Agenda and minutes

There were no declarations of interest on this occasion.

The Director of Corporate Services referred to paragraph no. 15 and informed the Committee that no comments were received on the draft Funding Strategy Statement (FSS) and accordingly the finalised document had been published on the Fund’s website.

RESOLVED – That the minutes of the meeting of the Pensions Committee held on 26 March 2021 be confirmed and signed by the Chairman.

Oral report of the Director for Corporate Services

RESOLVED – That the following Members be appointed to serve on the Pensions Panel for the 2021/22 municipal year:

• Philip Atkins
• Mike Davies
• Colin Greatorex
• Mike Sutherland
• Stephen Sweeney

Report of the Director for Corporate Services and County Treasurer (S151)

The Committee were informed that the audit of the Staffordshire Pension Fund would be undertaken by Ernst and Young (EY) who were also the County Council’s auditors.  Although the Fund would be audited as part of the County Council’s accounts, EY would issue a separate opinion on the Fund and produce a Fund specific Audit Findings Report (ISA260). This would be reported to both the Pensions Committee and the Audit and Standards Committee in due course.

The work the Auditors intended to undertake would provide the Fund with the following:

• The Auditor’s opinion on whether the financial statements of the Staffordshire Pension Fund gave a true and fair view of the financial transactions of the Pension Fund during the year ended 31 March 2021 and the amount and disposition of the Fund’s assets and liabilities as at 31 March 2021; and

• The Auditor’s opinion on the consistency of the Pension Fund’s financial statements within the Pension Fund’s annual report with the published financial statements of the County Council, as the administering authority.

The Director of Corporate Services indicated that there had been no change in focus for the Audit Plan compared with 2019/20 and that the Plan had identified the following “significant” risks and the action to be taken by the Auditors to mitigate those risks:

• Misstatements due to fraud or error
• Investment income and assets – Investment Journals
• Valuation of unquoted investments
• Going concern disclosure
• Valuation of directly held properties

The Committee noted that, for the purposes of determining whether the financial statements were free from material error, the Auditors had determined that overall materiality for the financial statements of the Pension Fund was £47.4 million based on 1% of the value of the net assets of the Fund. The Committee were also informed that EY would report back on all uncorrected misstatements relating to the primary statements (Net Assets Statement and Pension Fund Accounts) with a value greater than £2.4 million.

In response to a question by Cllr Sutherland, the Director indicated that the Audit Fee had yet to be finally confirmed but was likely to be around £80,000, which was similar to the fee charged for 2019/20, albeit this fee was still subject to approval by the Public Sector Audit Association (PSAA).

RESOLVED – That the external auditor’s plan for the audit of the Staffordshire Pension Fund (the Fund) for the 2020/21 financial year be noted.

Report of the Director for Corporate Services

The Committee considered the final outturn position for the financial year 2020/21 together with a summary of the key achievements against that Business Plan.

The Director of Corporate Services indicated that due to the extensive move to home working, in response to the Covid-19 pandemic, 2020 proved to be a challenging year in many ways. In line with the recommendations of the Pensions Regulator, business critical and business as usual activity had to take priority, with key development activities being of secondary order. Whilst the final position against the plan was not as favourable as would have been liked, it still demonstrated continued progress and development in several areas. 

It was noted that as well as continuing with a high standard of service delivery, key achievements during 2020/21 included: 

·       Continuing to implement i-Connect with the Fund’s larger Employers and developing new working practices with Third Party Payroll Providers following the introduction of i-Connect (both now moved to BAU activity);

·       Promoting the use of Member Self Service / My Pension Portal (MPP) ahead of issuing most of the 2020 Annual Benefit Statements electronically;

·       Demonstrating further improvement in Service Standards and Key Performance Indicators;

·       Preparing for and successfully managing the transition of UK Equities to Impax Asset Management (Global Sustainable Equity) and LGPS Central Limited (Global Factor Based Equity); and

·       Appointing an Investment Consultant to the Pensions Panel.

