Agenda and minutes

Pensions Committee - Friday 20th March 2015 10:00am

Venue: Oak Room, County Buildings, Stafford. View directions

Contact: Mike Bradbury  Email: michael.bradbury@staffordshire.gov.uk

Items
No. Item

44.

Declarations of Interest

Minutes:

The following Member declared an interest in accordance with Standing Order 16.5:-

 

Member

Minute Nos.

Interest

Reason

Alan Dudson

All

Personal

Membership of the UNITE and GMB Trades Unions’ Pensions Committee

 

45.

Minutes of the meeting held on 12 December 2014 pdf icon PDF 135 KB

Minutes:

RESOLVED – That the minutes of the meeting held on 12 December 2014 be confirmed and signed by the Chairman.

46.

Minutes of the Pensions Panel held on 3 March 2015 pdf icon PDF 135 KB

Minutes:

RESOLVED – That the minutes of the meeting of the Pensions Panel held on 3 March 2015 be noted.

47.

Staffordshire Pension Fund Audit Plan 2014/15 pdf icon PDF 194 KB

Report of the Director of Finance and Resources

Additional documents:

Minutes:

The Director of Finance and Resources submitted the proposed Audit Plan for the audit of the Pension Fund 2014/15 by PricewaterhouseCoopers and explained that, whilst the Pension Fund accounts formed part of the County Council’s overall accounts, it was recognised as good practice to audit them separately.  He outlined the areas the audit would focus on which included:

 

·         Investment assets and returns – The existence, valuation, completeness, performance and allocation of investments.

·         Contributions – The Payment of Employer contributions in accordance with the rules.

·         Benefits and membership – The correct calculation of benefits and accurate recording of membership statistics.

·         Other areas including that current assets and liabilities were appropriately accounted for and related party transactions.

 

It was noted that the detailed audit findings would be reported to the Committee as the responsible body for the Fund, although a summary would also be made to the County Council’s Audit Committee as part of the normal audit arrangements.  The Director added that the Audit in 2013/14 did not reveal any issues which needed to be addressed.

 

In response to a question from Ms. McKiernan concerning whether the Staffordshire Pension Fund loaned any money to the County Council, the Director explained that in the past the Fund had the power to lend to local authorities but did so very infrequently.  However, when such loans were made, interest was charged at the appropriate rate.

 

Note: Subsequent to the meeting advice from the legal department has confirmed that the Pension Fund can no longer lend to the County Council and has not done so.

 

RESOLVED – That the external auditor’s plan for the audit of the Staffordshire Pension Fund for the 2014/15 financial year be noted.

48.

Pensions Business Plan 2015-16 pdf icon PDF 234 KB

Report of the Director of Finance and Resources

Additional documents:

Minutes:

The Director of Finance and Resources presented the Pensions Business Plan 2015-16 and explained that the key issues to be faced in the coming year included –

 

·         Implement pensions payroll (Phase 2).

 

·         Implement and embed the new Governance arrangements - Public Service Pensions Act 2013.

 

·         Reconciliation of HMRC contracted out details – GMP reconciliation.

 

·         Continue to explore shared LGPS administration services.

 

·         Responding to the DCLG review of Pension Fund Investments.

 

The Committee also received an update on progress against the 2014-15 plan and noted that significant successes had been achieved in a number of areas including -

·         Implementation of the new Local Government Pension Scheme

 

·         Moving the pension payroll system to Altair

 

·         Award of the Actuarial Services Contract to Hymans Robertson

 

·         The commissioning of a Property Investment Manager

 

·         The commissioning of the Fund’s Investment Advisors

 

The Committee noted that full details of the progress being made against the 2014-15 Plan would be included in the final outturn reported to the next Committee in June 2015.

 

The Director also outlined the primary risks to the continued delivery of a pension administration service to the high standards achieved – i.e.

·         The staffing resource with the right experience to cope with changes to Government Legislation.

 

·         Pension payroll Phase 2 – maintaining business as usual whilst undergoing change.

 

In response to a question from Mr Marshall in relation to the cessation of the contracting out for occupational schemes, the Director indicated that from 1 April 2016, contracting out for Occupational Pension Schemes would cease. This was linked to the Government’s introduction of the simplified State Pension Arrangements. Contracted Out Pension Schemes would have two years to agree all of their members contracted out position which was a huge undertaking for the whole of the public sector occupational schemes. The consequences of not getting this right essentially meant the Schemes would overpay the Pensions Increase on pensions in payment.  A report on this issue would be submitted to the Committee at its next meeting.

 

Mr Elsey paid tribute to the Pensions team for the swiftness of their response to questions raised by scheme members, some of whom needed information quickly to enable them to take informed decisions which could affect their future, for example when facing redundancy.

 

RESOLVED – That the Pensions Business Plan 2015-16 be approved and the key challenges which might affect performance be noted.

49.

Review of Funding Strategy Statement (FSS) and Statement of Investment Principles (SIP) pdf icon PDF 202 KB

Report of the Director of Finance and Resources

Minutes:

The Director of Finance and Resources reported that as part of their work on the 2013 triennial actuarial valuation of the Pension Fund, Hymans Robertson reviewed the Fund’s Funding Strategy Statement (FSS). The draft version of the FSS was presented to the Committee at its meeting on 13 December 2013. Following a period of consultation, which resulted in no material changes, the final version of the FSS was approved in consultation with the Chairman of the Committee. The annual review had concluded that there was no need to amend the current version.

 

The Committee were also informed that following the Committee’s approval of the Fund’s Strategic Asset Allocation (SAA) in December 2013, a review of the SIP had been carried out. As there were no recommended changes to the SAA, there were no significant changes in the fundamental investment principles. However, changes were made to the narrative to more accurately reflect the latest position. Text and tables detailing future investment returns and their expected volatility were also revised to keep the information provided up to date.

