Meeting documents

To receive any apologies for absence

Apologies for absence were received from Ms T Barber, Mrs P Duke, Mr S Haraldsen and Mr P Thornton

To note the Terms of Reference of the Committee and any changes to membership.

Members are asked to welcome the Committee’s new Investment Advisor, Dr Bob Swarup of CAMDOR Global Advisors Ltd

The Committee’s Terms of Reference and membership were noted.

The Chair introduced Dr Bob Swarup of CAMDOR Global Advisors. He was the new Investment Advisor to the Committee. The Chair hoped for a long lasting relationship between Dr Swarup and the Fund.

The Chair congratulated the members who had been elected onto the new Westmorland and Furness and Cumberland Local Authorities following the recent local elections. The Chair passed on his commiserations to those members who had stood but had not been elected onto the new authorities.

Members are invited to disclose any disclosable pecuniary interest they have in any item on the agenda which comprises

1          Details of any employment, office, trade, profession or vocation carried on for       profit or gain.

2          Details of any payment or provision of any other financial benefit (other than from the authority) made or provided within the relevant period in respect of any expenses incurred by you in carrying out duties as a member, or towards your election expenses.  (This includes any payment or financial benefit from a trade union within the meaning of the Trade Union and Labour Relations (Consolidation) Act 1992).

3          Details of any contract which is made between you (or a body in which you have a beneficial interest) and the authority

(a)       Under which goods or services are to be provided or works are to be           executed; and

            (b)       Which has not been fully discharged.

4          Details of any beneficial interest in land which is within the area of the authority. 

5          Details of any licence (alone or jointly with others) to occupy land in the area of the authority for a month or longer. 

6          Details of any tenancy where (to your knowledge)

            (a)       The landlord is the authority; and

            (b)       The tenant is a body in which you have a beneficial                                                     interest.

7          Details of any beneficial interest in securities of a body where

(a)       That body (to your knowledge) has a place of business or land in the          area of the authority; and

(b)       Either –

(i)      The total nominal value of the securities exceeds £25,000 or one        hundredth of the total issued share capital of that body; or

(ii)     If that share capital of that body is of more than one class, the total nominal value of the shares of any one class in which the relevant person has a beneficial interest exceeds one hundredth of the total issued share capital of that class.

In addition, you must also disclose other non-pecuniary interests set out in the Code of Conduct where these have not already been registered.

Note

A "disclosable pecuniary interest" is an interest of a councillor or their partner (which means spouse or civil partner, a person with whom they are living as husband or wife, or a person with whom they are living as if they are civil partners).

There were no disclosures of interest made at the meeting.

RESOLVED,     that the press and public be excluded from the meeting during consideration of the following reports as they contain exempt information relating to the financial or business affairs of any particular person (including the authority holding that information) by virtue of Paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972:-

Item 14.          Provisional Budget Outturn 2021/22 and Delivery against Business Plan  (Part 2)

Item 15.          Monitoring Report for the Quarter ended 31 March 2022 (Part 2)

Item 16.          Cumbria LGPS Investment Sub Group Activity Report to May

Item 17.          Verbal Update - Emerging Issues

Item 18.          Closing Comments

To confirm as a correct record the minutes of the Cumbria Pensions Committee held on 18 March 2022 (copy enclosed).

RESOLVED that, the Minutes of the meeting held on 18 March 2022 be approved as a correct record.

This is a standing item.  To receive concerns, queries and comments from non-County Council employers and individual members of the Cumbria Local Government Pension Scheme

There were no representations made at this meeting of Cumbria Pensions Committee.

To receive for information a schedule of future meetings of the Cumbria Pensions Committee (copy enclosed).

The schedule of future meetings that had been published with the Agenda was noted.

The Chair reminded members that the September meeting of the Committee would be held in Leeds.

To receive the minutes of the BCPP Joint Committee meeting held on 8 March 2022 (copy enclosed).

The Minutes of the BCPP Joint Committee meeting held on 8 March 2022 were presented to the Committee.

The Chair reported on the business conducted at the meeting. This included a discussion on the annual elections to the Joint Committee, the Joint Committee’s budget and the 2021 Partner Fund Satisfaction Survey and Market Review.

