Agenda and minutes

Apologies for absence were received from L Oliver.

There were no Declarations of Interest.

The minutes of the meeting held on 12 September 2024 were agreed as a correct record and signed by the Chair.

Pension Fund Committee held 17 December 2024

The Head of Pensions (LGPS), Paul Cooper noted that the Committee had received a number of reports in the public part of the meeting, including an update on Government Consultation on the future of LGPS.  He noted there had been good feedback from the Committee to feed into the Fund’s response.  He added that the Committee had received the updated Responsible Investment Strategy from BCPP, noting it was a light touch review this year, with a deep-dive to be conducted next year.  He noted in private session, the Committee had looked at equity allocation and Global Equity Alpha and received information in respect of other BCPP funds.

RESOLVED:

That the verbal update be noted.

The Board considered a verbal update from the Finance Manager, Jo McMahon regarding the Pension Fund Statement of Accounts.

The Finance Manager noted that the Council’s Audited Statement of Accounts, including the Pension Fund Accounts, had been signed off at the meeting of the Council’s Audit Committee on 29 November, with the Chair of the Pension Fund Committee having been in attendance at the meeting.  In respect of External Audit, she explained that Durham was one of the first Local Authorities in the North East to have their accounts signed off, noting that at the end of November only five Local Authorities in England had their accounts signed off.  The Finance Manager explained that the accounts were published 29 November after the Audit Committee, with the Annual Report being completed 1 December.  She noted that all deadlines had been met and thanked the Finance and Pensions Teams as well as External Audit for all their hard work in completing the accounts.

The Finance Manager noted there had only been a small number of internal controls that had been flagged, in terms of some slight differences in reporting, and a working group had been set up to align reporting.

The Chair asked if there had been any issues in terms of recommendations from the previous year’s Audit.  The Finance Manager explained that some relating to BCPP had been flagged and would be addressed via regional meetings with the Team.  The Head of Pension (LGPS) noted that the External Auditor, Mazars had praised the work of the Finance Manager and her Team in the earlier Committee Meeting.  He explained that the issues flagged had related to private market calls and were more of a sector issue, than solely relating to the Durham Fund.  He added Mazars had been very positive in terms of the ongoing work of the Finance Manager and her Team in this regard.

RESOLVED:

That the verbal update be noted.

The Board considered a report from the Corporate Director of Resources regarding the Fund’s pension administration and service provision to members, as well as providing an update on Key Performance information (for copy see file of Minutes).

The Head of Pensions (LGPS) reminded Members of the raft of new KPIs as a recommendation from the Scheme Advisory Board (SAB), with a ‘best endeavours’ approach for this year, the KPIs being compulsory from next year.  He referred the Board to B KPIs relating to casework processing time, noting B11 – Payment of Refund being below target.  He noted while a lower priority, the percentage was usually around 75 percent, higher than the Quarter 2 figure of 69.86 percent.  He noted there was a link to a particular employer, and explained that looking at current quarter performance, it was around 82 percent.  The Chair asked if it would be appropriate to change the target.  The Head of Pensions (LGPS) noted that Statutory Guidance included that measure, and explained that for the upcoming year, there were only four measures requiring further work before the start of 2025/26 so that the Fund was reporting against all measures outlined in the Guifance.  He updated the Board on the Annual Benefit Statement, noting all Annual Benefit Statements for both Active and Deferred members of the Scheme were made available ahead of the statutory deadline of 31 August 2024. 

The Head of Pensions (LGPS) noted Section G of the KPIs set out Investments and Pooled Assets, reminding the Board of the progress that had been made and savings as a consequence of pooling.  Councillor A Hopgood noted the new Government’s direction in terms of an expectation in relation to inward investment into the UK by Pension Funds.  The Head of Pensions (LGPS) noted that intention, noting the LGPS Consultation item later on the agenda.  He added that there was a proposed requirement for a ‘plan for local investment’, however, that could be zero, or perhaps up to five percent.  He added this was already something the Pension Fund Committee were agreed to, to invest locally with impact, however, with the main focus being return on investment, with any local impact a secondary byproduct of such investment.  Councillor A Hopgood agreed, noting that Government needed to be clear that Pension Funds’ purpose was to pay pensions to its members, and that money not generating appropriate returns to enable pensions to be paid, was not an appropriate investment for the LGPS. 

RESOLVED:

That the report be noted.

