Agenda and minutes

There were no apologies.

Liz Barclay (employer representative) declared an interest for the sake of transparency in respect of items on the agenda as her organisation was one of the employers in the Fund.

Paul Dunphy and Vinothan Sangarapillai (employee representatives) declared an interest for the sake of transparency in respect of items on the agenda as they were members of the pension scheme.

There were no announcements.

There was no urgent business.

To approve and sign the minutes of the meeting held on 23^rd March 2016.

RESOLVED –

THAT the minutes of the meeting held on 23^rd March 2016 were approved and signed as a correct record.

Report of the Executive Director Corporate Services

The Pension Board has responsibility for assisting the Pension Committee in ensuring compliance with the Scheme Regulations, other legislation relating to governance and administration, and the requirements of the Pension Regulator. The Pension Board must also ensure the effective and efficient governance and administration of the scheme. This report summarises the fund’s experience with Aberdeen equity manager since inception in 2009 and the Pension Committee’s decision to terminate the mandate on 28^th June 2016.

This report has appendices which contain exempt information within the meaning of Schedule 12A to the Local Government Act 1972 (as amended) and are not for publication.  The appendices have therefore been circulated to Board Members only.

If the Board wishes to discuss the contents of an exempt appendix it may pass the proposed resolution set out at the end of these agenda pages to exclude members of the press and public from the proceedings for that discussion.

Consideration was given to a report of the Executive Director Corporate Services.

It was noted that there was a confidential appendix to this report containing confidential information relating to this item, which Board Members had read and would take into account when making the decision.

The Head of Treasury and Financial Transactions presented the report and outlined the key aspects.

The Pension Board noted the fund’s experience with Aberdeen since inception in 2009 and the Pension Committee’s decision to terminate the mandate on 28th June 2016. It also noted that the Committee had, in addition, agreed that the Fund should make an outline decision to invest these funds in the London CIV Baillie Gifford sub-fund, subject to further due diligence and a member level meeting with Baillie Gifford - which took place in July. The final decision to go ahead with the investment proposed, was delegated to the Executive Director Corporate Services, in consultation with the Chair of Pension Committee, and was approved on 20th September 2016. The next steps were to appoint a transition manager and officers were seeking quotes from four major transition managers. It was expected the transition would occur in time for Pension Committee in December.

The Pension Board also noted that following concerns about Aberdeen’s performance and the size of their allocation within the Fund, the Committee, agreed in March 2015, to reduce their allocation by £140m and to use this to fund a second global equity manager, Harris. Assets were transitioned in May 2015. In the light of this, Board Members asked if action to terminate the mandate should have been taken sooner.

The Head of Treasury and Financial Transactions replied that:

·         Aberdeen managed the portfolio effectively and their performance was in line with target for the first four years of their mandate

·         They have stuck to an investment philosophy that was successful for them for a long time and shown conviction in the initial period of under-performance that performance would improve

·         Their strategy is run by competent professionals and it wouldn’t surprise officers to see them performing well again sometime in the long-term but their sustained underperforming track record could not be tolerated any longer

·         It is important to take a long term view with any investment manager and the LGPS are long term investors

·         Any single snapshot of time may cause an ill-informed knee jerk reaction, its important investors don’t pull out at the bottom of the market, just before things are about to turn around and compound a loss.

·         Sacking a manager and the following trading exercise will ultimately be costly and thus all disinvestment decisions required detailed due diligence

·         Performance analysts WM determined the main reason that the Fund had begun to trail its investment return assumption, prescribed in the 2013 valuation, was the underperformance of Aberdeen which was the final fundamental justification to disinvest.

Board members also asked how the Fund could act swiftly in future to make and execute a similar decision, should the occasion call for  ...  view the full minutes text for item 6.

Report of the Executive Director Corporate Services

The Pension Board has responsibility for assisting the Pension Committee in ensuring compliance with the Scheme Regulations, other legislation relating to governance and administration, and the requirements of the Pension Regulator. The Pension Board must also ensure the effective and efficient governance and administration of the scheme. This report presents an update to the risk register associated with the Camden Pension Fund, that was received by the Pension Committee and is being reported to the Pension Board to ensure that it has oversight of how the Committee is managing risks.

Consideration was given to a report of the Executive Director Corporate Services.

