Agenda and minutes

There were no declarations of interest made on this occasion.

Resolved: That the minutes of the meeting of the Pensions Committee held on 16 December 2022 be confirmed and signed by the Chairman.

Resolved: That the minutes of the meeting of the Pensions Panel held on 6 December 2022 be received.

Resolved: That the minutes of the meeting of the Pensions Panel held on 7 March 2023 be received.

Report of the Director of Finance and presentation by LGPS Central Limited

The Committee received a report of the Director of Finance relating to the Climate Change Strategy for the Staffordshire Pension Fund (‘the Fund’).

Climate Risk Report 2022

The Committee received a presentation from Basyar Salleh and Alex Galbraith from LGPS Central, relating to the Fund’s third Climate Risk Report.

The presentation supported the 2023 Climate Risk report which assessed the Fund’s exposure to climate-related risks and opportunities, and allowed the Fund to identify further means to manage its material climate risks. The presentation also highlighted the report’s key findings and provided an overview of the Fund’s progress in managing climate risk. The presentation focused on the following areas:

• Holdings, Metrics & Analysis
• Carbon Intensity

• Financed Emissions
• Weight in Clean Tech and Fossil Fuel Reserves
• Top 5 Contributors
• Climate Scenario Analysis
• Climate Stewardship Plan

The presentation concluded that the Fund had made significant progress in its responsible investment and climate change practice. The key recommendations suggested that the Fund should:

• Continue with the development of the net zero strategy;
• Continue to report against the Task Force on Climate Related Financial Disclosures Recommendations;
• Work with fund managers to understand how they assess, monitor and mitigate key climate change risks; and
• Repeat the Carbon Risk Metrics annually and the Climate Scenario Analysis every 2-3 years.

A concern was raised about the validity of the metrics being measured and how they helped the Fund to achieve the target of Net Zero. It was suggested that it would be better to compare against a portfolio of comparable companies. LGPS Central acknowledged that, whilst there would be some merit in comparing against other portfolios, they did not have the tools in place to do so at this time. LGPS Central did compare the 40-year projection of the current asset allocation under different scenarios and some further analysis was included in the full report. It was noted that there was only a limited number of ways in which metrics could be measured currently, but new processes and technologies were constantly being introduced which might help the Fund achieve its target.

It was acknowledged that whilst the LGPS Central pool was a powerful resource, there seemed to be an issue with engagement with the smaller companies within the portfolio, and it was suggested that LGPS Central should focus on the smaller companies that weren’t supporting the Fund in achieving its targets. In response it was explained that within the portfolio 20% of companies created 80% of emissions, and the organisations that had been identified and engaged with were considered to be the largest polluters. It was clarified that, no matter the size of the organisation, if companies didn’t meet the expectations of LGPS Central, they would be engaged with and any concerns would be escalated and, if necessary, directors and resolutions would be voted against.

In response to a question asking if there were any plans to measure other polluting actions other than carbon, it was explained that this was considered in the analysis and some information about  ...  view the full minutes text for item 15.

Report of the Director of Finance

A report of the Director of Finance relating to the Staffordshire Pension Fund 2022 Annual Stewardship Report was presented for approval by the Pensions Committee prior to submission to the Financial Reporting Council (FRC).

The Committee was reminded that in 2020 the FRC launched an updated UK Stewardship Code. The Code took effect from 1 January 2020 and aimed to improve stewardship practices by setting substantially higher standards. The Fund was accepted as a Tier 1 signatory to the previous UK Stewardship Code, but signatories were required to submit a report annually that met the FRC’s reporting expectations.

The UK Stewardship Code 2020 was a voluntary set of principles that set high expectations for how investors, and those that supported them, invested and managed money on behalf of UK savers and pensioners, and how this led to sustainable benefits for the economy, the environment and society. There were 12 principles for asset owners and asset managers. Those principles covered the policies, processes, activities, and outcomes of effective stewardship.

It was stipulated that the report must be reviewed and approved by the applicant’s governing body, and signed by the Chair, Chief Executive or Chief Investment Officer, or equivalent, before its submission for consideration by the FRC.

Fund officer Helen Wilson and colleagues from LGPS Central were thanked for the hard work and effort that had gone into developing the Fund’s 2022 Annual Stewardship Report.

Resolved: That the Staffordshire Pension Fund 2022 Annual Stewardship Report be approved, signed by the Chair (electronically) and submitted to the FRC.