The Committee were also informed that there had been several Staffordshire Internal Audit Service reviews across the two Teams throughout the year:

(i)             the Pension Fund Governance Audit received ‘substantial’ assurance, for the fourth year in a row;

(ii)            the Pensions Administration Audit maintained its ‘substantial’ assurance rating for the third year in a row; and

(iii)          the Pension Fund Investment Audit, focussing on Property Investment Management, also received a ‘substantial’ assurance rating.

With regard to performance, the Committee noted that:

·       2018/19 shows that a 90% performance target was achieved in 8 of the 11 published standards.

·       2019/20 shows that a 90% performance target was achieved in 13 of the 15 published standards.

·       2020/21 shows that a 90% performance target was achieved in 12 of the 15 published standards.

The three published standards where the performance target was not achieved in 2020/21 related to distinct areas of activity:

(i)             Divorce Settlement – Details of Sharing Order

There were very few of these cases fortunately but there was some ambiguity around when the 4 months / 50 working days to legally implement the court order should begin. Unfortunately, the existing workflow process was not sufficiently detailed to monitor this aspect correctly. A manual check of the cases processed in 2020/21, revealed that all were completed well within the deadline, and the workflow process would be updated for 2021/22 to enable accurate reporting going forward.

(ii)            Transfers In – Send Transfers In Quote.

A Transfer Value (TV) was the payment that arose when a scheme member elects to move their pension benefits between Employer schemes or alternative insurance-based schemes. The current value  ...  view the full minutes text for item 5.

Report of the Director for Corporate Services

The Committee considered a report of the Director of Corporate Services on the Fund’s Risk Register.

They were informed that CIPFA Guidance recommended the production and monitoring of a Risk Register for Local Government Pension Scheme (LGPS) funds. At their meeting in September 2020, the Pensions Committee noted the contents of the Pension Fund Risk Register at that time and asked the Local Pension Board to continue to undertake a regular detailed review of the identified risks and the process for maintaining the Risk Register and report back on any areas of concern. It was also agreed that the Pensions Committee would continue to carry out an annual review of the high level and emerging risks identified from the Fund’s Risk Register.

The Committee noted that the Risk Register brought together all the Fund’s risks in a single document. It continued to be based on the 4 key areas of activity within the Fund: Governance, Funding, Administration and Investment. 

The detailed Risk Register matched high-level risks, under each of the 4 areas of activity, to the Fund’s high level objectives. Each of the detailed risks had been given an impact score and a likelihood score before any controls were applied. These had then been combined to give an overall pre-control risk score, which had been assigned a Red – Amber - Green (RAG) rating.

Controls that were currently in place to mitigate risks and additional sources of assurance were then considered to provide a post control impact and likelihood score. Again, these had been combined to give an overall post control risk score which had been assigned a RAG rating. All risks were given a review date, risk owner and any future actions to be taken were noted.

Officers reviewed the Risk Register every quarter, focusing in on the detail of one of the 4 areas, along with a review of any emerging risks. As part of their review, Members of the Local Pensions Board had attended the review meetings and had taken an active role in the discussions.

The Committee considered a summary of the high-level risks associated with the objectives (detailed in Appendix 3 to the report), together with emerging risks (detailed in Appendix 4 to the report).

Mr Birch informed Members that the Pensions Board would be content to continue to play an active role in the ongoing review process should the Committee wish.

The Committee also received the updated Risk Management Policy for the Staffordshire Pension Fund.

In response to a question from Cllr Sweeney concerning difficulties previously experienced in collecting payroll data from some employers within the Fund, the Director indicated that the roll out of iConnect had brought about improvements in this area.

RESOLVED – (a) That the summary of the high-level risks and emerging risks from the current Staffordshire Pension Fund Risk Register, as presented in Appendices 3 and 4 to the report, be noted.

