Agenda and draft minutes
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Contact: Simon Humble Email: simon.humble@staffordshire.gov.uk
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Declarations of Interest Minutes: |
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Minutes of the Pensions Committee meeting held on 22 March 24 Minutes: Minute 15 - Staffordshire Pension Fund Business Plan 2024/25 - Councillor Greatorex noted an error had been made in the section relating to the Key Developments for 2024/25 where a comment referred to “smaller members” of the pension scheme, rather than “smaller employers” of the pension scheme. The error was amended before the minutes were signed by the Chair.
Resolved: That the minutes of the meeting of the Pensions Committee held on 22 March 2024, be confirmed and signed by the Chair.
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Minutes of the Pensions Panel held on 4 June 2024 Minutes: Resolved: That the minutes of the meeting of the Pensions Panel held on 4 June 2024, be received.
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Appointment of Pensions Panel Minutes: Resolved: That the following Members be appointed to serve on the Pensions Panel for the 2024/25 municipal year:
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Staffordshire Pension Fund Audit Plan for 2023/24 Report of KPMG as the External Auditors to the Staffordshire Pension Fund
Additional documents: Minutes: The Committee received a report from the Director of Finance on the Staffordshire Pension Fund (the ‘Fund’) Audit Plan for 2023/24.
The Committee heard that the audit of the 2023/24 Pension Fund accounts would be undertaken by KPMG who were also the County Council’s external auditors.
The Audit Plan provided at Appendix 1 to the report, detailed how KPMG intended to carry out their responsibilities as the external auditors to the Fund, and also included an assessment of the key risks which they believed would affect the audit.
Although the Fund was audited as part of the County Council’s accounts, KPMG would issue a separate audit opinion on the Fund and produce a Fund specific Audit Findings Report (ISA260). This would be reported to both the Pensions Committee and the Audit and Standards Committee in due course.
Whilst preparatory work was already underway for the audit, and KPMG were gathering background information on the various systems and processes in place at the Fund, it was understood that the audit could not formally start until the previous two years accounts had been signed off by Ernst and Young (EY). This was clarified by KPMG during the meeting as they had now been given the permission to start the audit by the Public Sector Audit Appointments (PSAA) irrespective of what was outstanding from previous years.
The Committee was reminded that although the audit of the Staffordshire Pension Fund’s accounts for 2021/22 and 2022/23 were both substantially complete, EY had not been able to issue the concluding Audit Results Reports (ISA260). This was because the audit of the County Council’s Statement of Accounts for both years had not been concluded and the final sign off for the two sets of accounts was linked. Under the proposed ‘backstop legislation’, it was expected that this process would be finalised by 30 September 2024 at the latest.
Asim Iqbal of KPMG provided a presentation to the Pensions Committee relating to the Staffordshire Pension Fund Audit Plan for 2023/24, and the process which KPMG would undertake during the audit of the financial statements of the Staffordshire Pension Fund. The presentation covered the following matters:
In response to a challenge from the Committee regarding the level of risk still being associated with “Directly Held Property”, which had become increasingly volatile as a result of the Covid pandemic, when prices and valuations were now stabilising, it was explained that the property portfolio was only being considered a high risk whilst KPMG familiarised themselves with the Fund. Once the property portfolio/risks were better understood, it was likely that this portfolio would be removed from being a high risk.
Resolved: a. That the content of the Audit Plan from KPMG in relation to their external audit of the Staffordshire Pension Fund accounts for 2023/24, be noted.
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Climate Change Strategy A report of the Director of Finance
Additional documents: Minutes: The Committee received a report from the Director of Finance relating to the Fund’s Climate Change Strategy (CCS).
The Fund’s CCS set out the Fund’s approach to managing the risks and opportunities presented by climate change and was approved by the Pensions Committee at its meeting on 11 February 2022.
The overarching aim of the CCS was to achieve a portfolio of assets with net zero carbon emissions by 2050. With 2050 being several years away; to guide and monitor the Fund’s decarbonisation journey, a series of 2030 targets had been set which used the position at 31 March 2020 as a baseline. The detail provided in the report demonstrated the significant progress that had been made to date against the 2030 targets.