The Head of Treasury and Financial Transactions presented the report and outlined the key aspects.

The risk categorisation had been updated following a review of risk evaluation throughout the Council. Whilst the ratings scale for impact is set locally within services (in this instance the Pension Fund), the ratings scale for probabilities have all changed this year. The investment advisors, the shared service and internal audit officers had been consulted and advised on the capture and categorisation of risk. One new risk had been added this year relating to pooling progression and the potential defocusing, this represented for Fund’s executing their investment strategy and reallocation decisions, for concern around pooling accessibility and timing.

The Pension Board noted the updated risk register associated with the Camden Pension Fund and that any changes to the risk register would be highlighted to the Pension Committee.

Board Members felt that it would be useful to have more information in future on best practice and the process used to score, assess and prioritise risks.

ACTION BY: Executive Director Corporate Services

With reference to Table 1 “Risk Map Framework”, the Pension Board suggested that in future, to make the Risk Register review more streamlined, the Pension Committee should focus only on the risks in the reds and amber categories as their probability was the greatest and their mitigations more important.

 TO NOTE: Executive Director Corporate Services

RESOLVED –

THAT the report be noted

TO NOTE: Executive Director Corporate Services

Report of the Executive Director Corporate Services

The Pension Board has responsibility for assisting the Pension Committee in ensuring compliance with the Scheme Regulations, other legislation relating to governance and administration, and the requirements of the Pension Regulator. The Pension Board must also ensure the effective and efficient governance and administration of the scheme. This report sets out revisions to the Funding Strategy Statement (FSS) which establishes how scheme employers’ pension liabilities are best met. This report was received by Pension Committee and is being reported to Pension Board to ensure they are have an oversight of how the Funding Strategy Statement has been produced and consultation arrangements.

This report has an appendix which contain exempt information within the meaning of Schedule 12A to the Local Government Act 1972 (as amended) and are not for publication.  The appendix has therefore been circulated to Board Members only.

If the Board wishes to discuss the contents of an exempt appendix it may pass the proposed resolution set out at the end of these agenda pages to exclude members of the press and public from the proceedings for that discussion.

Consideration was given to a report of the Executive Director Corporate Services.

It was noted that there was a confidential appendix to this report containing confidential information relating to this item, which Board Members had read and would take into account when making the decision.

The Head of Treasury and Financial Transactions presented the report and outlined the key aspects.

The Pension Board noted that the proposed Funding Strategy Statement (FSS) had been distributed to employers for a one month consultation period after September’s Pension Committee agreement to the draft. A follow-up report would be submitted to the Pension Committee in December which would detail the outcome of the consultation process, officers’ response, and a proposed finalised FSS for the approval of the Pension Committee. To date no responses to the consultation had been received.

Liz Barclay (employer representative) added that she felt that the document was good, concise and transparent and was clear in respect of how it would affect employers.

RESOLVED –

THAT the report be noted

TO NOTE: Executive Director Corporate Services

Report of the Executive Director Corporate Services

The Pension Board has responsibility for assisting the Pension Committee in ensuring compliance with the Scheme Regulations, other legislation relating to governance and administration, and the requirements of the Pension Regulator. This report was presented to Pension Committee in September 2016 and reported the initial results of the triennial valuation from the Pension Fund’s actuary (Hymans Robertson). The Pension Board is asked to review the outcome of the actuary’s report and valuation to ensure the effective and efficient governance and administration of the scheme.

This report has appendices which contain exempt information within the meaning of Schedule 12A to the Local Government Act 1972 (as amended) and are not for publication.  The appendices have therefore been circulated to Board Members only.

If the Board wishes to discuss the contents of an exempt appendix it may pass the proposed resolution set out at the end of these agenda pages to exclude members of the press and public from the proceedings for that discussion.

Consideration was given to a report of the Executive Director Corporate Services.

It was noted that there was a confidential appendix to this report containing confidential information relating to this item, which Board Members had read and would take into account when making the decision.

The Head of Treasury and Financial Transactions presented the report and outlined the key aspects.

