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 the potential impact on the residents having to pay more council tax and thus should we say no to pooling.

Cllr Law said that LPP would only do the extra work regarding costs if they had an in principle agreement from the Fund that we would join their pool.

Cllr Hilton mentioned that we had no option but to join with LPP, however LPP needed to provide requested information so we could sell the proposal to the Berkshire Unitary Authorities.   Cllr Hilton also mentioned that LPP had indicated their strategy would evolve over time and as a partner we would have an opportunity to influence this. 

The Pension Fund Manager explained the investment buckets used by LPP but felt that they could not achieve their targets.  He was concerned that LPP had said they could add an emerging markets bucket but not an additional bucket to meet our investment strategy.   

Cllr Hilton mentioned that LPP had said they would achieve an income of 2.5% not the 4% targeted by the Fund.  The Pension Fund Manager said that LPP had indicated that over 3 years there would be a shortfall of £5 million however he felt this would be £17 million. 

The Chairman said that in principle we would be joining LPP but there were still many loose ends that needed to be resolved. 

With regards to keeping a local presence the Panel were informed that an office would be retained in Maidenhead but over time the staffing levels were expected to reduce by 50%.

The Panels independent advisor Mr Dhingra informed that joining LPP was an attractive offer considering we would have an equal voting right and increased resilience.  If the Fund moved away from its rigid investment approach income could come from other asset classes.

Resolved unanimously: that Panel notes the report and:

i)             Notes the instruction to join the Local Pensions Partnership issued by Marcus Jones MP.

ii)            In principle fully supports joining the Local Pensions Partnership as a shareholder.

iii)           Requests Officers to obtain details of on-going costs which will be incurred by Berkshire as a shareholder in the  Local Pensions Partnership  and authorises them in conjunction with the Chairman, Vice Chairman and other members of Panel to confirm details of the  terms, conditions and the timings of any transfers of assets, staff and operations to the Local Pensions Partnership.

iv)          Requests Officers in conjunction with the Local Pensions Partnership to prepare a report to be presented to unitary authorities, admitted bodies and other stakeholders.