To receive any apologies for absence.

There were no apologies for absence received. Councillor Wisdom Da Costa attended virtually as a non-voting member of the Committee.

To receive any declarations of interest.

There were no declarations of interest received.

To approve the Part I minutes of the meeting held on 12 October 2022.

RESOLVED UNANIMOUSLY: That the Part I minutes of the meeting held on 12 October 2022 be a true and accurate record, subject to amendments to the Administration Report agenda item.

Damien Pantling, Head of Pension Fund, introduced the item and explained that since the last meeting, he had looked at the impacts of inflation on both assets and liabilities, and was comfortable that these risks were reflected appropriately in the register. This had been reviewed by Barnet Waddingham, the Fund’s actuary, and LPPI, the Fund’s investments advisor.

Councillor Hilton, Vice-Chairman, asked in relation to risk PEN017 if any significant opportunities had arisen through other fund’s having to sell off assets in order to pay off gilt debts.

Damien Pantling stated that generally speaking, the Fund didn’t hold any products which contributed to the recent liquidity crunch (LDI investments). In terms of asset buying opportunities, it was being reviewed and would be taken into consideration when redrafting the investment strategy statement, which would come to the next Committee meeting.

Councillor Da Costa asked why the risk register reflected a high likelihood of unexpected employer contributions in PEN024.

Damien Pantling stated that the likelihood figure of 3 was a mid-risk. Affordability from an employer perspective was being challenged, and to describe the risk as a 2 would be inappropriate given the state of public finances.

Councillor Da Costa asked for clarification on risk PEN027.

Damien Pantling stated that the mitigations within the risk register had been put in place to reduce this risk, which resulted in a medium risk.

Councillor Da Costa asked if the McCloud case would have a significant impact on the fund.

Damien Pantling stated that there were three ways to look at the McCloud case – financial, administrative and from an employer perspective. The case would have an estimated 1% impact on the value of the liabilities which was already factored in. From an administration perspective, there would be a significant impact as the work that would be carried out would be legally required. From an individual employer perspective, this impact could be significant for individual employers but would be looked at on a case by case basis.

Councillor Da Costa asked if PEN032 was likely to be such a high risk.

Kevin Taylor, Pension Services Manager, stated that the risk was high before any mitigations were put into place. As a result of the treatments that were put into place, the actual net risk was green. The key item was to ensure that pensioners would be paid their pensions, treatments were in place to ensure that this would happen.

Councillor Da Costa asked if the cyber security policies relating to risk PEN035 were continually being updated, and whether the Fund outsourced this work.

Kevin Taylor clarified that there were two sides to this work – the system software provider had its own set of key factors in place to ensure against cyber security risk, which the Fund received regular updates about. The Fund was also supported by the borough and its cyber security risk policy.

Councillor Da Costa asked if any independent checks were carried out on behalf of the system software provider which would serve to  ...  view the full minutes text for item 97.

Damien Pantling introduced the report and stated that he had noted a significant improvement of the report from quarter to quarter, with the main RI report being built to align with the RI policy approved by the Committee last quarter.

In preparing the TCFD consultation response, Damien Pantling stated that he reviewed draft consultation responses from the LGA, Barnet Waddingham, PLSA, LPPI and various other pools and LGPS funds. The response submitted was very much Berkshire’s view, having been written based on previous conversations in various forums, and through consulting Committee and Board members.

To summarise the response, it was the Fund’s view that pools should be mandated to do more through TCFD. It was important that this policy was not at odds with pooling policy. LPPI had prepared a verbal statement on net-zero before receiving a formal report next quarter.

Richard Tomlinson, LPPI, stated that LPPI had been on its net zero for about a year and a half. The formal targets had been submitted to IIGGC and had been accepted and published, with LPPI now in the work of implementing the work towards these targets.

The first asset class that was in scope was global equities, with additional asset classes being brought in through time. The first two of these would be real estate and corporate credit. The Fund had a large global multi-asset portfolio, with each of those different asset classes bringing different challenges and opportunities for a net-zero perspective. The long-term goal was be to have 100% of assets under a net zero approach by 2050, though the goal was to reach the target before this date.

When looking at net zero investments, there were a number of factors to consider. The first of these was the backward-looking component, looking at how assets owned today could be decarbonised. The second element would be the actions taken to improve the characteristics of the portfolio. LPPI had a series of engagement targets within the global equities component which would evolve through time as other asset classes were brought in. The final element was the forward-looking aspect, looking at the alignment with net-zero, Paris-aligned pathways. The target for the portfolio was a 1.5 degree pathway, which meant looking at the assets within the global assets portfolio and forecasting forward to the expectations of where their businesses are going based on what they say they are going to do. At present, LPPI did not have a technical solution to model this but hoped to have this soon, as it would enable LPPI to be more granular and precise on managing that level of commitment.

Councillor Da Costa stated that he believed that the industry was so far-off reaching the Paris target, and asked how LPPI would move assets to net zero. When looking at the actual activities, Councillor Da Costa asked if investees would be looked at in terms of impact, with poor carbon credentials having a higher rate of return or if LPPI would want to move to each  ...  view the full minutes text for item 98.