Report of the Director of Finance

The Pensions Committee received a report of the Director of Finance relating to the Staffordshire Pension Fund Business Plan 2023/24.

Progress on 2022/23 Business Plan

The disruptive impact of the Covid-19 pandemic no longer affected the service provision. The hybrid working arrangements allow officers to continue to embrace the developments that have been made in technology, and the impact these had on operational activities.

The experience, dedication and enthusiasm demonstrated across the Treasury & Pensions Team enabled the ongoing delivery of a high level of day-to-day service provision to all the Fund’s stakeholders, as well as the delivery of several Key Development Activities from the 2022/23 Business Plan. These included:

• The successful collection and provision of data to the Scheme Actuary to facilitate the 2022 Actuarial Valuation at 31 March 2022 and the dissemination of results schedules to the Fund’s 500+ Employers.
• The successful completion of the first Digital Proof of Life exercise. This was a new process that replaced the paper process with a digital biometric facial recognition process to confirm identity from a computer or mobile phone.
• Work undertaken between Fund officers, Investment Consultant and Pensions Panel to consider how best to implement the strategy across the various asset classes. Whilst the focus in 2022 had predominantly been on Equities, the pace of investment into Private Markets had been maintained and opportunities to invest in several funds had also been taken.

Performance Standards 2022/23

The Committee was made aware of the challenges implicit in administering the LGPS, and the regulatory complexity that brought with it. Planning for a wide range of new and changing legislation meant that there would always be more to do.

The Fund had experienced a small increase in staff turnover over the last 12 months which had not been helped by a challenging recruitment environment; a problem echoed nationally across other LGPS. However, the recruitment program had continued and whilst the level of applicants had fallen, several successful appointments had been made. The Fund had finally been able to introduce a new five pillar team structure, which would future proof the service and allow for succession planning. This had facilitated internal promotions, to a new wider Management Team.

Key Developments for 2023/24

Several areas that the Treasury & Pensions Team had identified as Key Development Activities in 2023/24 included:

• Continuing to collect retrospective data from Employers and planning for the implementation of remedial action arising from the McCloud / Sergeant judgement;
• Appointing an ISP and the undertaking of a ‘data readiness’ exercise ahead of the LGPS staging date for the DWP new national Pensions Dashboard;
• Tendering for a provider of Actuarial Services; and

• Continuing with the implementation of the new Investment Strategy following the review of Fund’s Strategic Asset Allocation.
• Pensions Dashboard – Integrated Service Provider (ISP) and Data Readiness

Cost and Resources

The Pension Committee heard that the Fund had six main areas of ‘resource/cost’:

• Pension’s administration and accounting (internal);
• Governance (internal and external);
• Advice from actuary and consultants/advisors (external);
• Legal support  ...  view the full minutes text for item 17.

Report of the Director of Finance

The Pensions Committee received a report of the Director of Finance relating to the Staffordshire Pension Fund 2022 Actuarial Valuation Report, Funding Strategy Statement, and Investment Strategy Statement.

2022 Actuarial Valuation Report

Throughout late 2021 and most of 2022, the actuarial team from Hymans Robertson had attended Pensions Committee meetings to provide training and discuss the 2022 Actuarial Valuation of the Fund at 31 March 2022. Over this period, Members had approved the actuarial approach to be taken, the actuarial assumptions to be used and had received reports on the high-level results of the 2022 valuation and the funding and contribution levels for the different employer groups.

The Report on the Actuarial Valuation at 31 March 2022, attached at Appendix 1 of the report, fulfilled the requirements of Regulation 62(3) and 62(4) of the Local Government Pension Scheme Regulations 2013, in providing a document of record. It contained no fundamentally new information to that already presented by Hymans to the Pensions Committee at their meetings in September and December 2022.

Members were asked to note that the Primary Rate for the whole Fund had increased from 19.7% of pay at 31 March 2019, to 21.5% of pay at 31 March 2022, mainly due to higher inflation. This had been offset to some degree by a decrease in the Secondary Rate, which indicated the amount needed to be paid for past service liabilities, because of better-than-expected investment performance since the last valuation in 2019.

Following each triennial Actuarial Valuation, the Public Service Pensions Act required the Government Actuaries Department (GAD) to publish a report on the health of the LGPS. Using a common set of assumptions determined by the Scheme Advisory Board (SAB), to enable consistent comparison, Hymans had recalculated the Fund’s 2022 Funding position on a local funding basis (120%) which had resulted in a funding position of 128% on an SAB basis; an increase of 16% since the last valuation in 2019.

