this compared to fees paid in other boroughs. It was emphasised that the level of fees paid could not be looked at in isolation. Some risks needed to be taken in order to reduce the deficit which meant the use of active funds with higher fees. Fees needed to be considered in relation to the return received. Information on the fees paid by other boroughs could be obtained from the scheme advisory board website.

Benchmarking was undertaken using WM Local Authority data. Havering had previously been ranked 46^th of 85 funds but rose in the first quarter of 2015/16 to  24^th. Performance was affected by markets and Havering’s fund ranking had risen as the fund had relatively low exposure to the recent equities fall. Contributions to the fund had gone down as the Council had paid a one-off contribution of £11.5 million last year.

The overall fund was worth £575 million at the end of March but had lost £20 million (in line with the impact on all funds) due to the Greece and China economic difficulties. The value of fund assets needed to be as high as possible by the time of the next fund valuation in March 2016. 

The Board asked why we had no administration strategy and officers explained that it was not mandatory to have a pensions administration strategy and it had been an officer decision not to have one at this time. In answer to a question about how the website is communicated MJ explained that  the pensions website was shown to all Academies joining the scheme and the website address was included on all pension letters and factsheets. QR codes were also printed on documentation in order to promote the website as much as possible.

The scheme communications strategy was being revised and would be taken to the Pensions Committee in November.

A board member asked about voting and officers clarified that that the pension fund can only vote if shares are held in their name and as most of the funds are pooled  the Fund did not have the right to vote at board meetings of companies the fund had invested in. Any voting that was required was left to the discretion of the fund manager.