The CCS provided at Appendix 1 to the report had no structural changes from the original version approved in February 2022, but it had been updated with the Fund’s progress versus the 2030 targets.
Resolved: That the contents of the Staffordshire Pension Fund Climate Change Strategy be noted.
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Climate Risk Management Report of the Director of Finance and a presentation from LGPS Central Ltd Additional documents:
Minutes: The Committee received a report from the Director of Finance on the Fund’s Climate Risk Management Report.
The members heard that the Responsible Investment and Engagement (RI&E) Team at LGPS Central Limited produced Climate Risk Management Reports for each of the pool’s eight Partner Funds. Attached at Appendix 1 to the report was a presentation from LGPS Central Limited on the key findings and recommendations from Staffordshire Pension Fund’s fourth Climate Risk Management Report, based on data at 30 September 2023. Attached at Appendix 2 was the full Staffordshire Pension Fund 2023 Climate Risk Management Report.
Basyar Salleh and Alex Galbraith of LGPS Central provided a presentation to the Pensions Committee relating to the Climate Risk Management Report. The presentation covered the following matters:
Councillor Greatorex noted that the Fund appeared to be on target to be net zero by 2050, however the Fund’s Climate Metrics provided a large number of statistics but lacked any specific detail. He suggested that it would have been useful to understand how the information could be turned into actionable insights. In response it was explained that, although the Fund’s Metrics were trending positively, this was as a result of how the Fund had positioned itself in the last couple of years, by investing in low carbon funds, or by switching from conventional funds to climate focussed funds. It was acknowledged that for the world to get to net zero by 2050 the Fund could not simply change where it invested and that a coordinated global response was needed. Within the Climate Risk Management Report, LGPS Central had developed a Dashboard that would be used to track the performance of the Fund’s worst carbon performing stocks. This meant that the companies that were driving the Fund’s emissions could be identified and engaged with, either directly or through partner organisations, as soon as possible.
Liz Staples reminded the Pensions Committee that the purpose of the Pension Fund was to generate money to pay members their pensions. Whilst targeting Net Zero was important, it should not be to the detriment of the Fund’s primary purpose. In response, it was acknowledged that fiduciary duty and the generation of investment returns for the Fund’s members was important. However, as climate change was a large investment risk for the Fund it meant that the Fund also had a responsibility to ensure the potential impact this could have on those returns was considered thus ensuring the wellbeing of the Fund’s members in the future.
Resolved: a. That the presentation from LGPS Central Limited on the Staffordshire Pension Fund 2023 Climate Risk Management Report be noted.
b. That the Staffordshire Pension Fund 2023 Climate Risk Management Report be noted.
c. That Messrs Salleh and ... view the full minutes text for item 7. |
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Taskforce on Climate-related Financial Disclosures Report A report of the Director of Finance
Additional documents: Minutes: The Committee received a report from the Director of Finance relating to the Taskforce on Climate-related Financial Disclosures (TCFD).
The Committee was reminded that the TCFD was commissioned in 2015. In 2017, the TCFD released its recommendations for improved transparency by companies, asset managers, asset owners, banks, and insurance companies with respect to how climate-related risks and opportunities are being managed. Disclosures that align with the TCFD recommendations were currently seen to represent best practice.
The Fund’s Climate Risk Management Reports received from LGPS Central, were consistent with the disclosures required by the TCFD and this had enabled the Fund to report in line with the TCFD Framework, which, it was noted, was likely to become compulsory for all LGPS Funds soon. The Fund’s latest TCFD Report, which presents the latest Carbon Risk Metrics Analysis, was attached at Appendix 1 to the report. The TCFD report also described the way in which climate-related risks were currently managed by the Fund.
Resolved: That the contents of the Staffordshire Pension Fund’s Task Force for Climate Related Financial Disclosures (TCFD) Report be noted.
