Agenda and minutes

Pension Committee
Monday, 12th March, 2018 7.00 pm, NEW

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

Contact: Charles Yankiah, Committee Services Officer  Tel: 020 8770 4990 | Email:  committeeservices@sutton.gov.uk

Items
No. Item

45.

Welcome and Introductions

Minutes:

The Chair welcomed all those present.

 

46.

Apologies for Absence

Minutes:

Apologies were received from Councillors Richard Broadbent (for lateness) and Councillor Nick Mattey for absence.

47.

Declarations of Interest

Minutes:

Item 6 - Councillor Pollock declared a non-pecuniary interest as a member of the Planning Committee.

 

48.

Minutes of the Previous Meeting pdf icon PDF 80 KB

To approve as a correct record the Minutes of the meeting held on 18 December 2017.

Minutes:

RESOLVED: that the minutes of the meeting held on 18 December 2017 be agreed as an accurate record.

 

49.

Member Training

Minutes:

A member development session was delivered by David Walker (Hyman Robertson) on the LBS Pension Fund, Performance Monitoring and Pooling which focussed on:

 

  • Fund Governance
  • Impact of Pooling
  • Understanding roles and responsibilities
  • Performance Monitoring
  • Understanding performance

 

Members enquired about the “pooling system” and the relationship between Sutton and the CIV, the Pension Committee structure in future and how the various Boards would fit into the proposed new governance arrangements.

David Walker explained that Government wanted local authorities to be only in one pool with shareholder rights. The Board would still operate independently and feedback to the Committee. Elected members would have roles on the joint committees, with officers developing new relationships in the pool according to the Government criteria and report back annually to local authorities. April 2018 is the deadline for all pools to be operational, but it is clear that local authorities won’t be ready to transfer all their assets and funds to the pools.

 

The Strategic Director for Resources, Gerald Almeroth commented that the CIV was set up originally with London Councils and it was voluntarily not mandatory. London Councils met monthly to oversee the operations. But under the new governance arrangements, there will now be a smaller shareholders committee to advise and oversee, not exert control.

__________

 

Councillor Penneck left the meeting at 7.23pm, due to Councillor Broadbent arriving late.

__________

 

50.

Presentation by Invesco (Residential Property)

To consider the investment performance results to December 2017.

Minutes:

John German, Senior Director and Stuart Boucher, Client Director of Invesco gave a presentation on the investment performance results to December 2017.

 

Members enquired about whether the the investments were owned or a partnership and if the intention were to seek to own or invest in joint ventures.

 

John German explained that there is a mixture of 100% owned and partnerships e.g. Sutton Point is 100% freehold owned, Liverpool Strand is 100% freehold owned, other portfolios share a 96% ownership and 4% joint venture. Invesco’s intentions are to control everything it invests in and to grow the investment.

 

Members questioned the long term plans and how the assets were performing.

 

John German stated that that the structure was open ended with a view for the fund to continue to grow and investments continue to perform. The medium to long term plan over the next 5-7 years is that once the development assets have stabilised and been completed then the income producing potential would be seen.

 

The Chair thanked John German and Stuart Boucher for the presentation.

 

51.

Quarterly Investment Performance Report to December 2017 pdf icon PDF 259 KB

This report shows the performance of the Pension Fund Investment Managers for the quarter ending 31 December 2017, performance in the last twelve months, annualised rolling three year performance against target benchmark and performance since inception.

Additional documents:

Minutes:

Ian Talbot, Investments, Insurance and Commercial Manager presented the report and highlighted the following:

 

  • The value of holdings (paragraph 4.3 of the report)
  • The MSCI World Index being the Benchmark for the Fund’s three active global equities managers. (paragraph 4.4 of the report)
  • The performance after the restructure (paragraph 5 of the report)

 

Members asked that paragraphs 9.1 and 10.1 be explained.

 

Gerald Almeroth, Strategic Director for Resources informed the Committee that property is a long term investment and new development is part of the fund. However, not many developments are up and running so until the developments are completed and the rental incomes start generating, the investment opportunities can’t yet be seen.

 

David Walker commented that to commit money and draw it down over time will entail spending the money and building the investment over time. Building developments and assets first become operational and then generate income.

 

Members enquired about the real investment and real activities and whether an explanation/table could be inserted at the beginning of the report to reflect what it is about and who the fund managers are, especially as new members are expected on the Committee after the annual meeting of the Council.

 

Gerald Almeroth informed the Committee that through the investment report previously submitted to Committee agreed to invest in 2 other projects and it would be difficult to report quarterly as there would not be much progress at this stage, however, a fuller assessment can be reported on in due time.

 

Members thanked the officer team and partners for the success of the long term performance to date at Sutton, in terms of decisions taken to invest and new investments and that it deserved some acknowledgement.

 

Gerald Almeroth agreed and stated that the actual evaluations will see that the actual Sutton Fund has increased the most out of all the London Boroughs.

 

Members asked about the cash kept and the limitations and whether or not it has to be held.

 

Gerald Almeroth informed the Committee that it was useful to have a reasonable level of cash to draw upon, as funds can be cash flow negative, although Sutton is cash flow positive.

 

RESOLVED: That the public be excluded from the remainder of the meeting for the following item of business on the grounds that it involves the likely disclosure of exempt information as defined in paragraph 3 Schedule 12A of the Local Government Act 1972.

 

The Committee then considered Appendix B to the report.

 

The Chair thanked the officers and the advisors for their decisions and advice.


RESOLVED: that the performance of the Pension Fund Investment Managers be noted.

52.

Update on the London CIV pdf icon PDF 134 KB

This report provides the Committee with an update on recent developments with the London CIV in terms of the recent Governance Review and consultation as well as progress with the setting up of various investment funds.