It was confirmed that the full Report on the Actuarial Valuation of the Staffordshire Pension Fund at 31 March 2022 would be published on the Pension Fund’s website.

Funding Strategy Statement (FSS)

The draft FSS was published on the Fund’s website and was made available to Employers and other interested parties for a period of consultation that ran from 16 December 2022 to 31 January 2023. Feedback and questions arising from the consultation were received which resulted in some changes being made to the draft FSS presented to Pensions Committee previously. The changes centred around the Fund permitting all individual academies within the same Multi Academy Trust (MAT) to be considered as pooled for contribution rate setting purposes. This would be dependent on certain criteria being met and would only be considered at the request of the MAT and agreed at the discretion of the Fund. Minor amendments to allow for this were made in Section 2 of the FSS. The final version of the FSS, incorporating the changes, was attached for the approval of the Pensions  ...  view the full minutes text for item 18.

Report of the Director of Finance

A report relating to the Staffordshire Pensions Committee Training Needs Analysis (TNA) and Training Policy 2023/24 was presented to the Pension Committee for consideration and approval.

The Fund was required to ensure that trustees of occupational pension schemes should be trained and have knowledge and understanding of the law relating to pensions, the role of trustees, the principles of scheme funding and investment, and the management and administration of pension scheme benefits. In May 2021, the Chartered Institute of Public Finance and Accountancy (CIPFA) issued an updated Knowledge and Skills Framework (KSF) for LGPS Committee Members and LGPS Officers. The CIPFA KSF was something that the Staffordshire Pensions Committee had adopted for several years to demonstrate good governance and commitment to training.

The CIPFA KSF identified eight core technical areas where Pensions Committee Members were expected to have a general awareness and understanding. The Fund TNA measured against the same eight core areas of:

• Pensions Legislation and Guidance
• Pensions Governance
• Funding Strategy and Actuarial Methods
• Pensions Administration and Communications
• Pensions Financial Strategy, Management, Accounting, Reporting and Audit Standards
• Investment Strategy, Asset Allocation, Pooling, Performance and Risk Management
• Financial Markets and Products
• Pension Services Procurement, Contract Management and Relationship Management.

All Pensions Committee Members, Local Pensions Board Members and Senior Fund Officers were asked to complete a TNA during February 2023. The response rate for the Pensions Committee was 67% (8 out of 12), for the Pensions Board it was 67% (2 out of 3) and for Senior Fund Officers it was 75% (3 out of 4).

2023/24 Training Plan

Where appropriate, training would be incorporated into scheduled Committee and Board meetings in June, September, December and March and two dedicated training sessions for both Committee and Board members would be held in July and November.

Based on the output of the February 2023 TNA, the training proposed for 2023/24 was planned to include the following:

• June / September 2023 - Portfolio Evaluation Limited and CEM Benchmarking –refresher training at Committee on Performance Measurement, Cost Benchmarking and Risk Management;
• July / September / November 2023 - Procurement, Contract Management and Relationship Management;

• September / November / December 2023 and March 2024 – Strategic Asset Allocation, including Investment Structure implementation, Pooling, and Financial Markets and Products; and
• October – December 2023 – Local Government Association offer 3-day Pensions Fundamentals training.

Aspire Online Learning Academy

Pensions Committee and Local Pensions Board Members had been provided with access to Hymans Robertson’s online LGPS Learning Academy, ASPIRE, which covered all key areas of the CIPFA KSF. Hymans had recently refreshed ASPIRE so that it offers more but shorter learning modules.

Training Policy

The Fund’s Training Policy was shared with the Committee for approval. The policy incorporated the requirements of the latest CIPFA KSF and also included a set of seven statements which the Pensions Committee formally adopted at the meeting on 25 March 2022.

Resolved:

a.    That the results of the 2023/24 Training Needs Analysis in relation to the requirements of the CIPFA Knowledge  ...  view the full minutes text for item 19.

Resolved: That the public be excluded from the meeting for the following items of business which involve the likely disclosure of exempt information as defined in the paragraphs of Part 1 of Schedule 12A of the Local Government Act 1972 indicated below.

Report of the Director of Finance

Report of the Director of Finance

Verbal update from the Chair of the Pensions Committee and the Director of Finance

LGPS Central Limited 2023/24 Business Plan and Budget attached for information.