Agenda and minutes

There were no changes to the membership.

None.

Apologies for absence were received from Cllr Deane, Cllr Brady and Cllr de Rhe-Philipe, as well as Michael Hudson, Interim Chief Finance Officer.

Cllr David Jenkins substituted for Cllr Osborn.

To confirm the minutes of the meeting held on 27 July 2011 (copy attached).

The Chairman updated the meeting on the following items:

CIPFA Governance Health Check

At the previous meeting the committee resolved for officers to review the benefits and if appropriate commission an independent health check for the fund. This has now been commissioned, and Mr Keith Bray will present his report on the Governance Arrangements of the fund on 1 December 2011.

Members Training

Members were reminded that the next training event would focus on procurement and accounts & audit regulations. Originally scheduled for October 2011, this would likely now take place in November.

Following the announcements on the Government’s proposed changes to the LGPS, which are expected over the next few weeks, the Fund’s Actuary will be invited to the training session to give an update on the current actuarial issues facing the fund that committee members need to be aware of.

Democratic Services will circulate a list of suggested dates and the Pensions will choose a date and location most amenable to all. The finalised date will then be communicated to members by email.

LGC Investment Conference feedback

The Chairman highlighted positive feedback from Cllr Des Moffatt, who had attended the 2011 LGC Investment Summit at Celtic Manor at the start of September. Cllr Moffatt felt that the summit was very informative, particularly in updating on the expectations for the UK economy free of media spin. He stated that from an investment point of view the UK economy can expect to bump along for a few years, with the main risk being uncontrolled inflation. An interesting new initiative was the financial services industry working on bonds to provide local government with capital funding.

None

The Council welcomes contributions from members of the public.

Statements

If you would like to make a statement at this meeting on any item on this agenda, please register to do so at least 10 minutes prior to the meeting. Up to 3 speakers are permitted to speak for up to 3 minutes each on any agenda item. Please contact the officer named above for any further clarification.

Questions

To receive any questions from members of the public or members of the Council received in accordance with the constitution. Those wishing to ask questions are required to give notice of any such questions in writing to the officer named above, no later than 5pm on Friday 23 September. Please contact the officer named on the first page of this agenda for further advice. Questions may be asked without notice if the Chairman decides that the matter is urgent.

Details of any questions received will be circulated to Committee members prior to the meeting and made available at the meeting and on the Council’s website.

None

An update from the Chief Finance Officer on the Wiltshire Pension Fund Risk Register is circulated for Members’ consideration.

The Head of the Pension Fund, David Anthony, summarised his report, and explained that there were no significant changes in the risk register since the last meeting, however there were four areas where the risk remained at a medium level, instead of the target of low risk. These were as follows:

a)    PEN008: Failure to comply with LGPS and other regulations – A number of actions are on-going to mitigate this risk.  Workflow will monitor all tasks being undertaken by the Benefits Team, ensuring they follow the same procedures when processing work.  Currently this has only been rolled out to the Senior Pension Officers but all Pension Officers should be using this from October onwards.  The intention is this system will allow the monitoring of Employers performance in line with the Administration Strategy.  

There is also a need to review the current Pension Fund Team structure to ensure there is sufficient resource and knowledge available to not only monitor the team’s compliance with the regulations, but to ensure service standards are maintained and that the forthcoming changes surrounding the scheme, tax legislation, data records and auto-enrolment can be implemented.  The intention is the restructure will not significantly increase overall resources but allow for more technical posts to support the team to deal with the more complex issues facing the Fund.  All proposals need to be evaluated with HR and any additional costs will be approved by the Chief Finance Officer in liaison with the Chairman and Vice-Chairman prior to implementation.   

b)    PEN010:  Failure to keep pension records up to date and accurate – There has been detailed reconciliations undertaken between the Wiltshire Council payroll and the pension records.  The majority of the starters’ backlog has been resolved with the focus on the leavers records.  Once resolved, work will focus on the other large employers to reconcile data and address any issues. 

Once the Workflow project is fully implemented, an imaging project is planned in November to enable all documents to be scanned to ensure records are kept in a safe and consistent place.   

c)    PEN011:  Lack of expertise of Pension Fund Officersand Chief Finance Officer – as detailed above the Pension Team structure review will address any issues of knowledge gaps at the right levels, with particular reference to the administration of benefits.  All officers have the opportunity to identify any knowledge and skills gaps through the annual appraisal process.  The Fund has recently procured the CIPFA Knowledge and Skills Framework toolkit from Hymans Robertson which includes an evaluation process and a knowledge library to ensure officers have the relevant knowledge areas for their post.  This toolkit will be utilised over the coming months as part of officers learning and development programmes. 

d)    PEN013: Failure to communicate properly with Stakeholders – the Fund has refreshed its Communications Policy which is elsewhere on this agenda.  This includes taking a more pro-active approach to ensure scheme members are aware of their benefits.  The Fund has attended a ‘Pension Party’ at the  ...  view the full minutes text for item 63.