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Staffordshire Pension Fund Business Plan Outturn 2023/24 A report of the Director of Finance Minutes: The Committee considered the final outturn position for the financial year 2023/24, together with a summary of the key achievements against the Business Plan, provided at Appendix 2 to the report.
Pension Fund Administration
Members were informed that as well as continuing with a high standard of service delivery, key achievements for the Pensions Administration, Systems and Data, Funding and Employers and Governance and Communications Teams during 2023/24 included:
Liz Staples informed that Committee that she had been contacted as the Pensioner Representative by a member of the Fund who does not want to go ‘electronic’ and does not want to use the portal. They asked if the process by which they could prove they were still alive could be made a little simpler with additional information being provided to aid the completion of the form. It was confirmed that amendments to the process were being planned for the 2025 exercise.
Pensions Administration – Service Standards
The Committee were presented with the Pensions Administration Team’s Service Standards for 2023/24 and were informed that the Team had achieved a 90% performance target in 12 of the 15 published standards. The Committee were asked to note the consistent level of performance versus the standards over the last three years.
It was noted that the three published standards where the 90% performance target was not achieved in 2023/24 were:
The Committee were asked to note that the revised Department for Levelling Up, Housing and Communities (DLUHC) annual report guidance had reduced the timescales for some of the Service Standards from 2024/25 onwards and this may impact performance against targets.
Pensions Investment Team
The Pension Fund Treasury & Investment Team continued to undertake the day-to-day accounting and contract monitoring across the Fund. They also undertook several additional projects throughout the year:
Audit
The Committee were informed that two Internal Audits had taken place throughout 2023/24. The annual Pensions Administration Audit which had maintained its “Substantial Assurance” rating for the fifth year in a row; and the Pensions Governance Audit which had also received a “Substantial Assurance” rating.
Pension Fund Budget and Costs
Committee members were reminded that instead of solely setting an annual budget and relying on budget monitoring to manage costs, reliance would be placed on cost comparisons, benchmarking and trends, where these were available, to ensure that value for money was consistently delivered.
The headline budget reported to Pensions Committee ... view the full minutes text for item 9. |
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Staffordshire Pension Fund Risk Register and Risk Management Policy A report of the Director of Finance
Additional documents:
Minutes:
The Committee was informed that Officers reviewed the Risk Register every quarter, focusing in on the detail of one of four key areas, (Governance, Funding, Administration and Investment), along with a review of any emerging risks.
The Committee heard that as part of the review, members of the Local Pensions Board attended the review meetings and took an active role in the discussions. They also discussed the specific area under review each quarter at formal Board meetings, in an effort to widen the general understanding of each area. The Board’s comments on the Risk Register and the review process were attached at Appendix 1 to the report. The Committee was asked to consider asking members of the Local Pensions Board to continue with their role in the ongoing review process.
The Committee were presented with a summary of the high-level risks associated with the objectives, attached at Appendix 2 of the report. This summarised the highest score of the detailed risks associated with each of the high-level risks and provided a summary of the controls and sources of assurance currently in place. This was intended to give the Committee an overview of the main risks the Pension Fund needed to consider and the controls in place to mitigate them.
The Committee were reminded that as part of the annual review, it was agreed that the Pensions Committee would review emerging risks to the Fund. Several transitional areas were reflected in Appendix 3 to the report, which provided more detail on the emerging risks perceived to be faced by the Pension Fund.
The Committee was informed that the Pension Regulator’s Code of Practice recommended that a Pension Fund has a Risk Management Policy in place, and that this was reviewed periodically. The Risk Management Policy covered key areas such as: • The Fund’s attitudes to, and appetite for, risk; • Aims; • Risk measurement and management; • Responsibility.
The updated Risk Management Policy for the Fund was attached at Appendix 4 to the report and was submitted for approval.
Resolved: a. That the summary of the high-level risks and emerging risks from the current Staffordshire Pension Fund Risk Register, as presented in Appendices 2 and 3 respectively be noted.
b. That the content and recommendations of the Local Pensions Board review of the Staffordshire Pension Fund Risk Register, attached at Appendix 1, and the continued involvement of the Pensions Board in the ongoing review, be noted.
c. That the Risk Management Policy of the Staffordshire Pension Fund, attached at Appendix 4, be approved.