Damien Pantling introduced the report and stated that the purpose of the report was to sign off the draft 2021/22 Pension Fund annual report and accounts. The report was unaudited, with the audit still underway. There had been some amendments to the prior two years’ annual reports and accounts, which was why the report had been brought back to the Committee for re-approval. At the pre-meeting, Deloitte had asked the Committee to note a small amendment to be made to the covering report, noting a caveat to the wording around Deloitte being comfortable with the 2021/22 audit. Whilst Deloitte advised they were generally comfortable, the report had not been reviewed by their lead engagement partner which meant that the Committee and officers could not yet state that Deloitte were comfortable with the report.

Councillor Sharpe stated that the situation of a delay in audit that the Fund were in with relation to Deloitte was not an unusual one and was one that a number of other councils were facing.

Councillor Hilton asked if the increase in management expenses from £27.7m to £40m was a revised reporting structure including previously unreported costs.

Damien Pantling stated that the accounting methodology had changed using the Cost Transparency Initiative, which was an industry standard. A third party, ClearGlass, via LPPI reported on the Fund’s management fees, with a note in the still open 2019/20 accounts and annual report that defined this change in accounting approach. It was not that the management fees had significantly increased, but a different method of reporting was being used to improve transparency. It was important to note that this didn’t affect closing net asset values in any way. The Fund carried out a grossing up exercise, which was increasing the Gross performance of investment assets and increasing management fees, which meant they net each other off while having no impact on the bottom line closing balance sheet.

Councillor Hilton asked if Technology Enhanced Oil Ltd was still trading. Given the increase in oil prices, Councillor Hilton asked if there was any opportunity for the company to re-emerge as a force they might have been.

Damien Pantling stated that specific investments could not be discussed in Part I.

Councillor Da Costa asked if it would be helpful to have the comparable figure for the previous year available in order to compare.

Damien Pantling stated that the way the report was presented was in line with advice from Deloitte as auditors, re-stating prior years as agreed with the auditors. The accounts were appended to the report, and the advice had been taken from Deloitte to present it this way, rather than overcomplicating the annual report more than was required.

Councillor Hilton asked if, in the cases where the value of an asset had decreased, this was a result of selling.

Damien Pantling stated that it would depend, but in the majority of cases this was probably related to selling.

Alan Cross stated that in relation to Councillor Da Costa’s question, it  ...  view the full minutes text for item 99.

Philip Boyton, Pension Administration Manager, introduced the report and stated that this report covered the quarter 1^st July 2022 to 30^th September 2022. Section 1.4 of the report covered i-Connect users, and Philip Boyton confirmed that The Holt School had onboarded, and the Fund continued to work with the Slough and East Berkshire Multi-Academy Trust along with one other large Trust, which would reduce the number of member records down from the reported circa. 2300 to somewhere in the region of 1700. Additionally, the six unitary authorities had achieved 100% file submission with the period, with Academies, Schools and other employer types providing data to the team on a regular, timely basis.

Section 2.2 of the report covered the Pensions Dashboards Programme, with the regulations governing pensions dashboards being ratified by Parliament. As part of making these regulations, public sector schemes were required to onboard in late 2024 rather than late 2023. The Fund could now work with software provider Heywood Pension Technologies in ensuring that the Fund was in line to meet this date. This would involve a data cleansing exercise which was negotiated to be free of charge, combined with the annual data quality test of Common and Scheme specific data in line with The Pensions Regulator (tPR) code of practice. The Fund planned to meet with the software provider during early February 2023 to set out a timeline of events and who would be responsible for key targets.

Councillor Sharpe asked if there was anything that Philip Boyton wished to highlight as the main issue from an administration perspective.

Philip Boyton stated that this would be dealing with the additional workload created by the McCloud judgement alongside ensuring the Fund is as best placed as possible to meet its obligations in respect of the Pensions Dashboards Regulations. This went hand-in-hand with having good quality data, which historically through the tPR annual data quality exercise, the Fund could demonstrate the evidence for. Furthermore, working with Heywood Pension Technologies would help with this.

Councillor Hilton asked if admitted bodies had a right to enter into the Pension Scheme, and whether the Fund checked if they were in good shape.

Kevin Taylor, Pension Services Manager, stated that part of the process when admitting these bodies was for the actuary to undertake an evaluation of the assets and liabilities attributable to the scheme members being transferred to the new employer. They transfer at 100% funded level for future membership of the scheme, and were monitored at each valuation period to ensure that the contributions that had been paid were sufficient to meet their liabilities. As part of the triennial valuation, the Fund’s actuaries were asked to do a full employer covenant review of those employers perceived to be at risk.

Councillor Da Costa asked in whose gift it was to say yes or no to an organisation joining the Fund, and if the Pensions Dashboard Programme was something that the Committee would be talked to and given information about.  ...  view the full minutes text for item 100.

To consider passing the following resolution:-

“That under Section 100(A)(4) of the Local Government Act 1982, the public be excluded from the remainder of the meeting whilst discussion takes place 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.”

RESOLVED UNANIMOUSLY: That under Section 100(A)(4) of the Local Government Act 1972, the public be excluded from the remainder of the meeting 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 12 October 2022.