The Pension Board noted that every three years the Fund’s liabilities must be valued by a qualified actuary as set out in the regulations which govern the Local Government Pension Scheme (LGPS). The last valuation was undertaken in 2013 by Camden’s actuaries, Hymans Robertson (Hymans). The primary purpose of a valuation was to determine whether the Pension Fund had sufficient assets to meet its long-term pension liabilities. A scheme that was 100% funded would have sufficient assets (over time) to meet its current pension promises in the future, assuming the current assumptions were borne out in practice.

This report represented the current situation with regard to the Fund as a whole and did not show individual deficit recovery payments. The next stage in the valuation process was the preparation of the draft individual employer results which would produce contribution rates for each employer over the next three years and the Fund would need to agree these with employers by 31 March 2017. A report regarding the “Employer Contribution Strategy” would be submitted to the December Pension Committee meeting.

It was also noted that Section 13 of the Public Service Pensions Act 2013 brought in a requirement for the Government Actuary’s Department (GAD) to report on four aspects of the funding valuation for each Fund operating the LGPS: compliance, consistency, solvency and long term cost efficiency. . GAD had performed an initial report (known as the s13 dry run) on the 2013 triennial valuations and will follow this up in 2017/18 with work on the 2016 valuations. One of the purposes of the dry run was to standardise the actuarial assumptions from which funding levels are based (put forward by the Scheme Advisory Board) for all 90 funds in England and Wales. This has determined a restated funding level for the Camden Fund of 91%, compared to the formal 2013 triennial valuation: 75.6%. A review of the exercise would be presented to the December Pension Committee.

RESOLVED –

THAT the report be noted

TO NOTE: Executive Director Corporate Services

Report of the Executive Director Corporate Services

The Pension Board has responsibility for assisting the Pension Committee in ensuring compliance with the Scheme Regulations, other legislation relating to governance and administration, and the requirements of the Pension Regulator. The Pension Board must also ensure the effective and efficient governance and administration of the scheme. The Pension Fund is required to produce an Annual Report under the Local Government Pension Scheme Regulations 2013. This report was presented to Pension Committee in September 2016 and is reported to the Pension Board for them to ensure compliance with scheme regulations regarding the annual reports.

Consideration was given to a report of the Executive Director Corporate Services.

The Head of Treasury and Financial Transactions presented the report and outlined the key aspects.

The Pension Board noted that the cost of the service per member had decreased from £24.79 in 2014/15 to £22.54 in 2015/16. In response to a question asking the reason for this reduction, the Head of Treasury and Financial Transactions advised that the full embedding of pensions administration as a shared service had driven costs downwards.

Camden monitors the performance of the administration shared service (who pay out Pension Fund benefits) against targets using a computerised workflow management system. The service level provided to members had not been affected since the inception of the shared service. The costs were those purely attributable to the cost of administration (staff costs, overheads and administration systems £429k, and Actuaries costs £26k). These were higher in 2014/15 (£472k and £17k respectively) as the Fund incurred transition and upgrade costs in setting up the Shared Service, and increased actuarial costs leading into the triennial valuation work.

RESOLVED –

THAT the report be noted

TO NOTE: Executive Director Corporate Services

Report of the Executive Director Corporate Services

The Pension Board has responsibility for assisting the Pension Committee in ensuring compliance with the Scheme Regulations, other legislation relating to governance and administration, and the requirements of the Pension Regulator. The Pension Board must also ensure the effective and efficient governance and administration of the scheme. This report summarises the items presented and decisions made at the Pension Committee meetings on 28^th June and 15^th September 2016.

Consideration was given to a report of the Executive Director Corporate Services.

The Head of Treasury and Financial Transactions presented the report and outlined the key aspects.

The Pension Board noted that the Administration report detailed the cash flow and membership statistics for the previous year and over the longer term. The Fund was broadly cash neutral at present but the overall picture suggested the Fund might be edging into cash flow negative territory. Employers’ contributions had increased over the two previous financial years, whilst employee contributions had remained broadly the same. A Fund maturity study was being carried and would be reported to the Pension Committee in December, which would then be brought to the Pension Board in March 2017.

RESOLVED –

THAT the report be noted

TO NOTE: Executive Director Corporate Services

There was no urgent business

The next meeting will take place on 15^th March 2017 at 6.30pm.

It was noted that the next meeting of the Pension Board would be held on Wednesday, 15^th March 2017 in Committee Room 4.