Members were informed about the discussions held regarding the number of members required on the Joint Committee to make it quorate. A meeting in October had not been quorate so a change in quorum number was being sought to ensure that meetings could proceed. The Chair anticipated that 7 would be the future quorum number.

It was noted that there were no persistent absentees at the meetings, likely as Funds would want their members present to make representations.

An emergency report had been considered on Russia’s invasion of Ukraine. It was noted that BCPP had decided not to make any further investments in Russia and Belarus and to review current investments which would be written down in value and withdrawn when possible.

RESOLVED that, the minutes of the Border to Coast Pension Partnership Joint Committee meeting on 8 March 2022 be noted.

To consider a report from the Director of Finance (Section 151 Officer) (copy enclosed).

A report was considered from the Director of Finance (S151 Officer) regarding an update from the Cumbria LGPS Local Pension Board. The report summarised matters discussed by, issues arising from and any recommendations made by the Cumbria LGPS Local Pension Board (CLPB) at its recent quarterly meeting, held on 13 April 2022.

The Chair of the Board presented the report. The business conducted at the meeting was reported with a particular focus on the Work Plan. The Chair of the Board considered that this would give structure to future meetings and clarify the Board’s areas of business until 31 March 2023.

The Chair of the Pensions Committee expressed his concern regarding two queries noted in the report as having been raised during the Board meeting. The two questions related to investment decisions made by the Committee and the Chair was concerned that, in raising them, the Board seemed to be overstepping its Terms of Reference and remit.

The Chair advised that any investment made had gone through a robust process and due diligence had been undertaken by officers and the Investment Advisors, all of whom were highly skilled people.  He noted that details of proposed investments were presented to the Investment Sub Group who have many years’ experience with the Fund and who undertake a thorough review of the proposals. The Pensions Committee were then either appraised of the decisions made or asked to provide a further review ahead of any decision and can exercise their strong degree of knowledge. The Chair asked that the Chair of the Board pass his comments back to the Board.

The Chair of the Board acknowledged the points made by the Chair, giving context on how the comments were made during the Risk Register item which was within the Board’s remit.  The Chair of the Board agreed to make the Board aware of concerns of the Chair of the Cumbria Pensions Committee.

RESOLVED that, the update from the Cumbria Local Pension Board be noted.

To consider a report from the Director of Finance (Section 151 Officer) (copy enclosed).

A report was considered from the Director of Finance (S151 Officer) regarding the Draft Unaudited Accounts to 31 March 2022. The report presented to Members the draft (subject to audit) Accounts of the Cumbria Local Government Pension Scheme 2021/22 with a recommendation to submit the Accounts (subject to any final Audit amendments) to the Audit and Assurance Committee for approval on behalf of the Council.

The Finance Manager - Pensions Investments and Governance talked members through the report. Members were informed about the Constitutional role of the Committee in terms of submitting the accounts (subject to any final Audit requirements) to full Council for approval. This was expected to be approved on behalf of the Council by the Audit and Assurance Committee at its 30 September 2022 meeting. It would receive an update on the production of the Fund’s accounts at its June 2022 meeting.

The change to the timescale for this year’s accounts was detailed and a history of the temporary changes to publication deadlines over recent years was reported. The success of Cumbria LGPS meeting publication deadlines in the last two years compared to those of other Local Authorities was highlighted. As many local authorities had not met the deadlines, the Government had intervened, outlining how it would help tackle audit delays.

The Finance Manager - Pensions Investments and Governance was pleased to report that the draft LGPS accounts were expected to be published in June 2022, in advance of the statutory deadline date.

An update was given on Grant Thornton’s (the Council’s Auditors) intention to progress their audits in two phases with the Fund’s audit being completed by September 2022.  It was noted that there was currently no indication that the sign off of the accounts would not be achieved by September. Details were provided on a briefing session given to the Audit and Assurance Committee on the use of estimates and members were content with the level of scrutiny and the controls in place over the use of estimates.

The Finance Manager - Pensions Investments and Governance was pleased to report that the Fund’s assets had increased over the year by £251m to £3,318m (at 31 March 2022) out-performing the Fund’s 1, 3, 5, and 10 year benchmarks. This was due in part to the long term approach to investment and its diverse portfolio.

