Meeting attendees to introduce themselves and receive any apologies for absence.

Apologies for absence were received by advisory members Bob Swarup and Councillor Glenn Dennis, Reading Council

To receive any declarations of interest.

Councillor Stephen Newton, Wokingham Borough Council (Advisory Panel), declared that his wife was a member of the scheme.

To approve the Part I minutes of the meeting held on 18 September 2023.

RESOLVED UNANIMOUSLY: That the Part I minutes of the meeting held on 18 September 2023 be a true and accurate record.

To note the report from Damien Pantling, Head of Pension Fund.

Damien Pantling, Head of Pension Fund, delivered the update on Risk Management and explained they were presenting 46 risks this quarter, including two new risks and three that were removed or merged since the last meeting. It was noted that one new risk involved differences in the fund’s performance compared to the wider LGPS. The other risk noted concerned climate impact, split into assets and liabilities. Damien Pantling noted a new table had been included of top risks post-mitigation in the report, with a minor error to be corrected post meeting. It was also mentioned that during the Pension Board meeting it was discussed about a specific risk related to audit delays being documented in the Risk Register from March 2024.

Councillor Stephen Newton, Wokingham Borough Council (Advisory Panel), raised concerns regarding unsigned annual accounts affecting council operations, he emphasised the need for auditors to focus on resolving issues related to the Pension Fund accounts, minimising broader audit concerns.

Councillor Da Costa thanked Damien Pantling for the inclusion of climate risk in the Risk Register and for splitting it between assets and liabilities. He asked a few questions, firstly about how and when will they address operational risk, especially concerning infrastructure and building usability in the face of climate change impacts, secondly what their approach was to quantifying risks in terms of monetary value and considering potential increases in operational costs due to audit related issues?

Damien Pantling explained that Councillor Da Costa’s concern extended beyond climate risk and encompassed disaster recovery and business continuity which while not explicitly stated in the Risk Register, Damien Pantling said there were robust disaster recovery and business continuity plans, annually reviewed, that addressed these aspects. He noted that for quantifying climate risk, their methodology aligns with government guidelines. Damien Pantling also noted that climate risk scenario analysis was mandated in their triennial valuation process and was last conducted in 2022.

Councillor Da Costa wanted to clarify that the net risk would be borne by the scheme members rather than those paying the pension? And commented on operation risks, that the Pension Fund Committee should be able to see where they are at with their disaster recovery scenarios, and asked what kind of scenarios are included?

Damien Pantling said what whilst employers bear the risk, it was important to acknowledge that local taxpayers, who fund the employers, are also impacted. As for disaster recovery, it was primarily an operational matter managed across various departments within the administering authority and his focus was solely on the Pension Fund’s concerns. Councillor Da Costa believed it was essential to consider the significance of the risk and delegating responsibility was not good enough. He believed they should be aware of, if not directly involved in, addressing the risk.

Alan Cross, Chair of the Pension Board, said that regarding the new risk concerning a different investment approach, it's important to note that the approach aligned with their unique funding level. The Strategic Asset Allocation was thoroughly debated and unanimously  ...  view the full minutes text for item 142.

To note the report.

Damien Pantling introduced the report on Good Governance, firstly giving some background information that in September/October 2021, the CIPFA 2016 risk management framework was introduced to the Fund and adopted for Pension Board and Pension Fund Committee reports. The framework was used to establish the annual risk management policy and formed the basis for the quarterly Risk Register presented to the forum for approval. It was noted there had been a lack of professional second opinion on the interpretation of the framework.

Damien Pantling explained that an internal audit was commissioned a few months ago to thoroughly review the Fund's risk management practices. The outcome of the review was positive, with no high-priority recommendations identified. However, two classified as medium priority and five as low priority recommendations were made. Officers had already begun working on addressing the recommendations, and the deadlines were considered realistic.

Damien Pantling said it was important to note that internal audit reviews were not compulsory but were conducted for reasons of good governance and best practice. These reviews aligned with the Fund's business plan and its goals of continuous improvement.

Councillor Tisi highlighted the positive progress with no high-priority actions required, commenting that of the two medium-priority actions, one of which had already been resolved within the allocated timeframe. Regarding the open action concerning risk controls, Damien Pantling said specific risks identified had been addressed. However, restructuring the risk register remained pending. Damien Pantling highlighted that discussions with RBWM on utilising their risk management software were underway, with plans for a review before the next Pension Fund Committee meeting in March or June. He noted that the software seemed suitable for local authorities, its compliance with LGPS risk management frameworks would be assessed before implementation. If necessary, external procurement options would be explored.

