Agenda and minutes

The Chair welcomed Jeremy Randall, Interim Pensions Consultant, to his first meeting of Harrow’s Pension Fund Committee.  The Chair asked that the Committee’s best wishes be conveyed to Iain Millar, Jeremy’s predecessor, who had left the employment of the Council.

To note the attendance at this meeting of any duly appointed Reserve Members.

Reserve Members may attend meetings:-

(i)            to take the place of an ordinary Member for whom they are a reserve;

(ii)          where the ordinary Member will be absent for the whole of the meeting; and

(iii)         the meeting notes at the start of the meeting at the item ‘Reserves’ that the Reserve Member is or will be attending as a reserve;

(iv)         if a Reserve Member whose intention to attend has been noted arrives after the commencement of the meeting, then that Reserve Member can only act as a Member from the start of the next item of business on the agenda after his/her arrival.

RESOLVED:  To note that there were no Reserve Members in attendance.

To receive declarations of disclosable pecuniary or non pecuniary interests, arising from business to be transacted at this meeting, from:

(a)          all Members of the Panel;

(b)          all other Members present.

RESOLVED:  To note that

(1)          the Declarations of Interests published in advance of the meeting on the Council’s website were taken as read and no further declarations were made at the meeting;

(2)          the Members, Advisers and Co-opted Member, who had declared interests remained in the virtual meeting whilst the items were considered and voted upon, except that the Advisers and the Co-opted Member left the meeting prior to the consideration of agenda item 17 – Appointment of Independent Advisors.

To consider the appointment of a Vice-Chair to the Pension Fund Committee for the Municipal Year 2020/21.

RESOLVED:  To appoint Councillor Bharat Thakker as Vice-Chair of the Pension Fund Committee for the 2020/2021 Municipal Year.

That the minutes of the meeting held on 18 December 2019 be taken as read and signed as a correct record.

RESOLVED:             That the minutes of the meeting held on 18 December 2019 be taken as read and signed as a correct record, subject to the following amendment:

Minute 97 – Performance Dashboard and Update on Regular Items

Paragraph titled ‘Summary Performance Dashboard for period ended 30 September 2019’, 3^rd bullet point on pages 9 and 10 of the Main Agenda, to delete the sentence ‘In response, Aon drew the ... market performance’.

To receive any public questions received in accordance with Committee Procedure Rule 17 (Part 4B of the Constitution).

Questions will be asked in the order in which they were received.  There will be a time limit of 15 minutes for the asking and answering of public questions.

[The deadline for receipt of public questions is 3.00 pm, 4 September 2020.  Questions should be sent to publicquestions@harrow.gov.uk  

No person may submit more than one question].

RESOLVED:  To note that no public questions, petitions or deputations were received at the meeting.

Report of the Director of Finance and Assurance.

The Committee received a report of the Director of Finance, which set out the draft Pension Fund Annual Report, External Audit Plan and Financial Statements for the year ended 31 March 2020 on which the Committee’s comments were invited.

An officer reported that draft Pension Fund Annual report was subject to external audit and that Mazars had yet to complete their field work.  Upon receipt of their audit, the outcome would initially be reported to the Council’s Governance, Audit and Risk Management Committee on 22 October 2020 and, thereafter, to the Pension Fund Committee scheduled to be held on 25 November 2020.  He added that the Report complied with the revised reporting guidelines due to the Covid-19 pandemic.  The final Report would need to be published by 1 December 2020 as this was the only date that had not altered in the reporting cycle.  He added that the membership of the Fund had remained stable albeit with minor movements and, given the size of the Fund, was not considered to be an issue.

Members were informed that the Council remained the biggest employer accounting to 82.5% of the Fund membership but the membership also included other educational bodies, the largest of which comprised of some 319 members.  The value of the investment assets of the Pension Fund had decreased during the year 2019-20, but in the period from 1 April to 31 July 2020 the figure had risen although the markets remain volatile due to the Covid-19 pandemic.

Members and an adviser asked the following questions:

Q1:  What were the potential implications of the increase in the number of pensioners by over 8% compared to the decrease in active members in the scheme which was down by 4% and how did that compare to previous years?  Would the changes in the trend cause problems in the future?

The table at page 26 of the agenda also required an explanation – lower charging structure.