The Board considered a report from the Corporate Director of Resources which provided details on developments in matters that were both Local Government Pension Scheme (LGPS) specific, as well as providing an update on non-LGPS specific matters of interest (for copy see file of Minutes). 

The Head of Pensions (LGPS) noted the LGPS Consultation was a separate item, and that Appendix A to the report included information in relation to a SAB Statement on Fiduciary Duty and dealing with lobbying.  He explained Appendix B referred to Counsel’s opinion on investments in Israel, given the current situation in Gaza.

RESOLVED:

That the report be noted.

The Board considered a report from the Corporate Director of Resources which provided details on the Government’s proposals for further reform of the LGPS following the first phase of the Pensions Review (for copy see file of Minutes).

The Head of Pensions (LGPS) noted the Chancellor’s Mansion House speech on 14 November 2024, where she confirmed that the government will legislate that the 86 LGPS Funds in England and Wales must consolidate their assets into eight “megafunds” supporting change in the UK economy.  He added it was clear now that those “megafunds” were the existing Pools, rather than Pension Funds themselves, and he reminded the Board of the good progress that Durham had in pooling, with BCPP.  He added that consultation appeared to envisage a similar operating model to that followed by BCPP, including regulation by the Financial Conduct Authority (FCA), which BCPP already is.

The Head of Pensions (LGPS) noted the consultation proposed that Pools should take principal advice on their investment strategy from their Pool, with external advice to be by exception, and with a further proposal expanding the role of independent advisors and the possibility of such advisors becoming co-opted Pension Fund Committee members.  He added that feedback from the Committee had been in retaining independent advice, with an external view being complimentary to those from internally and from BCPP.  

He referred the Board to the table at Paragraph 12, setting out roles and responsibilities for the Pool and Pension Fund Committee, reiterating it was very much in alignment with the BCPP 2030 strategy.  He noted the way strategic allocations were set, with consultation noting this could be delegated to the Pool.  The Head of Pensions (LGPS) noted a response from the Fund would include comments on changes to advice and on allocations outside of the pool, with it being proposed that BCCP would carry out due diligence on local investment opportunities, which will require capability development at the pool.

The Head of Pensions (LGPS) noted Appendix B to the report set out the SAB’s ‘Good Governance’ Phase 3 guidance report from February 2021.

Councillor A Hopgood asked if Government would look to ‘clamp down’ on those Funds which had not pooled.  The Head of Pensions (LGPS) noted there were now hard deadlines in terms of pooling criteria and the March 2026 date.  Councillor A Hopgood asked if there were implication for Durham.  The Head of Pensions (LGPS) noted not directly, as Durham had pooled effectively through BCPP with most assets already under management; however all Pools would be required to submit proposals as to how they would meet the aspirations of the consultation.

Councillor A Hopgood noted the Government messaging appeared to be mixed, with many aspects looking at devolved powers, with their proposals in relation to the LGPS being the opposite.  The Head of Pensions (LGPS) reiterated that Government was looking for greater investment in the regions, through the eight “megafund” Pools, rather than 86 individual Pension Funds.  Councillor A Hopgood noted other Government approaches  ...  view the full minutes text for item 8.

The Board considered a verbal update on the preparation for the Pensions Dashboard by the Pensions Team Leader, Ashleigh Phillips (for copy see file of Minutes). 

The Pensions Team Leader reminded the Board of the ongoing work in relation to preparations for the Pensions Dashboard and noted the attached document setting out key issues and timescales.  She highlighted that the first stage was data cleansing, and the importance of data quality.  She noted the work of the integrated service provider and procurement of software, and of AVC Providers and reconciliation of their data and establishing who would put their data onto the Pensions Dashboard.  She explained as regards the main two AVC providers, Prudential and Standard Life, with Prudential being open to suggestions in how to implement.  The Head of Pensions (LGPS) noted a small number of legacy AVCs via Utmost Life that would require more comprehensive work, reiterating they were no longer an option for new AVC investments, rather a legacy option.  The Pensions Team Leader noted that in terms of employers and monthly reporting, around half had responded so far.

RESOLVED:

That the verbal update be noted.

The Head of Pensions (LGPS) noted that in had been agreed at the meeting of Durham County Council’s Full Council, held 11 December 2024, that the membership of the Local Pension Board be increased from six to eight, as per previous discussions at the Board.  He reminded the Board that it was to help make the Board more resilient and assist with quoracy and added that the vacancies to be filled as soon as practicable following discussions with political group leaders and Trade Unions.

The next meeting would be held on 13 March 2025 at 2.00pm.