To receive any apologies for absence.

Apologies for absence were received by Cllr Rankin, Cllr Stanton, Cllr Worrall and Engin Eryilmaz.

To receive any declarations of interest.

The Pension Fund Manager declared that all Pension Fund officers could be affected by LGP Pooling.

To approve the Part I minutes of the meeting held on 13 February 2017.

The Part I minutes of the meeting held on 13 February 2017 were approved as a true and correct record subject to on page 8 the AAA rating be amended to AA and that on page 9 out saucing be amended to out-sourcing.

To note the report.

The Pension Fund Manager informed the Panel that following the triennial actuarial valuation and the new deficit recovery rates Barnett Waddingham had been instructed to prepare a cash flow mode for the fund. 

Agenda pages 11 and 12 showed details of two cases that were presented; the base case (no outsourcing of services over three years) and the bear case (with 25% of patrols out sauced).  In both cases both benefits remained the same.  The Panel were informed that the Pension Fund operated with a negative cash flow and therefore needed investment income on a regular basis and not wishing to sell assets to pay benefits.

Cllr Hill asked if in 3 to 4 years time if the fund has to sell assets to pay benefits what were the options.  The Panel were informed that the answer was to rely on investment income.  It was always known that the gap would grow and the fund would be cash flow negative hence the plan was to increase investment income for as long as possible.  The need to sell assets was not expected for another 20 to 30 years.  The Fund needed repetitive, regular, predictable income.

Cllr Hill said that the fund needed regular income that the Pensions Manager feels should come from equity whist others have said this should come from capital sales. 

The Chairman mentioned that the dangers of out-sourcing was the reduction of employee contributions that could, as shown in the American car industry, result in bankruptcy.

The Panel were informed that section 2.2 of the report showed a hypothetical model (as requested by the Panel) of an admitted body which did not allow new employees to join the Fund.  The scenario showed that payroll falls and after 2020 deficit recovery payments would be required.

Cllr Hilton asked what the table showed and the Panel were asked to refer back to the table on agenda page 11 that showed the results of a reduced contribution rate producing a deficit of £1.1 million.

Resolved unanimously: that the report be noted.  

To consider the report.

The Chairman of the Panel informed that a meeting was held with representatives of the Local Pensions Partnership on 11^th May 2017 and notes of the discussion were circulated to the Panel. 

The Chairman explained that the main problem moving forward for LPP was that they were not comfortable with the Funds investment strategy and the amount we wished to retain for local investments. 

With regards to the documentation the Pension Fund Manager informed that when they draft legal documents were sent there were over 75 errors, LPP had not yet corrected the documents as they were waiting for our commitment to Pool.

The Chairman highlighted that agenda pages 19 to 21 contained the letter from Marcus Jones MP (Minister for Local government), instructing the Berkshire Pension Fund to conclude their negotiations with LPP, and the Panel Chairman’s response. 

The Chairman informed the Panel that he had informed the Minister that his department had not replied to his letter requesting confirmation that LPP would become an authorised LGPS Investment Pool. 

Cllr Hilton informed the Panel that the Fund currently had about £500 million invested in equity with the aim that income produced would cover pension payments.  LPP may refuse to maintain our investment strategy and they would cover pension payments from the capital bucket and by selling capital.  LPP did concede to creating an emerging markets bucket.  LPP currently had 8 investment buckets that we split our investments into; however we would be moving to a vanilla traditional fund. 

Cllr Law informed that there were two main issues that came out of the meeting with LPP.  It was clear that their strategy for equity income differed from ours and that they expected that once our local investments matured they should be re-invested back into the Pool.  LPP expected that eventually we would have 100% of the fund invested with them.   The only choice was to agree to join LPP or say no to pooling.  Cllr Law stated that prior to making our decision we needed a clear understanding of the costs. 

The Chairman mentioned that he had been surprised that there had not been more opposition to pooling from other LGPS.

