Agenda and minutes

Pension Committee - Tuesday, 1st October, 2024 7.00 pm

Venue: Civic Offices, St Nicholas Way, Sutton SM1 1EA

Contact: Dominic Ryan, Committee Services Officer Tel: 020 8770 4990, Email: committee.services@sutton.gov.uk

Media

Items
No.	Item
14.	Welcome and introductions Minutes: The Chair, Councillor Cryss Mennaceur, welcomed those present. The Chair noted that Item 6, Annual Report & Accounts 2023-24, would be taken first.
15.	Apologies for absence and declaration of interests View the background to item 15. Minutes: The Committee received apologies for absence from Councillor Paul Cole, with Councillor Isabel Araujo attending as a substitute, from Councillor Jake Short, with Councillor Luke Taylor attending as a substitute, and from Councillor Tom Drummond, with Councillor Eric Allen attending as a substitute. Apologies for absence were also received from Councillor Sam Martin. Councillor Eric Allen declared that he was in receipt of a pension from the London Borough of Sutton.
16.	Minutes of the previous meeting View the background to item 16. To approve as a correct record the minutes of the meeting held on 25 June 2024. Supporting documents: Minutes , 25/06/2024 Pension Committee , item 16. PDF 124 KB Restricted enclosure 5 View the reasons why document 16./2 is restricted Minutes: Members enquired as to the progress made in gathering the email addresses of those in receipt of an London Borough of Sutton pension. Officers noted that the process had not started, but confirmed that an update would be presented to the Committee at a future meeting. RESOLVED: 1. That the minutes of the previous meeting held on 25 June 2024 be agreed as an accurate record.
17.	Any urgent business View the background to item 17. To consider any items which, in the view of the Chair, should be dealt with as a matter of urgency because of special circumstances (in accordance with S100B(4) of the Local Government Act 1972). Minutes: There was no urgent business.
18.	2023/24 Pension Fund External Audit Plan Supporting documents: 5. 2023_24 Pension Fund External Audit Plan _ Pension Committee _ 20241001 , item 18. PDF 158 KB 5a. Appendix A - 2023_24 London Borough of Sutton Pension Fund External Audit Plan Pension Committee 20241001 , item 18. PDF 741 KB Minutes: The Assistant Director of Finance introduced the report. The Committee noted that the audit fee financial statements had increased and enquired whether this was due to a change of providers. Officers stated that this was a factor in the increase, but also highlighted that the Public Sector Appointment of Auditors (PSAA) scheme, which the Fund had opted into, set the audit fees. Officers also explained that a factor within the increase of the fees was the audit industry believing that fees were reduced too far in previous years. Officers noted that further increases within audit fees were expected in the next financial year. Members asked whether the audit of the Pension Fund Accounts and Annual reports would be signed off by the auditor by the 1 December 2024 deadline, ahead of the meeting of the Audit and Governance Committee on 2 December 2024. Officers noted that previously they had expectations of the audit being completed in September 2024, which they recognised would be delayed until the end of October 2024, but they believed that the 1st December 2024 deadline was attainable. Members enquired about the work of the previous auditors, Grant Thornton LLP, and how their work with the LBS Fund and the current auditors, KPMG, differed. The Committee asked Officers whether the risks presented in the report were common risks shared by other funds. Officers confirmed that the risks were general to all funds and not specific to the LBS Pension Fund. Members also enquired about materiality presented within the report, asking whether the figure of £8.2 million of materiality for the financial statements as a whole was an aggregate figure. Officers said they would investigate this and inform members following the meeting. RESOLVED: 1. To note the 2023/24 Pension Fund External Audit Plan.
19.	Annual Report & Accounts 2023-24 Supporting documents: 6. Annual Report and Accounts 2023_24 (R) _ Pension Committee _ 20241001 , item 19. PDF 174 KB 6a. Appendix A - Draft LBS Pension Fund Annual Report 2023_24 _ Pension Committee _ 20241001 , item 19. PDF 869 KB Minutes: The Head of Pensions Investment introduced the report. The Committee enquired as to whether the maximum level of investment with the London CIV had been reached. Officers confirmed that further investment was possible and highlighted that a process was ongoing to transfer the Opportunities Fund to the London CIV MAC Fund which was due to be completed by the end of 2024. Members asked whether a potential decrease in interest rates would lead to further funds being placed in equities. Officers highlighted that there would be no short-term action to amend the investment strategy, but that a review would take place following the triennial valuation in March 2025. Members asked why global equities highlighted in the report were not listed as Level 1 investments within the fair value calculation. Officers stated that the Level 2 classification was due to the fund not being a listed pooled fund. They confirmed that LGIM had agreed with this classification as a result of the evaluation, methodology, and pricing. RESOLVED: 1. To approve the Pension Fund Annual Report 2023/24 and delegate to the Strategic Director of Resources, in consultation with the Chair of the Pensions Committee, any changes that are required to be made to the report, as a result of the external audit.
20.	Pension Administration Performance Update Supporting documents: 7. Pension Administration Performance Update (R) _ Pension Committee _ 20241001 , item 20. PDF 171 KB 7a. Appendix A - Benefits processing performance data _ Pension Committee _ 20241001 , item 20. PDF 249 KB Minutes: The Assistant Director of Finance introduced the report. The Committee highlighted that the report referenced that the level of processes overdue by 12 months had seen a decrease of minus 15. Officers confirmed that this was a drafting error with the report and that there had in fact been an increase of plus 15 overdue processes of 12-months or more. Members enquired about outstanding issues with historic aggregations and whether the issues were experienced by Civica customers more widely. Officers noted the question and confirmed they would clarify this for members. Officers noted that the Fund worked with the London Users Group to place additional pressure on Civica to amend these issues. They explained that manual methods could be used to avoid this issue, however this resulted in longer processing times and added to officer workloads. RESOLVED: 1. To note the update.