Councillor Newton commended the initiative taken for the voluntary internal audit, noting positive outcomes with minimal priority actions identified, he then inquired about the plan for future audits and updates on pending actions.

Damien Pantling said that whilst there was no specific agenda item for reporting back on these actions, Officers intend to provide updates periodically. This could be included in future Good Governance reports, the annual governance statement, or the annual business plan. The exact reporting mechanism was yet to be decided but would ensure transparency and accountability.

Regarding future audit plans, Damien Pantling highlighted that the administering authority's Audit and Governance Committee sets the internal audit plan. The Pension Fund would coordinate with them to allocate internal audit resources effectively. While annual audits were not guaranteed, efforts would be made to continue this practice for ongoing improvement and oversight.

Councillor Da Costa commended the presentation and expressed agreement with the recommendations put forward. He emphasised the importance of having a formal view and external validation. Councillor Da Costa then inquired about the approach taken by external auditors in assessing the risk program, considering RBWM's existing teams. He sought clarification on how the audit compared to traditional audits, which focus on accounting  ...  view the full minutes text for item 143.

To note the report from Damien Pantling, Head of Pension Fund

Damien Pantling delivered the Annual Report and Accounts and began with a commendation to the team for their hard work in preparing the draft annual report for the Pension Fund, ending on 31 March 2023. It was explained that the purpose of the report was outlined as seeking approval for the draft, which remained unaudited due to ongoing prior audit periods. It was emphasised that the Pension Fund accounts were integral to the RBWM accounts and could not be signed off until the latter were audited. Although external auditors provided a positive verbal update during the Pension Fund pre-meet, formal audit opinions were pending. Pension Fund Committee approval was sought to publish the annual report, marking its first public release, although it was noted the chart of accounts had been previously published alongside RBWM draft accounts in May/June.

Councillor Da Costa acknowledged the effort that had gone into the report and suggested using PNG format for signatures instead of JPEGs. Reflecting on the audit, Councillor Da Costa sought clarification that while most of the testing had been conducted and formal sign-off was pending, the auditors did not raise any issues with the Pension Fund accounts and their feedback suggested no significant concerns?

Damien Pantling explained that auditors had completed most of the testing and verbally confirmed no issues found, but formal assurance awaited partner review. However, due to unaudited prior-year balances and outstanding audits, full assurance was pending.

Councillor Da Costa asked what the process was once the previous outstanding accounts were signed off? Damien Pantling explained that once the auditors sign off on the accounts for the years 2021to 2023, the final audited accounts will be approved by the Audit and Governance Committee of the administering authority. Any material amendments will be brought back to the committee for reapproval. It was also noted that the process for finalising the annual report will follow a similar pattern, with any significant changes requiring Pension Fund Committee approval.

Councillor Da Costa requested that the word ‘draft’ be added to the motion which officers accepted.

Councillor Tisi wanted to clarify the wording in 2.6 of the report that referred to a correction related to scheme assets amounting to £24 million, representing approximately 0.9% of the total assets. He sought clarification if this error was due to an update or adjustment in the reported values of the assets rather than an error in the internal accounting processes. Damien Pantling explained that they reported the information provided to them by their Fund custodian, and it was later discovered that there was a double counting error amounting to approximately £24 million. The error was identified by fund officers approximately two months after the initial reporting and they followed all due processes by reporting the information as received from their third-party custodian. Upon officers discovering the error and raising with the Custodian, they (the custodian) promptly corrected it.

Councillor Tisi asked about potential legislation changes impacting financial reporting requirements, and would they still do the outstanding previous  ...  view the full minutes text for item 144.

To note the report by Philip Boyton, Deputy Head of Pension.

Philip Boyton delivered the Administration Report, highlighting three key points in the presentation. Firstly, it was highlighted the addition of a new membership type called "Frozen Refund Records" and "Frozen Refund People" to ensure consistency with the annual report and accounts. Frozen refunds referred to former contributors who did not meet the two-calendar year vesting period for a deferred benefit and were entitled to receive a return of their net pension contributions. The number of frozen refunds was higher than desired, prompting plans for a project to reduce this number through an address tracing exercise and utilising the National Insurance database. Philip Boyton then spoke on i-Connect and the report noted a significant increase in employer performance and engagement with Academies and Schools, showing a circa 8% increase compared to the previous quarter, reaching 93.4%. This improvement was attributed to enhanced communication and engagement with third-party payroll providers. Finally, there was discussion focused on increasing the key performance indicator (KPI) for deceased processing from five to 10 working days. The KPI measured the time taken to begin payment of a surviving partner's annual pension after receiving all necessary paperwork. Despite the increase, the timeframe remains within the CIPFA benchmark of two months. The report emphasised the importance of monitoring progress and highlighted the development of less experienced pensions administrators in handling this area.

