For members to review and comment on various draft papers ahead of final versions being presented to the Pension Committee on March 22^nd 2021.

Members were told that the draft papers had been circulated offline, prior to them being formally published in the agenda papers for the Pension Committee meeting. Alan Cross commented that this was a new way of working and should it cause an issue for online observers of the meeting they should advise Kevin Taylor.

Pension Fund Governance Progress Report

Kevin Taylor told members that this would be a standing item outlining the progress being made on the governance review. Changes had been made to the Constitution to reflect the governance requirements of  the Pension Committee, Advisory Panel and Board. Ian Coleman highlighted the fact that revision of the Investment Strategy Statement did not need to be completed until spring 2022, although it was hoped this could be done before then and a paper brought forward in the nearer future. A possible revision of the Strategic Asset Allocation had been mooted and it was possible the LPPI would look at this and report to the Pension Committee. However, Ian Coleman added that if this was not required, it would be possible to move swiftly forward with the ISS review. A recommendation on the next course of action would be made at the next Committee meeting on 22 March 2021. Ian Coleman said the Committee would need to decide if they wanted a strategic review of the SAA, although this was dependent on the recommendations of LPPI.

Regarding the external audit report, Ian Coleman said he was not optimistic this would be ready in time for consideration at Committee as work needed to be done on a number of areas. However, he did not anticipate wholesale changes from the draft report.

Draft Responsible Investment Policy

Ian Coleman said all Pension Funds were expected to have an up to date responsible investment policy and the Berkshire policy had not been reviewed for some time. The draft policy had been put together following discussions with LPPI, who would deliver the policy on behalf of the Berkshire Fund. An extensive re-write of the climate change section of the report was anticipated as a consultation paper on climate change, and its effect on the Local Government Pension Scheme, was due to be published by the Ministry of Housing, Communities and Local Government later in the month.

Local Investment Report

Ian Coleman said a number of Funds had set aside funding for investment into local assets both generally and due to the problems associated with Covid. It was being viewed as a solution to helping grow local economies. The Board was told that the chairman of the Pension Committee had wanted a report on this topic to see if increased local investment was something elected Members wanted to pursue. Any execution of investment locally would involve LPPI. Ian Coleman said he had made a presentation on the subject to members of the Berkshire Unitary Treasurers, who had been supportive of the proposals. Alan Cross suggested the Local Enterprise Partnership (LEP) could be a useful source of information on investment opportunities, if Committee were to approve this and LPPI should have a discussion with  the LEP.

Jeff Ford suggested there was a possible political angle to local investment. He gave the example of a Pension Fund helping to fund a redevelopment of a shopping centre as an investment opportunity that could be construed as a political issue. Alan Cross said LPPI would need to intervene in such a scenario andconsider whether or not the proposed local investments met the return requirements. Ian Coleman said LPPI had established local funds for London and Lancashire and the same team would be involved in a Berkshire fund were it to be established. The team would likely to be based in London, although he added the Lancashire arm of the operation did have some staff operating from Preston.

Voting and Engagement Policy

Ian Coleman advised that voting and engagement would be carried out on the Fund’s behalf by the LPPI. He had had it confirmed that the LPPI policy would apply to all investments owned by the Berkshire Pension Fund. However, it would be possible for Berkshire to apportion a share of any vote if their view on a particular issue differed from those in the partner organisations in London and Lancashire, if it was made known there was a difference in opinion.

Pension Fund Business Plan 2021/22

Members were told this was an updated business plan, which included what actions from the previous year’s business plan had been undertaken.

Regarding the appointment of a Head of Pension Fund, Kevin Taylor advised that this had not yet gone out to advertisement. It was hoped this could be done as soon as possible and was awaiting final sign-off from the Head of Finance. Alan Cross noted a fixed timescale was in place for a review of the pension team structure and stated his opinion it would make more sense to do this once the new Head of Pension Fund had been identified as they may have a different view as to how the team should potentially be restructured. Members were in agreement that the timescales suggested in the report ought to be changed so they were conditional to the appointment of the new Head of Pension Fund.

Responding to a question from Jeff Ford regarding iConnect usage, Philip Boyton stated that 86 per cent of scheme member data is currently received from employers or their third party payroll provider on a monthly basis  through iConnect. He said there was no intention to impose the system on employers with ten or fewer scheme members and some onboarding of employers may be hampered by the payroll system they use. It was therefore suggested by Tony Pettitt that the report should be amended to state the aim was to have 100 per cent of scheme employers administering their services using iConnect by 31 March 2022 where viable.

Alan Cross stated that because of Covid, some investment values may be below the levels expected at this time by the actuary (in the 2019 review) and this would impact on the level of funding at the next actuarialreview. He suggested more work needed to be done to resolve this as far as possible. Ian Coleman said he expected funding to still be significantly below 100 per cent funding. Following the next actuary review a report would be produced that would outline the options available and the associated risks and it would be for the Fund to balance the levels of risk against investment. This would be considered at the same time as the plans for the Strategic Asset Allocation. The risks would be identified jointly by LPPI and the actuary. Regarding whether the targets would be the same as those identified in the actuarial review, this would be confirmed in time for the Pension Committee meeting. Ian Coleman said he could see no reason why the issue relating to risk could not be discussed at the next Board meeting.

Regarding the objectives listed in sections 3 and 4 of the paper, Nikki Craig stated RBWM had updated their policy on this recently and an interim strategy had been signed the previous year. It was agreed the most up to date version should be included in the report.

It was agreed some of the dates listed in the report would be amended as there were some inaccuracies.

Jeff Ford asked if Pension Administration Standards Association (PASA) accreditation was still an objective. Philip Boyton said it was still an ambition, but due to legislative changes in the pension industry PASA is currently less of a priority, with the need to redirect resources on to other projects.