Agenda and minutes

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 the attendance at this meeting of the following duly appointed Reserve Member:-

To receive declarations of personal or prejudicial interests, arising from business to be transacted at this meeting, from:

(a)               all Members of the Committee, Sub Committee, Panel or Forum;

(b)               all other Members present in any part of the room or chamber.

RESOLVED:  To note that there were no declarations of interests made.

That the minutes of the meeting held on 25 November 2009 be taken as read and signed as a correct record.

RESOLVED:  That the minutes of the meeting held on 25 November 2009, be taken as read and signed as a correct record.

To receive questions (if any) from local residents or organisations under the provisions of Committee Procedure Rule 19 (Part 4B of the Constitution).

RESOLVED:  To note that no public questions were put, or petitions or deputations received at this meeting under the provisions of Committee Procedure Rules 19, 16 and 17 (Part 4B of the Constitution) respectively.

Report of the Corporate Director Finance.

An officer presented an update of the Funding Strategy Statement (FSS) and Statement of Investment Principles (SIP) for discussion and approval by the Pension Fund Investment Panel. 

During the discussion, Members raised a number of issues which were responded to as follows:

·                     local authorities were able to take a long term view of funding the liability on the pension fund because of the nature of local government.  However, the authority took a fairly cautious view based on the advice of the actuary.  Active members of the fund are required to contribute to the pension fund unlike some other parts of the public sector where the pension liabilities were unfunded;

·                     the. Employers referred to in Annex A of the report  made the required minimum employer contributions to the pension fund;

·                     a detailed review of the FSS took place every three years before the triennial valuation was conducted.  The admitted bodies were invited to make comments on the proposed change to the FSS;

·                     the valuation process was based on the assumption that the fund would be sufficient to cover its liabilities and the gap identified would be addressed by the employer’s future contributions;

·                     in theory, employers could increase the contribution rate in the interim period between valuations .  The contribution rate was adjusted every 3 years as the long term view was to ensure that the liabilities of the fund were fully funded.  Employees’ contribution rates were set nationally;

·                     adjustments to the contribution rate of individual employers had been made because officers had applied different valuation assumptions against different employers in calculations.  Transfer costs were applied to contribution rates if an employee was transferred into the Local Government Pension Scheme (LGPS;

·                     the asset values and shortfalls of assets against liabilities were included in the annual pension fund statement of accounts;

·                     officers would confirm the length of the debt recovery period applied to employers in the FSS and advise Members of the risk mitigation process taken if an employer ceased to exist;

·                     the fund would be evaluated in March 2010 when a detailed assessment of liabilities would be based on various assumptions.  These included, the inflation rate, salary inflation and  the discount rate which was the anticipated return on Investments.  The financial health of the fund was recalculated and employer contributions were determined;

·                     other strains or decisions that directly affected the health of the fund had not been included.  However, employers were required to absorb the cost of payments if employees had not taken early retirement on the grounds of ill health;

·                     officers felt that the recommendation to increase employer contributions in the Medium Term Financial Strategy to 0.5% in 2011/12 was a sensible upper limit to meet any shortfalls in employer contribution rates after the next valuation;

·                     the contribution rate payable by employees was banded since 1 April 2009/10.  It ranged from 5.5% to 7.5% paid by higher income earners; 

·                     changes to the LGPS were reported on a quarterly basis to the Licensing and General Purposes (L&GP) Committee.  Members of the  ...  view the full minutes text for item 216.

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 the press and public be excluded from the meeting for the following items for the reason set out below:

Report of the Corporate Director Finance.

The Panel received a report which reviewed the pension funds use of active currency management as part of the pension fund and reconsidered the approach taken by the fund managers appointed in 2006.  The Panel were required to agree one of three options recommended.

In response to questions from Members of the Panel, officers and the Advisor to the Panel advised that:

·                     correlations between equity and currency risks and returns were not directly linked;

·                     due to the volatility of currency and the relationship between different currencies, a reasonable approach was taken to investment in this particular area to maximise returns;

·                     following the appointment of fund managers in 2006, the value of some investments had fallen.  This could be attributed to the financial crisis and changing economic conditions;

·                     before making a decision on the future of the use of currency management as part of the Pension Fund, the Panel would need to consider the overall strategy of asset classes.

The Panel received advice from officers and the Adviser to the Panel

RESOLVED:  That

(1)               Option 1 in the review paper be agreed;

(2)               a cost report on Option 3 in the review paper be presented at the next Panel meeting;

(3)               officers would investigate and prepare a report on alternative forms of investment.

Report of the Corporate Director Finance

The Panel received a report of which provided an update following the transition to a new pension fund management structure.

An officer reported that the actual cost of the transition, which included equity transition costs were better than anticipated.

The Panel noted that the transfer of the bond mandate had reached a satisfactory resolution.

RESOLVED:  That the report be noted.

Which cannot otherwise be dealt with.

The Chairman reminded Members that a training session by the Actuary of the Fund had been organised to take place on 10 February 2010.  He added that the agenda had been circulated to Members and Reserves of the Pension Fund Investment Panel and Licensing and General Purposes Committee.  He advised that a more detailed training programme would be offered following the local elections in May 2010.

RESOLVED:  That the update be noted.