A summary of the Fund’s key activities was reported. These included a review of the Fund’s Investment Strategy, increased commitments to a number of alternative investments with Border to Coast to progress pooling of assets and work assessing and preparing for Local Government Reorganisation.

To conclude, it was reported that officers were working on the draft Annual Report which would be presented for approval to members at the 13 September 2022 Pensions Committee meeting.

The Chair welcomed the report and congratulated officers on publishing the Accounts to deadline. He commented that it proved the calibre of officers and Investment Advisors and showed how comprehensive their advice had been to the Committee over  ...  view the full minutes text for item 66.

A training session on the Actuarial Valuation 2022 (copy enclosed).

A training session was given by Mark Wilson from Mercer Ltd on the Actuarial Valuation 2022. The presentation covered the following:

·         Valuation and Funding Basics

·         2019 Valuation Recap

·         Funding Update

·         2022 Valuation – key themes

·         Questions from members

The Group Finance Manager – Pensions, Investments and Insurance gave context for the presentation which was to remind members of the last Actuarial Valuation and identify the key themes for the 2022 Actuarial Valuation. The Committee’s September 2022 meeting would agree the key assumptions used within the Valuation subject to consultation with scheme employers. There was a reminder that the next Pensions Forum meeting was scheduled in November 2022 which would give Pensions Committee members the opportunity to meet with representatives from scheme employers.

Throughout the presentation, members asked a number of questions.

A member asked who was ultimately liable if an employer became insolvent. Mr Wilson advised that if no employer guarantee was in place, any unrecoverable liabilities were funded by all other employers in the Fund.

Members noted that life expectancy, inflation and other factors kept changing and there were discussions around the kinds of assumptions that were built into the valuation process and what difference the range of assumptions can make.

A member queried how salary increases (which he considered had been poor over the past 10-20 years), and other social factors may impact on the life expectancy of Fund members. Mr Wilson noted that figures used by the actuary to reflect the impact of salary increases on the Actuarial Valuation might seem higher than expected – this was because they included assumptions about promotions that an individual may receive as well as annual pay awards. Members were informed that the change in the LGPS in 2014 to Career Average Revalued Earnings (CARE) meant that an increasing amount of LGPS pension benefits were not linked to an employee’s final salary and that pensions were driven by inflation. Members were reassured that salary increases did not materially impact upon the Actuarial assumption.

Reference was made by a member to Local Government Reorganisation (LGR) and the impact that it could have on leaver numbers. He thought that this may not have been forecast a few years ago. Mr Wilson commented on when a scheme member left the Fund, assumptions on their future pay were replaced with assumptions on inflationary increases and therefore liability costs were broadly the same. He advised he did not expect LGR to have a great impact on the Valuation.

Continuing the theme of LGR, a member highlighted that on 1 April 2023, there would be many people transferring in and out of the Fund particularly at a management level so queried if this would be a risk to taken into account. Mr Wilson considered that there would be minimal impact but Mercer Ltd would need to know actual numbers to ascertain the impact and this data would not be available until Vesting Day or later. Mr Wilson considered that in terms of the Actuarial Valuation, it would  ...  view the full minutes text for item 67.

To consider a report from the Director of Finance (Section 151 Officer) (copy enclosed).

A report was considered from the Director of Finance (S151 Officer) regarding the Monitoring Report for the Quarter ended 31 March 2022. The report advised Members of any material risk, administration, investment performance, governance, and policy issues of the Fund for the quarter ending 31 March 2022. It also identified any current governance issues and national regulatory changes and outlined the performance of the whole portfolio and estimated change of liabilities over the quarter to 31 March 2022.

The Group Finance Manager – Pensions, Investments and Insurance talked members through the report. He detailed the two new risks that had been added to the Risk Register. In terms of the Russian invasion of Ukraine, he reassured members that the Fund had a diverse portfolio and the situation would be monitored. With regard to increasing inflation, this may impact on the value of the Fund and global economies. Inflation Divergence would be added to the Risk Register as agreed by assent by members during the Mercers Ltd presentation. He was pleased to report that risk associated with COVID’s impact on pensions investments had been removed from the Risk Register and was now business as usual. No risk scores had changed.