(b) That the content and recommendations of the Local Pensions Board review of the Staffordshire Pension Fund Risk  ...  view the full minutes text for item 6.

Report of the Director for Corporate Services

The Committee were informed that, at their meeting on 26 March 2021, they received the Staffordshire Pension Fund Climate Risk Report together with a presentation from the authors of the report, LGPS Central Limited.  The Climate Risk Report provided the Fund with an assessment of any material financial risks related to climate change and identified the most effective means to manage these risks.  The Climate Risk Report was also consistent with the disclosures required by the Taskforce on Climate-Related Financial Disclosures (TCFD) and had allowed the Fund to produce the Staffordshire TCFD report.

The Committee noted that a key recommendation of the Climate Risk Report was for the Fund to develop a Climate Strategy and a Climate Stewardship Plan. The Fund’s Climate Strategy would be developed as part of a wider Strategic Asset Allocation review, which would consider all asset classes and the impact they would have on the Fund’s climate related risks. The results of this review, which was being undertaken with the help of the Fund’s Investment Advisers, Hymans Robertson, would be presented to Members later in 2021, at which time a Climate Strategy would also be presented for approval.

The Committee also received the Fund’s Climate Stewardship Plan, which monitored engagement by the Fund’s external investment managers, to whom much of the day-to-day responsibility for managing portfolio-level climate risk was delegated.  Members noted that the Plan was a live working document, which would be updated as engagement with companies and investment managers occurred. This activity would be reported to the Pensions Panel as part of the Responsible Investment Report presented at their quarterly meeting. An updated Climate Stewardship Plan would also be presented to the Pensions Committee annually.

RESOLVED – (a) That the content of the Staffordshire Pension Fund Task Force for Climate Related Disclosures (TCFD) Report, attached as Appendix 2 to the report, be noted.

(b) That the content of the Staffordshire Pension Fund Climate Stewardship Plan, attached at Appendix 3 to the report, be noted.

Report of the Director for Corporate Services

The Committee were informed that Regulations stated, and best practice dictated, that a Pension Fund should have a range of written policies and procedures in place. Having such, not only proved regulatory compliance, but more importantly demonstrated good governance and provided a range of information to stakeholders.

Members noted that an audit by Officers, in 2018, found many policies needed a refresh and since then most policies had been reviewed and updated. The Pensions Committee had approved these policies where necessary and several had also been the subject of wider consultation with the Fund’s many stakeholders.  

The Director explained that the Communication Policy Statement was last reviewed in September 2018, so as well as a more general review, to reflect any changes in procedures since then, the opportunity to update the Policy to reflect more flexible ways of working and communicating, as a result of the COVID-19 pandemic, had also been taken. As there had been no significant changes, wider consultation was considered unnecessary.

In response to a question from Cllr Wilcox as to whether the Fund had other policies which needed to be updated, the Director indicated that the Fund’s Administration Policy needed to be updated and it was anticipated that this would be completed by the end of the current financial year.

RESOLVED – That the revised and updated Communication Policy Statement, attached as Appendix 2 to the report, be approved.

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.

PART TWO

The Committee then proceeded to consider reports on the following issues:

(Exemption paragraph 3)

(Exemption paragraph 3)

(Exemption paragraph 3)

Report of the Director for Corporate Services

(Exemption paragraph 3)

Verbal update from the Chair of the Pensions Panel and the Assistant Director for Treasury & Pensions on the LGPS Central Joint Committee Meeting held on 18 June 2021.

Meeting papers can be accessed via the link below:

Agenda-and-Rhttps://www.cheshirepensionfund.org/members/wp-content/uploads/sites/2/2021/06/Agenda-and-Report-Pack-18-June-2021.pdfeport-Pack-18-June-2021.pdf (cheshirepensionfund.org)

(Exemption paragraph 3)

(Exemption paragraph 3)

Presentation by LGPS Central Limited

(Exemption paragraph 3)