Hounslow Council


Agenda and minutes

Venue: Committee Room 1, Civic Centre, Lampton Road, Hounslow. View directions

Contact: Carol Stiles Tel: 020 8583 2066 Email:  carol.stiles@hounslow.gov.uk 

Items
No. Item

11.

Introductions, apologies for absence, declarations of interest or any other communications from Members

Minutes:

All members were present. Stephen Williams was welcomed as the new Employer Representative.

 

The Chair advised that Councillor Mukesh Malhotra, Chair of the Pension Fund Panel, would attend the meeting later. He clarified that members of the Pension Fund Panel attended the Board by invitation. Board members had the right to attend the Pension Fund Panel as observers.

 

The Chair suggested that the Board might wish to consider the agenda order for meetings, to allow for the option of discussion of issues without the attendance of the Chair or members of the Pension Fund Panel. One option would be to extend the invitation to the Chair from 3.00 p.m. so that other matters might be discussed in the earlier part of the meeting.

12.

Minutes of the meeting held on 20 July 2015 pdf icon PDF 99 KB

Minutes:

The minutes of the meeting held on 20 July 2016 were confirmed.

13.

Terms of Reference and Developing a Work Plan pdf icon PDF 87 KB

Minutes:

See the Terms of Reference document – Agenda Item 3.

 

The detailed Terms of Reference for the Pension Board had been included in the agenda pack for members’ information.

 

The Board discussed the basis of a Work Plan at a later item in the context of the Pension Regulators Key Performance Indicators.

14.

Role of the Pension Board at the Annual General Meeting (AGM) of the Pension Fund - for discussion

Minutes:

The Chair had asked for this item as he considered that prior to the next Pension Fund Annual General Meeting (AGM) he needed input from Board members on the role of the Board and his role as Chair in respect of reporting to the AGM.

 

The Chair explained that he had been asked to attend the AGM this year and was aware that some other members of the Board had attended. The meeting had been well attended by current staff and pensioners. He understood that in some other authorities the AGM was chaired by the Head of the Pension Board, so there were alternative models.

 

The Chair noted that although the performance in the year under report had been good there were issues arising from performance. He asked Board members to consider how they should position themselves in respect of the AGM as they had a different role to that of the Pension Fund Panel. They needed to consider, for example, whether they aligned themselves with the Panel or took a critical approach. There could be a different position if the Fund was performing poorly. He noted that it was expected that the results of the Triennial Evaluation would be available by the end of September.

15.

Role of Pension Board with reference to the Pension Fund Panel - for discussion

Minutes:

The Chair advised that he and William Cassell had attended the last Pension Fund Panel meeting. He asked the Board to consider whether they needed more than two members present to determine the mood of the meeting and in particular of the Fund Managers. It would be possible for Board members to report back formally to this meeting. William Cassell felt that at least two Board members should be present, otherwise the version reported to the Board could be skewed by one person’s view. He felt that this was particularly true for those Board members who were unfamiliar with the Panel to ensure that they covered all points.

 

The Chair advised that although the key role at the Pension Fund Panel was to attend and listen, the Board needed to consider arrangements should they need to pursue an issue and to meet to agree a collective view of points and questions which they might wish to direct to the Panel, probably via Lorelei Watson, Head of Treasury, Pensions and Capital. The timing of the two meetings per year might be insufficient to obtain a collective view.

 

Neil Mason suggested that there should be a report back to the Pension Board meetings from the Pension Fund Panel. The Chair undertook to write up a resume rather than wait for the minutes. He would share this for comment with whichever other Board member/s attended before sharing with the whole Board. He felt that it might be more effective to pick up issues quickly to raise with the Panel.

 

Neil Mason advised that the role of the Board was to assist the Panel through a scrutiny role so it would be helpful if the Panel suggested ways in which they could be assisted by the Board.

 

Councillor Malhotra, Chair of the Pension Fund Panel, suggested that if the Board had specific questions arising from the papers, it would be helpful to have those in advance so that the Panel had the opportunity to consider and respond. He also suggested that this did not necessarily need to take place within the public domain at the meeting but could be worked on outside the meeting via himself as Chair and Lorelei Watson. He understood that Board members had a scrutiny role to provide oversight on processes not decision making.

 

Neil Mason advised that the Board had a role in judging whether investment decisions matched the Panel’s Strategy statement. Councillor Malhotra clarified that the Panel followed CIPFA guidelines and internal processes, for example in respect of procurement. He advised that the Panel had serious decisions to make in the next year or so. He noted that the summer of 2015 had witnessed a financial crisis with deterioration in the value of the Fund, namely a 20% decrease in the market price. It was important to get this message understood and to ensure that there were processes of risk management. Mr Cassell also suggested that this was a further reason to give the right information to people  ...  view the full minutes text for item 15.

16.

Training pdf icon PDF 47 KB

Report to the July meeting attached.

Minutes:

 

See the report on Training Requirements – Agenda Item 6.

 

The report on training requirements and options submitted to the inaugural meeting of the Board had been circulated again in this agenda to remind Pension Board members of the training requirements.