 

In preparing, maintaining and publishing the SIP the Authority were required to consult with ‘such persons as they consider appropriate’. In view of the fact that there were no significant changes in the investment strategy or in the strategic asset allocation, it was considered unnecessary for wider consultation of the SIP on this occasion. However, the Fund’s Investment Advisors had been consulted.

 

RESOLVED – (a) That it be noted that there have been no changes to the fully revised FSS, which took account of the results of the 2013 triennial actuarial valuation of the Fund.

 

(b) That it be noted that there have been no significant changes to the investment principles included in the SIP; albeit there have been minor changes in narrative and some tables to more accurately reflect the latest position of the Fund’s investments.

50.

CIPFA Knowledge and Skills Framework - Training Plan pdf icon PDF 229 KB

Report of the Director of Finance and Resources

Additional documents:

Minutes:

The Director of Finance and Resources reported that, at their meeting on 26 March 2010, the Committee approved the adoption of CIPFA’s Knowledge and Skills Framework which looks to address the following six areas of knowledge –

 

o   Legislative and Governance

o   Accounting and auditing

o   Financial Services, procurement and relationship management

o   Investment performance and risk management

o   Financial markets and products knowledge

o   Actuarial methods, standards and practices

 

He informed the Committee that the training planned for July 2015 would cover Pension Legislation and Governance and Pension Accounting and Auditing Standards (areas A and B), whilst the November training would cover Financial Markets and Product Knowledge (area E). Where possible, joint training would take place with Pension Board Members if the training was thought to be relevant. Options would also be considered for joint training for Committees and Boards with neighbouring funds.  .

 

RESOLVED – (a) That the proposed Training Plan (Appendix 1 to the report) be approved.

 

(b) That it be noted that an extra two half days will be slotted in for training in the current financial year in July and November.

 

(c) That it be noted that a training log is being maintained and “just in time” training at Pensions Panel and Pensions Committee are being identified on meeting agendas and entered on the training log.

 

(d) That it be noted that attendance at Committee and Panel meetings and training are shown in the Annual Report and Accounts.

51.

Risk Update pdf icon PDF 200 KB

Report of the Director of Finance and Resources

Minutes:

The Director of Finance and Resources informed the Committee that the Fund reported a risk register each year based on a previous piece of work conducted by SCT/CIPFA.   In the light of the more recent CIPFA publication the risk register was being overhauled and a more detailed report would be brought to the Committee’s meeting in June.

 

The Director outlined the main risk areas facing the Fund that could affect performance including governance, payroll, Guaranteed Minimum Pension reconciliations, freedom and choice, investment risk, fund maturity and employer risk.

 

In response to a question from Mr Elsey about the growth in the number of employers in the Fund and the challenges this brought, the Director explained that this could be risked managed by looking at “headline sectors” rather than examining the financial position of all individual employers.

 

RESOLVED – That the contents of the report, including key risks for the business plan,  together with the intention to bring a detailed risk register to the meeting of the Committee in June 2015, be noted.

52.

Governance Regulations - Update

Presentation by Director of Finance and Resources

Minutes:

The Committee received a presentation by the Director of Finance and Resources on The Local Government Pension Scheme (Amendment) (Governance) Regulations 2015 which came into force on 20 February 2015 and provided for the establishment of Pensions Boards.  The Committee had approved draft Terms of Reference and the Constitution for the Staffordshire Pensions Board at its meeting on 24 October 2014 which provided for the appointment of two Member Representatives, two Employer Representatives and up to three Independent Members.  Under the Regulations, only the Employee and Employer Representatives would have voting powers.  The final Regulations had also clarified the position with regard to elected Members of the Council being able to be appointed as Members of the Board provided that they were not connected with the administration of the Fund (e.g. existing members of the Pensions Panel or Pensions Committee).

 

The Director reported that it was proving difficult to recruit people who were interested in becoming Board Members and that it might be necessary to revisit the Board’s Terms of Reference to be able to “cast the net wider”.

 

The Committee were also informed that the County Council’s Constitution was amended at the Council Meeting on 19 March 2015 to provide for the establishment of, and terms of reference for, the Board.

 

The Director also outlined the arrangements for the establishment of the National Board which was to consist of 12 members appointed by the Secretary of State and would replace the Shadow Scheme Advisory Board.  The new National Board would have its budget approved by the Secretary of State with the administering authorities funding the Board.

The Committee also noted that the cost of new Schemes must be periodically assessed to ensure the reforms were affordable and sustainable.  This would be undertaken through two separate mechanisms –

 

·         The Employer Cost Cap – a process operated by the Treasury and set at 14.6% of pensionable earnings.

·         The Future Service Cost – a process operated by the National Board.

 

Both processes could lead to changes in the Scheme design or the level of employee contributions.  Both caps were concerned with calculating the cost of providing benefits that had built up since the introduction of the new LGPS Scheme and movement of 2% or more in either direction would require changes to be made.

 

RESOLVED – That the presentation be received and noted.

53.

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

 

The Committee then proceeded to consider reports on the following issues:

54.

Exempt minutes of the meeting held on 12 December 2014 (Exemption paragraph 3)

55.

Exempt minutes of the Pensions Panel held on 3 March 2015 (Exemption paragraph 3)

56.

Update on Investments (Exemption paragraph 3)

Presentation by the Director of Finance and Resources

57.

Freedom and Choice in Pensions - Update (Exemption paragraph 3)

58.

Local Government Pension Scheme Regulations Administration - Debt Write-off (Exemption paragraph 3)

Report of the Director of Finance and Resources