The Group Finance Manager – Pensions, Investments and Insurance was pleased to report that the Local Pensions Partnership Administration (LPPA) SLA performance was 96.4% against a target of 95%. Members were provided with performance data relating to processing death cases and retirements from deferred status and retirements of active members. It was noted that LPPA and the Fund had reviewed performance targets. These were outlined for members.

An Investment Management update was provided. Members were informed about asset allocation changes and Fund performance. The Group Finance Manager – Pensions, Investments and Insurance stressed the importance to focus on long term performance and reported that the Fund’s long term performance continued to exceed the 1, 3, 5 and 10 year benchmark.

In terms of Oversight and Corporate Governance, members were advised of Class Actions, Shareholder Voting and Global Tax Recovery. An update was provided on Regulatory changes which included the McCloud resolution and the Exit Payment Cap. It was reported that officers were currently awaiting revisions to the Pensions Regulator’s Code of Practice. The Group Finance Manager – Pensions, Investments and Insurance reported on a recent release of personal information which had resulted in a breach of Data Protection Regulations.

After referring to the potential of a large number of staff retiring after Local Government Reorganisation (LGR), a member asked officers to ask LPPA to make appropriate provision for the impact that it would have on their service. The Group Finance Manager – Pensions, Investments and Insurance explained that LGR would impact greatly on LPPA and its workload would increase. He reassured members that officers were liaising with LPPA to ascertain the implications of LGR.

A member talked about Russia’s invasion of Ukraine and added that cyber-attacks were an ever increasing risk in local authorities. He queried whether the Risk Score should  ...  view the full minutes text for item 68.

To consider a report from the Director of Finance (Section 151 Officer) (copy enclosed).

 A report was considered from the Director of Finance (S151 Officer) regarding the Provisional Budget Outturn and Delivery against the 2021/22 Business Plan. The report advised Members of the work undertaken during 2021/22 to deliver the Business Plan and provided a provisional outturn for the Fund including variances against the budget.

A document which showed the provisional 2021/22 outturn was tabled. This document showed further work on the allocation of Investment Manager fees between reporting lines. In recognition of the updated figures, the Committee was asked to agree a revised Recommendation 2. It now read:

(2) Note that the provisional 2021/22 outturn for Cumbria Pension Fund was an overspend of £0.183m against a budget of £6.467m.

The Senior Manager - Pensions and Financial Services talked members through the report and detailed the changes to Recommendation 2 as set out in the tabled document. She was pleased to report that all targets in the 2021/22 Business Plan had been achieved. A number of key activities were highlighted such as the successful work undertaken on data quality, particularly relating to pending leavers. There had been a sense check on Investment Management Strategy. In terms of Oversight and Governance, a number of documents had been updated and officers continued to ensure that new Members had an effective training package to assist them with their work on the Committee.

Members were advised that LGR was having an impact on the work of the team and this would continue into 2022/23.

The changes to Investment Manager Fees and how they impacted on the second resolution of the Committee were explained.

It was noted that, excluding Investment Manager Fees, staffing had the biggest variance against the budget. The Senior Manager - Pensions and Financial Services advised that a vacancy within the Pensions Team had been recruited to during the year and this would help with resilience in the Team. It was noted that legal fees on employer issues were variable but the provision of legal advice was necessary in complex cases.

The underspend on Investment consultancy fees for professional advice on pooling/transition management was explained. This had been expected as it could be variable each year and there had not been as much activity requiring additional advice in 2021/22 as had been budgeted for.

Actuarial fees and Legal and Tax figures were outlined with the reasons for spend being explained. The latter had been overspent due to the need for specialist legal advice which had been part of due diligence work on a proposed change to one of the Fund’s investments.

There were no member questions or discussion on this item.

The Chair proposed acceptance of Recommendation 1 as set out in the report and Recommendation 2 as set out in the tabled Provisional 2021/22 Outturn document. It was,

RESOLVED, that

1          Members note that business of the Pension Fund in 2021/22 was completed in accordance with the Business Plan approved in March 2021.

2          Note that the provisional 2021/22 outturn for Cumbria Pension Fund was  ...  view the full minutes text for item 69.