Cllr Hill questioned what the implications would be if costs increased and was informed that LPP had said that if we changed our investment strategy then they could decrease costs.  A costs analysis exercise had been undertaken but LPP had refused to provide data as they said it was sensitive information.  It would be difficult to justify pooling if we can not justify costs. 

The Panel were informed that the minister had said in his letter that we had to pool and he has powers to force a new investment strategy on the fund.  An off the record discussion with a legal advisor had indicated that he minister could not force the fund to pool, however he could introduce legislation to be able to do this. 

Sue Nicholls said that if costs were going to increase there was  ...  view the full minutes text for item 111.

To consider the report.

The Panel were requested to approve two statutory policy documents; the Funding Strategy Statement and the Investment Strategy Statement.  The Panel were also asked to approve the Pension Funds Business Plan. 

The Panel were informed that the Funding Strategy Statement had been previously approved so the version under consideration was a refresh reflecting the assumptions made and the results of the 2016 Actuarial valuation.  The Investment Strategy Statement was a new requirement replacing the Statement of Investment Principles. 

Mr Butcher highlighted that on agenda page 29 paragraph 1.1 the Royal Borough of Windsor of Maidenhead should be changed to Windsor ‘and’ Maidenhead. Mr Butcher also recommended that as the first two documents were departmental statements that it should say so on the front sheets. 

Mr Butcher asked if there should be reference to LPP and risk management.  The Pension Fund Manager replied that this would be added later when the Funds position on pooling was clearer.  The Chairman recommended that we could add that we planned to join LPP.

Cllr Hill questioned how table 7 could show contributions increasing whilst the number of employees in the scheme was decreasing.  The Panel were informed that contributions would increase as debt recovery contributions have increased.  The impact of out-sourcing would take 3 years to have an impact.

Cllr Hilton mentioned  that on agenda page 43 the table showed that 50% of the Funds assets would not be pooled and questioned if this was still correct.  The Panel were informed that the table was correct when the document was published.  LPP had the assumption that in 8 years all the Funds assets would be pooled. 

It was noted that the approval date of the Business Plan would have to be changed to 15 May 2017. 

Resolved unanimously: that the Panel notes and authorised the publication of:

      I.        The Funding Strategy Statement

    II.        The Investment Strategy Statement

   III.        Business Plan 2017 – 18 and Medium Term Strategy 2018/2021

To consider the report.

The Panel considered the latest stewardship report of the Pension Fund for the period October 2016 to 31 March 2017. 

The Panel were informed that on agenda page 54 a new table had been added showing funding levels over a 12 month period, both smoothed and unsmoothed.  The performance indicators on agenda page 57 showed the improved performance of those authorities using i-Connect.  When an employer was underperforming against the KPI’s this would be reported by exception. 

Cllr Law asked why Table 8B showed West Berkshire as underperforming and was informed that this was because they were not using i-Connect.  West Berkshire were due to implement i-Connect this year. 

Resolved unanimously: that the Panel noted the report and:

      I.        The investment performance and asset allocation of the Fund

    II.        All areas of governance and administration as reported

   III.        All key performance indicators

To consider passing the following resolution:-

“That under Section 100(A)(4) of the Local Government Act 1972, the public

be excluded from the remainder of the meeting whilst discussion takes place

on the grounds that it involves the likely disclosure of exempt information as

defined in Paragraphs 1-7 of part I of Schedule 12A of the Act"

RESOLVED UNANIMOUSLY: That under Section 100(A)(4) of the Local

Government Act 1972, the public be excluded from the remainder of the meeting whilst discussion takes place on following items on the grounds that they involve the likely disclosure of exempt information as defined in Paragraphs 1-7 of part I of Schedule 12A of the Act.

To approve the Part II minutes of the meeting held on 16 January 2017 and 13 February 2017.

To consider the report.

To note the Investment Working Group minutes of 26 April 2017.