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Report of the Director of Finance
Minutes: The Committee received a report from the Director of Finance that considered the draft response to the Minister for Local Government's letter on Efficiencies in Local Government and the management of the LGPS, dated 15 May 2024.
On 11 July 2023, the DLUHC (now renamed Ministry of Housing, Communities, and Local Government (MHCLG)) launched a consultation on LGPS investment reforms. The consultation sought views on proposals on five areas, the three most controversial being Pooling, Levelling Up and Private Equity. At the meeting held on 29 September 2023, the Pensions Committee approved the response of the Staffordshire Pension Fund to the questions asked by the consultation on the five areas outlined. This was submitted prior to the 2 October 2023 close of the consultation period.
Alongside the Chancellor’s Autumn Statement, the response to the “next steps on investments” consultation was published by DLUHC on 22 November 2023. The consultation response largely adopted the measures the government had originally consulted on.
The Committee was informed that on 15 May 2024, the Local Government Minister, Simon Hoare MP, wrote to all Pension Committee Chairs and administering authority Chief Executives and Section 151 Officers in England asking that they respond by 19 July 2024, setting out their responses to several questions. A copy of the Minister’s letter was provided for information at Appendix 1 of the report.
This followed a letter sent from the Minister to Council Chief Executives in April 2024, setting out expectations for productivity plans to be developed by each authority as announced at the local government finance settlement. The request was for plans to cover ‘service transformation, better use of technology and data and reduction of wasteful spend as well as views on barriers which government could remove’.
The Minister’s first set of questions to the LGPS carried on from DLUHC’s Investment Consultation response and related to a Fund’s plans to complete asset pooling by the March 2025 deadline. However, the second set of questions went further and asked how Funds would ensure that they were run efficiently, with appropriate governance structures in place. Funds were specifically asked whether they could achieve long-term savings and efficiencies if they were to become part of a larger Fund through merger, or creation of a larger pension authority.
Since receiving the letter, Fund Officers had taken part in several conversations with colleagues across the LGPS Central pool and had also taken part in a wider LGPS meeting facilitated by the Scheme Advisory Board and Local Government Association on 17 June 2024. Whilst views about pooling had been presented previously to DLUHC, there were clearly very strong feelings, and absolutely no desire for forced Fund mergers or the creation of a larger pension authority.
A draft response to the Minister’s letter from the Staffordshire Pension Fund was attached at Appendix 2 for the Pensions Committee to approve.
Councillor Greatorex, once again, stated that he had always been positive about pooling, and the benefits it brought, however, he felt that the questions being asked ... view the full minutes text for item 11. |
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Actuarial Update - Preparing for the 2025 Valuation A presentation from Hymans Robertson
Minutes: Adrian Loughlin of Hymans Robertson (Hymans) delivered a presentation to the Committee relating to the working that is being undertaken by Hymans in preparation for the 2025 valuation process. The presentation covered the following matters:
Resolved: a. That the Actuarial Update - Preparing for the 2025 Valuation be noted.
b. That Mr Loughlin be thanked for his presentation.
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Exclusion of the Public The Chairman to move:
‘That the public be excluded from the meeting for the following items of business which involve the likely disclosure of exempt information as defined in the paragraph of Part 1 of schedule 12A of the Local Government Act 1972 indicated below’ Minutes: Resolved: That the public be excluded from the meeting for the following items of business which involve the likely disclosure of exempt information as defined in the paragraphs of Part 1 of Schedule 12A of the Local Government Act 1972 indicated below.
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Exempt minutes of the Pensions Committee meeting held on 22 March 24 |
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Exempt minutes of the Pensions Panel held on 4 June 2024 |
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Local Government Pension Scheme Regulations - Admission of New Employers to the Fund (Exemption paragraph 3) A report of the Director of Finance |