Additional documents:

Minutes:

Ian Talbot, Investments, Insurance and Commercial Manager provided the Committee with the following update:

 

  • The progress of the CIV in making sub-funds available for investments based on Quarter 4, December 2017.
  • The Fixed Income and Cash -flow strategies
  • The future direction of the London CIV
  • Lord Kerslake’s letter (attached at Appendix A to the report)
  • LBS’s response to the London CIV Consultation on Strategy

 

Members enquired about the London Treasurers suggesting an alternative approach and whether this was captured in the consultation response and if the Leader’s meeting had taken place yet.

 

Gerald Almeroth informed the Committee that the alternative approach suggested by London Treasurer’s had been captured in the LBS consultation response and that the Leaders’ meeting had not yet taken place.

 

Members asked about the strategy proposal and the views of the other boroughs and the proposed makeup of the shareholders meeting.

Gerald Almeroth stated that the investment arrangements are still not clarified and it would be difficult to agree to something without the full detail, so LBS’s response was “No” to the Strategy Proposal. Proposals were clouded around governance and need more clarity. In relation to the makeup of the shareholders meeting it was being proposed that there be 12 Treasurers and Pension Chairs (6 of each).

 

Members enquired about the Shareholder Group and who currently sits on it and about the additional costs that would arise as a result of an increase in the range of options.

 

Gerald Almeroth commented that the CIV have invited an elected member and a treasurer onto the Board and to be decision makers on the Board of the CIV.  He further commented that there can be as many as 45 people attending the investment advisors’ meeting and a more focussed approach is being sought.

 

Members asked about the liability aware fund and what LBS’s current cost savings were.

 

David Walker advised the Committee that the liability aware fund made reference to liabilities that were sensitive to inflation and interest rates.

 

Gerald Almeroth informed the Committee that the cost savings to LBS were not available, but would share it with the Committee after the meeting.

 

Members enquired about why the Government was forcing local authorities to invest in the CIV and couldn’t there be a possibility that Government could then direct funding to investments in their own interests and is it a good idea to be investing in infrastructure in the UK.

 

David Walker informed the Committee that the proposed new governance arrangement is a better governance process and that management savings, cost savings, pooling facilities would be part of the Government criteria. There was a legal ruling to say that Government can’t force local authorities, but if things are not going well then the Government can step in and take over the fund.

 

Members enquired about the benchmark for success and whether it was worth pursuing these new governance arrangements with the CIV and what would be the timescales for the changes to be into effect.

 

Gerald Almeroth stated that  ...  view the full minutes text for item 52.

53.

Review of Risk Register pdf icon PDF 129 KB

This report presents the Sutton Pension Fund Risk Register.

Additional documents:

Minutes:

Ian Talbot, Investments, Insurance and Commercial Manager presented the report.

 

RESOLVED: that the update on the Sutton Pension Fund Risk Register be approved.

 

54.

Pension Fund Business Plan 2018/19 pdf icon PDF 115 KB

This report introduces the Pension Fund Medium Term Business Plan.

Additional documents:

Minutes:

Ian Talbot, Investments, Insurance and Commercial Manager presented the report and tabled a revised version of Appendix A, paragraph 8.4 with the following amended figures:

 

  • Administrative Costs - Other
    • 2018/19 - £75k
    • 2019/20 - £60k
    • 2020/21 - £30k
  • Sub Total -
    • 2018/19 - £432k
    • 2019/20 - £421k
    • 2020/21 - £394k
  • Overall Total -
    • 2018/19 - £3,272k
    • 2019/20 - £3,294k
    • 2020/21 - £3,140k

 

RESOLVED: that the Pension Fund Medium Term Business Plan as set out in Appendix A to the report and the revised version of Appendix A, paragraph 8.8 as tabled and appended to these minutes be agreed.

 

Appendix to the Minutes - Pension Fund Business Plan 2018/19 - Revised Appendix A pdf icon PDF 68 KB

55.

Pension Administration update pdf icon PDF 151 KB

This report provides an update on the main work streams impacting pension administration for the period December 2017 to February 2017.

Additional documents:

Minutes:

Sarah Spence, Sutton & Kingston Shared Pension Service Project Manager presented the report.

 

Members enquired about the reduced backlog and why Kingston’s was higher.

 

Sarah Spence informed the Committee that the backlog split figures were not available but would be circulated to members after the meeting. In relation to the Kingston Pension Fund it is larger than LBS for example, Kingston University is in the Kingston Pension Fund and has over 1000 active members.  

 

Members asked about the additional staff needed for the administration team and about the online facility.

 

Sarah Spence commented that the total cost would be in the region of £40k over 18 weeks for the additional staff, but it is very difficult to recruit as the staff would need to hit the ground running, but because of LBS system’s and the experience needed for the role it is difficult to recruit. There were currently 2 temps in the team at the moment. In relation to the online process, ongoing communication to active members in both funds have encouraged registration, because 2018 annual benefit statements for active members will only be available on-line in September 2018.

 

The Chair enquired about members leaving the authority now and not having access to modern desktop.

 

Sarah Spence informed the Committee that for deferred members, their 2018 annual benefit statements will be sent by post to all members by September 2018 and will inform them that they would need to respond and register to be able to view subsequent statements.

 

RESOLVED: that the Committee noted the report.

 

56.

Review of Work Programme pdf icon PDF 89 KB

To review the Work Programme for 2018/19.

Minutes:

The Committee noted the Work Programme 2018.

 

57.

Any Urgent Business

The Chair must approve the reason for urgency.

Minutes:

There were no urgent items.