The Director of Finance stated that officers would provide the comparisons and future reports would include such data. She accepted that the numbers might appear starkand would be monitored and kept under review.  She acknowledged that there had been a reduction in contributions whilst the liabilities had increased.

An officer added that last year’s figures showed that the membership was stable and details were set out on page 40 of the agenda.  He added that the table on page 26 of the agenda set out Investment Management Expenses which had been negotiated with the London CIV (Collective Investment Vehicle).  He explained that whilst the other costs had increased, the move to the London CIV had resulted in an overall decrease in investment management costs.  The Oversight and Governance costs had gone up as, every 3 years, a full actuarial valuation is required, and 2019-20 is the year in which the work for the 2019 Valuation is carried out. The costs of the actuarial valuations are not spread over three years, hence there was a “spike” in  ...  view the full minutes text for item 110.

Report of the Director of Finance and Assurance

Members received a report of the Director of Finance and a confidential appendix, which provided a summary of the contents of the latest internal controls reports for seven of the Fund’s investment managers.  The reports had been reviewed and showed that the controls were operating effectively and, where exceptions had been identified, there had been a satisfactory management response.

An officer introduced the report and stated that it was best practice for all Funds to receive annual reports and to show that, where issues had been identified, appropriate controls had been put in place.  He added that should Members wish to discuss any of the ‘exceptions’ set out in the confidential appendix, the Committee would need to move into a private session.  Members were also informed that the London CIV had provided details of their reviews of the various underlying Fund managers and there were no unresolved issues to report.

Members queried the reference to SCR in the confidential appendix.  An officer undertook to provide details of the acronym used.

RESOLVED:  That the report be noted.

[Post Meeting Note:  SCR is short for “Server Control Rooms”.  The access to these is restricted to authorised personnel and controlled via proximity cards.  Reports of access are reviewed by a senior manager each month.  In the case identified, there was one month where the review had not been properly evidenced.  The manager responded by confirming that this was now being done, and that a review of the period in question confirmed that all access to the areas had been appropriate.]

Report of the Director of Finance and Assurance.

The Committee received a report of the Director of Finance, together with appendices 1-5 of which appendix 4 was confidential and appendix 5 updated, which set out:

·                     the draft Work Programme on which the Committee’s comments and agreement were requested;

·                     the investment and management performance dashboard report summarising key fund performance, risk indicators, trigger monitoring report and PIRC (Pension and Investment Research Consultants) Performance Indicators;

·                     the Fund’s performance to July 2020;

·                     an update on the Pension Board.

An officer introduced the report and referred to the draft Work Programme until March 2021.  He invited the Committee to consider whether it wanted to hold a ‘Meet the Managers’ day before the November 2020 meeting of the Committee or to use the time to focus on progressing the review of the Investment Strategy.  The decision could be taken when the Committee would be considering the report on the Investment Strategy Review during the private session of the meeting.

The same officer added that the Performance Dashboard had been produced by the Council’s Advisors to the Fund/Fund’s Investment Consultant, Aon, and he referred to the Trigger Monitoring report set out at appendix 2 on the Supplemental Agenda.  It was acknowledged that the change in actuarial valuation methodology used means that the approach to trigger monitoring was out of date and updated versions of the trigger monitoring report would not be submitted to future meetings of the Committee.

Members’ attention was also drawn to the report from the PIRC, setting out the Fund’s quarterly performance, and an updated appendix 5, second supplemental agenda referred, which set out the Fund Valuation and Performance.

It was noted that a report on the Review of the Risk Register would be submitted to the November 2020 meeting of the Committee, including the emerging risks.

Members also discussed the subject of training which had previously been provided prior to each Committee meeting and agreed that the training sessions be resumed.  Members were asked to notify officers of the areas of training that they would like covered.  As part of the training sessions, the Chair emphasised the need to invite the London CIV (Collective Investment Vehicle) and he briefed the Committee on the CIV Annual General Meeting which he had attended.  He suggested that the Chief Investment Officer of the London CIV be invited to a training session.

RESOLVED:  That

(1)          subject to any comments set out in the preamble above, the Work Programme for the period up to March 2021 be agreed;

(2)               the comments on the performance and investment dashboard report be noted;

(3)          the Director of Finance invite the Chief Investment Officer of the London CIV to a training session to be held before a future meeting of the Committee.