21.	Pension Administration Projects Update Supporting documents: 8. Pension Administration Projects Update (R) _ Pension Committee _ 20241001 , item 21. PDF 183 KB 8a. Appendix A - Summary McCloud Project Plan _ Pension Committee _ 20241001 , item 21. PDF 30 KB 8b. Appendix B - McCloud Project Risk Log _ Pension Committee _ 20241001 , item 21. PDF 45 KB Minutes: The Assistant Director of Finance introduced the report. The Committee asked for further information regarding the 1.2% of scheme members affected by the McCloud Remedy. Officers stated that this figure referred to the number of scheme members for whom calculations were needed to measure impact. Officers confirmed that a report with further detail would be presented to the Committee at a future meeting. RESOLVED: 1. To note the update.
22.	Governance and Risk Update Supporting documents: 9. Governance and Risk Update (R) _ Pension Committee _ 20241001 , item 22. PDF 292 KB 9a. Appendix A - Risk Register Overview Report _ Pension Committee _ 20241001 , item 22. PDF 218 KB Minutes: The Assistant Director of Finance introduced the report. The Committee enquired whether there was an increased level of engagement with the employer training and the impact this was having. Officers stated that the numbers were lower on this occasion, but suspected that this was linked to the school calendar. Officers confirmed that they would be engaging on a one-to-one basis with employers who had not attended the training. Members highlighted that Risk 22, loss of experienced pension staff and lack of expertise/capacity of Officers involved in the Fund, had been labelled as a green (low) risk despite challenges within recruitment. Officers said they would take this feedback away for consideration within future governance and risk updates. The Committee discussed whether the penalties faced by employers for delays in providing data were sufficient. Officers noted that employers who do not provide information within the allocated time frame were typically smaller employers, for which the current penalties would be effective. RESOLVED: 1. To note the update and risk register.
23.	Work Programme Update Supporting documents: 10. Work Programme Update (R) _ Pension Committee _ 20241001 , item 23. PDF 167 KB Minutes: The Pensions Finance and Investments Manager introduced the report. RESOLVED: 1. To note the updated Work Programme for the Committee.
24.	Responsible Investment Update Supporting documents: 11. Responsible Investment Update (R) _ Pension Committee _ 20241001 , item 24. PDF 124 KB 11a. Appendix A - LBS Responsible Investment Policy _ Pension Committee _ 20241001 , item 24. PDF 145 KB Minutes: The Head of Pensions Investment introduced the report. The Committee enquired how the Fund could make responsible investment better performing and maximise returns. Officers confirmed that the primary goal of the Fund was to fulfil its fiduciary responsibilities to pay benefits to the scheme members and highlighted that financial returns were an essential focus. Officers reaffirmed the Fund’s commitment to partnering with investment managers and opportunities that were actioning environmentally responsible practices. Additionally, representatives from Mercers highlighted that integrating Environment, Social and Governance can have a material impact on the performance of Funds. RESOLVED: 1. To review and approve the updated Responsible Investment Policy for the Fund at Appendix A.
25.	Investment and Manager Performance to 30 June 2024 Supporting documents: 12. Investment and Manager Performance to 30 June 2024 (R) _ Pension Committee _ 20241001 , item 25. PDF 283 KB 12a. Appendix A - Quarterly Performance Report June 2024 (Mercer) _ Pension Committee _ 20241001 , item 25. PDF 2 MB Restricted enclosure 30 View the reasons why document 25./3 is restricted Restricted enclosure 31 View the reasons why document 25./4 is restricted Minutes: he Head of Pensions Investment introduced the report. The Committee noted that equities were outside of the strategic range and asked for further information on the rebalancing of the Fund’s investment portfolio and potential corrections within this. Representatives from Mercers noted that, overall, the Fund was within target for the risk return and was in a comfortable position, but agreed that it would be a positive step to reduce the weight of equities within the investment portfolio. Members enquired about the winding down of property manager LaSalle in light of the serving of redemption notices, and in particular the sale of the Unite student accommodation at a 2% discount to the NAV. Representatives from Mercers noted that, within a Fund of £945 million, the LaSalle equates to around 1% of total assets, a portion of which is invested in the Unite student accommodation fund. A 2% discount to NAV is not considered a cause for concern and the sale of this holding is in line with the winding up of the fund. The Committee asked for further clarity regarding the move from M&G’s Alpha Opportunities Fund into the LCIV Multi Asset Credit (MAC) Fund. Representatives from Mercers confirmed the Fund had invested with both CQS and Pimco, which Representatives explained presented a similar investment arrangement to M&G. In addition to the recommendations, the Pension Committee noted: 1. The current investment allocations are not in line with the Strategic target and ranges set in the Investment Strategy Statement and the actions underway to address and monitor the issue. 2. The Committee would review the allocations again at the next meeting. RESOLVED: 1. To note the performance of the Fund during the quarter ended 30 June 2024. 2. To note the funding level as at 30 June 2024.
26.	London CIV Update Supporting documents: Restricted enclosure 33 View the reasons why document 26./1 is restricted Restricted enclosure 34 View the reasons why document 26./2 is restricted Minutes: The minutes of this item were exempt.
27.	Exclusion of the public and press The following motion should be moved, seconded and approved if the committee wishes to exclude the public and press to deal with reports revealing exempt information: “That the public and press be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information as defined in paragraph X Schedule 12A of the Local Government Act 1972.” Minutes: The motion to exclude the public and press was moved by Councillor Cryss Mennaceur seconded by Councillor Luke Taylor. RESOLVED: 1. That the public and press be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information as defined in paragraph 3 Schedule 12A of the Local Government Act 1972.