Agenda item

Report of the Director of Finance and Assurance.

Having noted the confidential Appendix 2 to the officer report, the Board received a report which summarised the matters considered by the Pension Fund Committee Items at its last meeting on 24 November 2021 and invited the Board’s comments.

During the discussion that ensued the following key points were highlighted:

1)              A technical amendment to the definition of “Regulatory Capital” in the Shareholder Agreement and Articles of Associate had been approved by the London Collective Investment Vehicle (CIV) following some additions to its range of fund offerings;

2)              Arrangements to appoint two independent advisors to the Pension Fund were under way as current contracts were due to expire in March 2022.  Recommendations for appointees were expected to be made at the next Pension Fund Committee (PFC) meeting in March 2022;

3)              As at 30 September 2021, the Pension Fund’s investments were valued at just over £1bn with estimated liabilities at £985m and investment funding level of 104% value just over £1bn – this was an improvement since the last valuation mainly due to higher than expected returns on investments during the most recent quarter;

4)              Environmental, Social and Governance (ESG) reporting and dashboard had been agreed by the PFC.  Options offered by Blackrock for exercising voting rights in respect of the Fund’s passive equity investments were also considered and having considered a number of possible options, it was agreed that the approach of continuing to use Blackrock’s Investment Stewardship division to vote on the Fund’s behalf remained the most appropriate.  With regards to the ESG dashboard, set out in the exempt Appendix 2, it was expected that subject to confirmation from Aon, once completed with Harrow’s data it would become a publicly accessible document.

5)              Referencing Appendix 1 to the report, which set out the Fund’s valuation and performance for the period March 2021 – March 2022, in particular with regards to the valuation of assets without a specific market class, the Board was informed that this referred to all liquid assets.  Property was of particular concern due to the impact of the Covid-19 pandemic and the uncertainly around valuation of commercial property.  Other assets where the market was less obvious private equity investment, infrastructure fund and renewables infrastructure (since July 2021).

6)              With regard to funding and liabilities, the Board was informed that under current statue it was not possible to outsource risk to third parties even if its funding level exceeded acceptable thresholds.  Funds are expected to manage this through modification of investment strategies (eg lowering risk as funding levels increase and vice versa).  Other factors which had to be taken into account included the Fund’s cash flow position (in Harrow’s case most returns were reinvested) as well as the assumptions made by the Actuary particularly the discount rate applied to future liabilities.  Any large surpluses highlighted by triennial valuations opened the possibility for review of the employer contribution rates and would normally be managed through adjustment of secondary employer contribution rates to avoid potential problems.

RESOLVED:  That the report be noted and that a further report on the Government Actuary’s Section 13 report on the 2019 Valuation be included on the agenda for the March 2022 Board meeting.