Report of the Director for Corporate Services

A report relating to the Staffordshire Pension Fund Business Plan 2021/22 was presented to the Pensions Committee for consideration and approval.

It was noted that, as well as continuing to do the ‘day job’, and the increasing challenges that this continued to present, the majority of the Treasury & Pensions Team faced additional challenges as they predominantly worked from home for a second year. The Committee were informed that morale remained high across the Team, which enabled the ongoing delivery of a high level of service provision to all stakeholders. Several Key Development Activities from the 2021/22 Business Plan had been achieved, including:

•             Tendering for an Administration System provider, to incorporate an external hosting platform service, and testing and implementing the new system within the same 12-month timeframe. The “Go live” date for this was the 16 March 2022, which was significantly ahead of the date anticipated.

•             An exercise relating to the under / overpayment of Guaranteed Minimum Pensions (GMP) had been completed.

•             A Covenant Monitoring Process had been put in place which brought together key pieces of financial information, about any Employer in the scheme, where there were concerns around their ongoing participation in the Fund.

•             A Strategic Asset Allocation and Investment Strategy review had been undertaken ahead of the 2022 Actuarial Valuation.

There were several activities planned to take place in 2020/21 that were delayed as a result of the Covid-19 pandemic. These were due to be delivered in 2021/22, but as they were dependent on the outcome of the Administration System provider procurement, these would be picked up in 2022/23. These included:

•             Living as Stated/Address Tracing Exercise;

•             Task Design in Altair for Deaths and Concurrency;

•             Use of the interactive dashboard or alternative provision in Altair Insights; and

•             Promotion of My Pension Portal (MPP) to Retired Members.

Full details would be included in the final outturn report to be presented to the Pensions Committee at the meeting in June 2022.

The Committee noted that, throughout 2021/22, the Treasury & Pensions Teams had made excellent progress in meeting the competing demands across the service. The change in working arrangements had continued to emphasise the need to review all processes and 2021/22 had been no exception with reviews of the Transfers In / Transfers Out process and the Death Grants process being completed.

The Committee were informed that, as in previous years, the Business Plan for 2022/23 was split into two distinct sections. The first section dealt with Key Development Activities, which aimed to make the way the service worked more efficient and effective. The second section dealt with the activities that the team needed to undertake as part of the day job, but which impacted significantly at certain points in the year or which happened as a by-product of another activity e.g., finalising the year end data. Once again, several of last year’s development activities had now been re-categorised into Business-as-Usual activity, including the Employer Covenant Monitoring and the Employer Practitioner Workshops, which had been held virtually on several days throughout the year.

Several areas that the Treasury & Pensions Team had identified as Key Development Activities in 2022/23 include:

•             Continuing to collect retrospective data from Employers and plan for the implementation of remedial action arising from the McCloud / Sergeant judgement (& possibly Goodwin);

•             Dealing with the additional data and checking requirements arising from the 2022 Actuarial Valuation;

•             Embedding the new Pensions Administration System & preparing for the Department of Work & Pensions new Pensions Dashboard;

•             Developing a Cyber Security Policy; and

•             Implementing the new Investment Strategy following the review of Fund’s Strategic Asset Allocation.

The Committee were informed that, subject to approval of the Investment Strategy, the key development activities for the Pensions Investment Team throughout 2022/23 would be focussed on a Strategic Asset Allocation Review and Implementation.

The Committee also noted that the primary risks to the continued delivery of a pension’s administration, accounting and investment monitoring service to the high standards achieved were;

•             Having a team of staff, sufficiently resourced, with the right experience to cope with changes to Government Legislation E.g., McCloud and the Pensions Dashboard;

•             The ability to deal with an increasing number of Employers and the challenge and complexities their different requirements present;

•             The increasing fragmentation of payroll provision and the requirement for accurate and timely data;

•             The current geopolitical and inflationary environment; and ultimately

•             The need to ensure that the correct Pensioner Members are paid on time with the correct amount.

These, and other risks, were further analysed in the Pension Fund’s Risk Register, the latest version of which would be presented in full to the Committee at the June 2022 meeting.

In response to a question from Nigel Caine on the subject of the risk of compensation claims relating to the Guaranteed Minimum Pension, the Director explained that the action taken involved not asking for overpayments to be paid back by an individual, but instead the pension was being put back to the position it would be, at the current value of that pension, so no individual, in terms of arrears owed, would be worse off. Ongoing the individual would be in the position they would’ve been. This information had been communicated to members. Work has been undertaken with HMRC to ensure records of all Guaranteed Minimum Pensions aligned, and where there was a liability, they had been investigated.

In response to a question asked by Cllr Wilcox, relating to priority of the key development activities and timelines for delivery, the Director explained that the Actuarial Valuation was the prime priority with a view to having the information finalised ahead of budget setting for 2023/24, when the new contribution rates would begin.

In response to a question by Cllr Huckfield relating to the Cyber Security Policy and the guarantee of protection for pensions, it was confirmed that LGPS Pension benefits were guaranteed. It was also explained that the team were working to better understand exactly what was involved in Cyber Security and how best to prevent issues occurring, prior to the development of the Cyber Security Policy.

Committee members heard that the Pension Fund currently 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 (internal and external);

·         Investment management (external); and

·         Custody (external).

Some of these were difficult to anticipate for example, costs for investment advice and legal support varied depending on the level of activity. Investment Management fees varied dependent of the value of assets under management (AUM) and the level of manager performance, impacting on the payment of performance related fees.

CIPFA reporting guidance stated that it was good practice to produce a three-year budget and the Table below illustrates indicative costs of the Fund’s likely budget costs for the period commencing 2022/23. The Committee noted that the indicative costs had been produced using the information available at the time, with reasonable assumptions made about growth in AUM and levels of activity.

*Includes the running costs of LGPS Central

** the above does not include the cost of transition which will be taken from the capital value of assets.

In response to a question from Cllr Sutherland regarding the different levels of Actuarial fees over the three-year period, the Director informed the Committee that the “peaks and troughs” of this cost reflected the level of work that was undertaken in preparation for and in carrying out the Actuarial Valuation during those particular time periods.

In response to a question from Cllr Wilcox relating to “other expenses” costs, the Committee was informed that 90-95% of “other expenses” were made up of cost associated with the quarterly Portfolio Evaluation Fund Performance reports that were received by the Pension Panel; and property valuations, which were undertaken quarterly.

Cllr Sutherland paid tribute to the sterling work the Pensions Team had undertaken over last 12 months to install the new system whilst working remotely.

RESOLVED – That the Staffordshire Pension Fund Business Plan for 2022/23 be approved and that the key challenges be noted.