To resolve that the press and public be excluded from the meeting for the following items of business, on the grounds that they involve the likely disclosure of confidential information in breach of an obligation of confidence, or of exempt information as defined in Part I of Schedule 12A to the Local Government Act 1972:

RESOLVED:  That, in accordance with Part I of Schedule 12A to the Local Government Act 1972, the press and public be excluded from the meeting for the following items for the reasons set out below:

Appendix 1 to the report of the Director of Finance and Assurance.

[See Minute 111 above.]

Appendix 4 to the report of the Director of Finance and Assurance.

[See Minute 112 above.]

Report of the Director of Finance and Assurance.

The Committee received a report of the Director of Finance which provided an update on the work of the London Collective Investment Vehicle (CIV) and its current Fund offerings.

An officer introduced the report and outlined the percentage of the Fund that was managed by the London CIV.  He referred to the CIV’s annual report which summarised their activities and highlighted concerns in respect of a MAC (multi-asset credit) Fund Manager and described what these were, details of which were set out in paragraph 5 of the main report.

The Council’s Fund Advisor, Aon, stated that whilst the direction of travel was satisfactory, there were some questions that needed answering by the London CIV.

An adviser referred to his meeting with London CIV’s CIO (Chief Investment Officer) and raised some operational concerns about the individual’s planned investment process which he had provided to the Committee separately.  The adviser suggested that the CIO be invited to Harrow to allow for scrutiny by the Committee.  The Committee was in general agreement of this suggestion.

The Chair also remarked on the lack of presence of the London CIV as he had expected the organisation to have visited the participating boroughs on a quarterly basis.  An adviser undertook to assist in extending an invitation to the CIO and referred to the quarterly reports submitted by the London CIV which he considered to be of poor quality.

RESOLVED:  That the report be noted and that the London CIV be invited to attend the training session to be held prior to the November meeting of the Committee.

[See also Minute 112, Resolution (3)]

Report of the Director of Finance and Assurance.

Members received a report of the Director of Finance on the Investment Strategy for the Pension Fund investment portfolio and proposed how the review of the Strategy ought to be taken forward.

The Council’s adviser to the Fund/Fund’s Investment Consultant, Aon, referred to their report and outlined the Pension Fund’s current Investment Strategy.  The report highlighted to the need to adopt a definition of asset classes and the need to incorporate Responsible Investment in light of the Council having declared a Climate Change Emergency.

A representative from Aon responded to questions on flexibility and good discipline and assured the Committee that the views of the advisers and the co-optee had been incorporated. 

An adviser enquired about the parameters that would be set. He asked if the fund would be forced to sell if equities were 51% (rather than 50%).  He hoped that this would not be the case.  He saw the need for some flexibility to be applied and was of the view that it would be reasonable for it to be plus or minus 3%.  Any breach greater than 3% should be reported to the Committee for rebalancing and he sought Members’ views in this regard. In response, Aon pointed out that for equities, the Fund’s rebalancing triggers were + / - 5%, and it was good practice to carry out automatic rebalancing on a quarterly basis.

RESOLVED:  That, having considered the Investment Strategy review as set out in appendices 1 and 2 of the report,

(1)          it be agreed that the high level allocation be in three “buckets” as follows:

·                     50% equities, with any breach greater than + or - 5% necessitating rebalancing and being reported to the Committee

·                     25% Diversifying return assets

·                     25% Risk control assets;

(2)          further actions required to complete the review be as set out in paragraph 5 of the report.

Report of the Director of Finance and Assurance.

Prior to the consideration of the report, the independent advisers, including the co-optee, left the virtual private meeting during the discussion and decision-making relating to this item.

The Committee received a confidential report of the Director of Finance, which set out the proposals to extend the appointments of the existing Independent Advisers to the Pension Fund and to enable a procurement exercise to be undertaken in the 2021-22 financial year.

The Chair stated that whilst some Members might have wanted to carry out a procurement exercise after the local elections in May 2022, it would be prudent, given the circumstances set out in the report, for a procurement exercise to be undertaken earlier.

RESOLVED:  That the extension of the appointments of the current independent advisors, Mr Colin Robertson and Honorary Alderman Richard Romain, to 31 March 2022, be endorsed, including their role description.