 

The Chair reminded members that it had been agreed that all would undertake the three modules of the Local Government Employer training as a refresher even if they had undertaken this previously, so that all training was consistent. All members of the Board were also required to undertake the electronic training modules of the Pensions Regulator.

 

Stephen Williams understood that the modules would be repeated in September. William Cassell had already attended the three day course and the Annual General Meeting and the Pension Fund Panel meeting.

 

Neil Mason acknowledged that the three modules were good as overall background to pension funds whereas the electronic training in the toolkit provided the specific training on what the pensions regulator expected of the Pension Board.

 

The Chair understood that the Pension Fund Panel might have also completed the toolkit training. Lorelei Watson clarified that although one member of the Panel had, not all members had agreed to do so. It was not obligatory for the Panel as it was for the Pension Board.

 

William Cassell noted that at the Annual General Meeting of the Pension Fund the whole issue of ethical investment had been raised. He asked about the implications of the Modern Slavery Act which required British Companies to include reference in their Annual Reports. He requested a discussion of what the powers under the Act would be, the nature of the reports and how the ethical issue was monitored. Neil Mason suggested that they might have a report from officers on the Stewardship policy. However, Lorelei Watson explained that the Fund Managers had a duty to ensure legal compliance so she would ask the Relationship Managers to provide information on this point. The Chair suggested that the Board might also ask the Chair of the Pension Fund Panel how the Panel was dealing with the issue.

 

Councillor Malhotra commented on training. He suggested it might be helpful where there was specific pensions training if both groups trained together so that they heard the same message. Lorelei Watson gave an example. The Actuary would be providing training at the Pension Fund Panel in June and members of both the Panel and the Pension Board would be invited. Councillor Malhotra considered that as an excellent proposal. He also pointed out that there was Local Government Pension Scheme (LGPS) information and free courses available.

 

 

 

Resolved:

 

1.     That the Head of Treasury, Pensions and Capital would ask the Fund Managers to provide information on how they ensured compliance with the Modern Slavery Act.

2.     That it was noted that members of the Pension Board would be invited to the Pension Fund Panel in June for a briefing by the Actuary.

 

 

17.

Risk Register pdf icon PDF 106 KB

As considered by the December Pension Fund Panel.

Additional documents:

Minutes:

See the report of the six monthly monitoring of the Risk Register (as considered by the December Pension Fund Panel) – Agenda Item 7.

 

The Board considered the Risk Register. The Chair was mindful of issues raised by Mr Cassell. Looking at the headings in the register, he considered that there were other risks in addition to volatility. He asked about the comments of the Regulator.

 

William Cassell wondered if the systemic risk had been underestimated, in particular the risks from the economic position in China and the decline in the stock market. The potential for an EU referendum was also of concern. The last time there had been such a referendum there had been concern about the possible breakdown of the United Kingdom. He asked what the position would be if there was a majority vote in England to leave the EU but a majority vote in Scotland to remain in the EU. This would provoke a constitutional crisis.

 

The Chair commented that as the Fund Managers were underweight in UK stocks, if there were a vote to leave the pound could plunge in value whilst assets in Euros were up. Lorelei Watson advised that they had raised the issue with the Fund Managers who considered that there would be volatility if there were a vote to leave but this would then stabilise. Mr Cassell was of the view that the potential for a constitutional crisis, should the home nations vote in different ways, would affect the stock market and the value paid. The Chair noted that this was acknowledged as a risk and there was a diversification strategy to do what they could to mitigate the risk. He asked what could be done to protect against the risk.

 

Councillor Malhotra explained that the Panel took professional advice from the Fund Managers and advisers. He pointed out that they had regular review meetings with the Fund Managers and this point might be something to discuss with them once the Government had decided on a referendum.

 

Neil Mason asked whether the Investment Adviser included risk as part of her analysis. Lorelei Watson advised that the present position was that they did not consider that European Union membership deserved its own independent risk as the view so far was that  the markets would settle down. She pointed out that they had not had Scottish Independence as a separate risk to the Fund and this was a comparable situation.

 

Stephen Williams understood that the Board’s role was to consider whether the issue of risk had been considered properly. The Chair agreed that the Board should consider whether they were satisfied that this was an appropriate process to consider risk and whether they were satisfied that all major risks were captured on the register. Neil Mason noted that the risk register followed CIPFA guidelines so he considered the role of the Board was to quality assure the register.

 

Councillor Malhotra left the meeting at this point. He thanked the Board for his  ...  view the full minutes text for item 17.

18.

Exclusion of Press and Public

To resolve that the public and press be asked to leave the meeting during discussion of the remaining items of business because exempt information as defined in Paragraph 3 of Part I of Schedule 12A of the Local Government Act 1972 is likely to be made known.

 

Please note that members of the public and press must leave the meeting at this point.

Minutes:

Resolved:

 

That the public and press be asked to leave the meeting during discussion of the remaining items of business because exempt information as defined in Paragraph 3 of Part I of Schedule 12A of the Local Government Act 1972 is likely to be made known.

19.

Review of Performance of Fund Managers

As considered by the December Pension Fund Panel.