Councillor Tisi acknowledged the realistic adjustment of the key performance indicator (KPI) benchmark to 10 working days and expressed satisfaction with the progress on adopting the i-Connect system. He commended the team for the efficient transition. However, Councillor Tisi asked for clarification on the graph representing Frozen Refund People, noting a discrepancy in the numbers, and asked for an explanation for the apparent sudden increase in the figures from previous years.

Philip Boyton summarised that the Frozen Refund Records represented individuals who had contributed for less than the vesting period required for a pension entitlement. These individuals were not previously included in the reported figures, hence the sudden appearance in the graph. The team was going to undertake efforts to identify and reduce the number of Frozen Refund Records through an address tracing exercise and utilising the National Insurance database.

Councillor Da Costa highlighted the positive progress outlined in the report but raised concerns about the quality of communications sent to members. Councillor Da Costa also discussed ongoing issues with the McCloud Remedy and the Pensions Dashboard Programme, underscoring the need to identify pressure points and allocate resources accordingly for sustained operational effectiveness.

Philip Boyton reported progress on familiar KPIs, noting that all team members are experienced in delivering except for deceased processing, which less experienced team members are now transitioning to handle, anticipating improved reporting in this area. Philip Boyton discussed communication efforts, including pension surgeries, presentations, employer meetings, and training sessions, led by a dedicated Communications Manager with support from the team. Ongoing projects included addressing the McCloud Remedy and developing the Pensions Dashboards, with a revised timeline for the latter to 2025.  ...  view the full minutes text for item 145.

To note the report from Damien Pantling, Head of Pension Fund

Damian Pantling introduced the report on Responsible Investment but explained that two colleagues from LPPI were present for questions on the reports. It was emphasised the portfolio's current green-to-brown ratio with 3.4 time more green than brown and consistently better ESG score compared to the benchmark. Damien Pantling noted an outstanding action regarding climate training and the setup of a task and finish group, ensuring it remains on the radar despite resource challenges, with plans to address it in the new financial year.

 Councillor Da Costa expanded on Damien Pantling’s point regarding climate change training, highlighting its dual purpose of educating Pension Fund Committee members and shaping a responsible investment policy and strategy. This endeavour aimed to align investment objectives with emerging opportunities in green assets and other climate-friendly solutions. Councillor Da Costa emphasised the long-term nature of this project, acknowledging the complexities involved and the need for extensive information and collaboration to formulate a strategy that maximises growth while addressing challenges and opportunities in the changing environment.

Alan Cross noted a point for the benefit of LPPI colleagues regarding the comparison of changes over time, particularly in areas like diversity on boards. He raised the question of whether these changes were driven by shifts in investments or by alterations in board compositions, possibly influenced by actions taken by partners collaborating with these boards. Alan Cross emphasised the importance of delineating between changes resulting from investment shifts and those stemming from board dynamics to better understand progress.

Richard Tomlinson, LPPI, spoke on the difficulty in attributing outcomes to specific actions, especially within a public equity portfolio, it was noted that multiple managers often claim responsibility for the same outcome due to various engagements. This made it challenging to determine whether changes were driven by shifts in composition or in the assets themselves. While efforts were made to analyse these factors, it remained complex as changes were influenced by both portfolio adjustments and advocacy for change. Richard Tomlinson emphasised that preferences for certain types of investments can shape future decisions and engagements to align with desired characteristics. He noted that transparency was encouraged, with a reminder to acknowledge actions taken when attributing outcomes.

The Chair queried the involvement of various organisations mentioned in the report, all of which appeared commendable and committed to effecting change. The International Investors Group on Climate Change (IIGCC) was highlighted for its admirable work over the past decade. The Transition Pathway Initiative (TPI), initiated with the support of organisations like the Church of England, was also noted for its dedication to responsible investment. The Task Force on Climate-related Financial Disclosures (TCFD), championed by Mark Carney, was recognised for its influence in driving change. Mention of the Nature Action 100 initiative on biodiversity was particularly welcomed. The Chair requested additional context on the initiative, particularly regarding the founding participants and other key stakeholders involved.

Richard Tomlinson clarified that the Nature Action 100 initiative is an organisation being supported, with biodiversity and nature emerging as key themes not  ...  view the full minutes text for item 146.

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 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 18th September 2023.

To note the report from Damien Pantling, Head of Pension Fund.

To discuss any other Part II items of business.