To consider a report from the Director of Finance (Section 151 Officer) (copy enclosed).

A report was considered from the Director of Finance (S151 Officer) regarding the Provisional Budget Outturn and Delivery against the 2021/22 Business Plan. The report advised Members of the work undertaken during 2021/22 to deliver the Business Plan and provided a provisional outturn for the Fund including variances against the budget.

A document entitled ‘2021/22 Outturn for the Investment Management Fees of the Cumbria LGPS’ was tabled. Year-end work had identified that certain Border to Coast Pensions Partnership Ltd investment management fees were shown against incorrect lines in the table on page 313 of the document pack. The tabled document set out the amended provisional outturn figures following correction of the allocation.

The Senior Manager - Pensions and Financial Services talked members through the report which related to Investment Management costs and Custody fees.

Members asked questions on the Investment Management fees. Dr Swarup briefly talked about how the budget for Investment Management fees was dealt with in other Funds.

The Chair proposed acceptance of the recommendations as set out in the tabled 2021/22 Outturn for the Investment Management Fees of the Cumbria LGPS. It was,

RESOLVED that, members note that the provisional outturn against its budget for investment management fees (excluding Alternative- Pooled fees) is an overspend of £0.246m

To consider a report from the Director of Finance (Section 151 Officer) (copy enclosed).

A report was considered from the Director of Finance (S151 Officer) regarding the Monitoring Report for the Quarter ended 31 March 2022 (Part 2). The report advised Members of any matters that were considered to be Part 2 (due to the inclusion of exempt information relating to commercially sensitive matters of third parties including employers in the Fund, tax recovery cases, class actions and fraud cases), and therefore excluded from public disclosure, arising during the quarter ending 31 March 2022. These matters were generally in regard to either governance or employer issues.  

The Finance Manager – Pensions Administration talked members through the report which included reports on Pension’s Administration, Investment Management and Oversight and Governance.

A member commented on the fees paid to date in relation to global tax recovery claims and added that they should be monitored to ensure the spend would benefit the employers in the Fund.

The Chair proposed acceptance of the recommendations as set out in the report to the Committee. It was,

RESOLVED, that the Committee

1          Receives and notes the quarterly monitoring Part 2 items of the Fund for the period to 31 March 2022.

2          Notes that the Fund has elected to withdraw from the Manufactured Overseas Dividends (MODs) test case seeking to recover withholding tax on dividends from HMRC and will continue to monitor other ongoing cases to ensure that its participation continues to be in the best interests of the Fund.

To consider a report from the Director of Finance (Section 151 Officer) (copy enclosed).

A report was considered from the Director of Finance (S151 Officer) regarding the Cumbria LGPS Investment Sub Group Activity Report to May. The report outlined activities of the Investment Sub Group (ISG) meetings on 26 May 2022, including any decisions made by the Section 151 Officer (none this quarter) and the proposed future work schedule in respect of the Investment Sub Group (ISG).

The Finance Manager - Pensions and Treasury talked members through the report which focussed on the business conducted at the ISG meeting held on 26 May 2022 which included asset allocation and performance monitoring and the work programme.

There were no member questions on this item. The Chair commented on the volatility of the markets following Russia’s invasion of Ukraine.

The Chair proposed acceptance of the recommendations as set out in the report to the Committee. It was,

RESOLVED, that the Committee

1          Notes the progress of the Investment Sub Group from March to May 2022;

2          Notes the performance of the Fund over the quarter to 31 March 2022; and

3          Agrees the proposed work programme of the Investment Sub Group for the next reporting period, including supporting the s151 Officer to continue planning and implementation of the changes required and research of available opportunities for investment to enable the Fund to achieve the Target Investment Strategy.

To receive a verbal update on emerging issues

A verbal update was given by the Senior Manager - Pensions and Financial Services. This covered an update on expected consultations and Local Government Review from the Pension Fund perspective.

There were no questions or comments on this item.

RESOLVED that, the position be noted.

To receive closing comments from the Chair

The Chair asked members that even if they had not stood or been elected in the recent local elections, they use their influence in their political groups to encourage members with an interest in or experience with Pensions to become members of the Pension Committee following Local Government Reorganisation.

The Chair thanked members and officers for their attendance.