Minutes:

Reference the confidential report – Quarterly Report by the Investment Adviser (as reported to the Pension Fund Panel in December) – Agenda Item 9.

 

The Board considered the quarterly report from the Investment Adviser to the Pension Fund Panel which had been considered by the Panel in December. Lorelei Watson, Head of Treasury, Pensions and Capital, explained the format of the report which was a standard agenda item for every Pension Fund Panel meeting. The report covered the overall performance of the Fund that quarter by asset class and the specific performance of each of the Fund Managers, again overall and by asset class.

 

The Board also discussed and considered the review of the Investment Strategy and proposals to address both performance of the Fund and the potential cash fund deficit. The recommended solution to address all issues was a multi-asset income fund. The Board considered and noted that due process in line with the Fund’s Funding Strategy Statement had been followed by the Panel in making this decision. 

 

 

20.

Review of Investment Strategy

As considered by the December Pension Fund Panel.

Minutes:

Reference the confidential report – Investment Strategy – Multi Asset Income Fund (as considered by the Pension Fund Panel in December) – Agenda Item 10.

 

The Board had discussed the review of the Investment Strategy in considering the previous agenda item, the performance of the Fund.

 

 

 

21.

Pension Fund Administration

As considered by the December Pension Fund Panel.

Minutes:

Reference the confidential reports – Review of the Hounslow Pension Fund administration contract April – October 2015 and Update of the Service Improvement Plan between Capita Employee Benefits and the London Borough of Hounslow Pension Fund (as considered by the Pension Fund Panel in December) – Agenda Item 11.

 

The Board considered the report which had been taken to the Pension Fund Panel on the performance of Capita in administering the pension scheme against the terms of the contract and the report related to the Service Improvement Plan.

 

The Board noted that there had been problems in performance against the contract requirements the previous year and that this had been pursued with Capita at a high level. Penalty payments had been incurred under the contract and as a result a Service Improvement Plan had been developed to offset the penalties against enhancements to the service provided. The Plan included enhancements such as Capita’s revised pensions website and also provision of some of the work on reconciliations required under the government changes for the Guaranteed Minimum Pension. 

 

The Board explored the processes for monitoring the performance of the contractor to ensure compliance. Performance had improved. It was pointed out that some of the failures noted were minor, for example a slight delay in meeting a target. Data and an error log could be shared with the Pension Board.

 

22.

The Pension Regulator - Key Performance Indicators (Final)

Minutes:

Reference the confidential report – The Pension Regulator Key Performance Indicators – Agenda Item 12.

 

The Scheme Advisory Board had initiated an exercise to assess Pension Funds against key performance indicators (KPIs). The borough had responded to the exercise but had not yet received any feedback to assess how the Hounslow Fund compared with other local authority funds in respect of these indicators. The template was still a draft under development.

 

The Board discussed the fact that the performance indicators could prove a useful tool for the Board to consider in order to test whether the Fund was compliant with these requirements. There were primary and secondary indicators which could form the basis of a forward plan for Pension Board meetings in respect of quality assurance.

23.

Urgent Business

Any business which the Chair agrees to accept on grounds of urgency.

Minutes:

William Cassell explained to the Board his position as a member of the Retired Staff Association and the benefits of reporting to and receiving feedback from the organisation to fulfil his role on the Board.

 

However, he raised concerns about the future of the Retired Staff Association and concerns about the level of support from the local authority for the Association. The Association faced pressures from the reduction in subsidy to groups for renting community halls so that the Association now paid a higher rent for monthly meetings in the Montague Hall, from the imminent loss of its Treasurer and from the potential loss of the current support for mailing of newsletters. The issue for the Board was the difficulty in providing effective reporting to pensioners without the Retired Staff Association. Mr Cassell felt that the authority could give more support to the Association, for example some support to the Treasurer’s role. He wished the Cabinet and members to be aware of his concern that the borough could give more support to the organisation.

 

The Board discussed the current mechanisms for informing pensioners. There was the invitation to the Fund’s Annual General Meeting. HR sent payslips once or twice per year and there was a paragraph in the retirement letter about the Association. Stephen Williams suggested that there could be comment in the annual newsletters and the Board discussed the possibility of a piece in the newsletter to pensioners, which might generate interest in the Association and the Treasurer’s post. This would need to be ready by the end of February and Mr Cassell was asked to provide appropriate wording. Mr Cassell confirmed that the Association had extended its membership to include deferred pensioners and other staff who might have transferred a pension but had retired and previously worked for the London Borough of Hounslow. So more scheme members could be involved.

 

Resolved:

 

That William Cassell would provide wording to include in the forthcoming pensioners’ newsletter to promote the Retired Staff Association and seek any interest in the Treasurer’s post.  

24.

Date of next meeting - Monday, 11 July 2016 at 2.00 p.m.

Minutes:

The date of the next meeting was noted as Monday, 11 July 2016 at 2.00 p.m. but the Board noted the potential need for additional meetings if there was a significant issue to discuss. One such issue might be the consideration of pooling of investments and use of the CIV and the establishment of a multi-asset income fund.