The presentation of the projected outturn for the Wiltshire Pension Fund for the year based on the position at the end of August for information.

The Fund Investment and Accounting Manager, Catherine Dix, outlined the Fund’s projected outturn statement for 2011-12. In doing so she drew particular attention to the performance fee paid to Baillie Gifford which had contributed to a £550,000 overspend against Investment Management Fees for segregated funds. However, the Fund has benefited from greater than expected asset returns far in excess of this for the Baillie Gifford mandate.

A report presenting a refreshed Communications Policy for Committee’s approval.

The Head of the Pension Fund explained that the policy under consideration by the committee was a refresh of the previous communications policy which was introduced in approved in 2009.

Questions were invited, and members of the committee were content with both the content of the policy and information flow between the Fund and its employers / members.

It was made clear that there were a number of ways the Pensions Fund team communicates with employers who are part of the Fund. These are as follows:

·         A dedicated member of staff to act as a Employer Relationship Manager

·         Quarterly liaison meetings

·         Employers’ newsletters

·         An annual report

·         Training opportunities

A new initiative is the development of drop-in ‘clinics’ as a method of distributing information to members of the scheme through their employers / workplaces. There will be a series of roadshows once the outcome of the Hutton report is known.

Resolved:

To approve the revised Wiltshire Pension Fund Communications Policy

A report presenting the Wiltshire Pension Fund’s proposed position on the Stewardship Code to be approved by committee.

The Fund Investment and Accounting Manager, Catherine Dix introduced the attached statement of compliance with the FRC’s Stewardship Code. This was in accordance with good governance guidelines and set out extent to which the Wiltshire Pension Fund and its fund managers have complied with the code.

It was reported that two-thirds of the Fund’s global equities managers were fully compliant with the code.

Questions were asked regarding the way votes were cast at the AGMs of companies whose stock was owned by the Fund. It was confirmed that at each meeting, votes were cast in accordance with the Fund’s third party voting administrator, Pensions & Investment Research Consultants Limited (PIRC’s) Governance Code.

If there was a vote on a specific issue on which the committee had expressed a strong direction and / or held a longstanding interest, it was possible to resolve to instruct PIRC to vote in a specific manner.

Generally members of the committee welcomed moves to strengthen the accountability of funds invested on behalf of local authority funds by the Financial Reporting Council (FRC) and praised the Fund’s engagement and conflict resolution structures.

Members were reminded that voting reports for the Fund from PIRC were available on the Fund’s website, through the members’ login portal:

http://www.wiltshirepensionfund.org.uk/login

Resolved:

To approve the Stewardship Code Compliance Statement 2011.

A report by KPMG presenting the Final Audit report on the 2010-11 Annual Report for the Wiltshire Pension Fund for information.

A member of the committee highlighted that concern was raised at the Audit Committee a day previously that some of the hedging activities undertaken by the Fund’s mandates were illegal.

The Committee was assured that this was not the case. The Fund’s advisor, Mr Paul Potter commented that the Fund was invested in some long/short equity funds but he was confident that they acted properly.

Chris Wilson, of KPMG summarised the key points of the report and thanked the Pension Fund staff for their support.

A discussion ensued regarding the auditing and governance difficulties of monitoring the Fund as it now had a fundamentally more global approach to investing.

In response Gemma Broom, of KPMG explained that their ‘Fund Radar’ system allowed the company to gain comfort on the accuracy of investment pricing, based on stock prices, underlying assets and computer modelling, or a combination of the above methods. Investment allocations are audited to ensure they are within a certain tolerance on the above measures.

The role of the Fund’s custodians, BNY Mellon was pointed out: as they check that the fund managers’ valuations of investments are sound, through due diligence and other measures.

Members of the committee were also reminded that there existed and legislative framework for the investment of Pension Fund assets, and that under the IFRS, funds were required to list all credit risks.

The presentation of the 2010-11 Annual Report for the Wiltshire Pension Fund for members to note.

At the Chairman’s discretion this item was held before the preceding item on the agenda to facilitate smooth running of the meeting.

Members were asked to note the report was still in an unpublished format. A number of typographical corrections were pointed out and corrected.

Resolved:

To approve the draft Wiltshire Pension Fund Annual Report & Financial Statements 2010-11 for publication, subject to the completion of the audit.

To note that the next regular meeting of the Committee will be held on 1 December 2011.

The committee noted that the next meeting of the Committee will be held on 1 December 2011.

A members’ training session is planned for 24 November 2011.

None

To consider passing the following resolution:

To agree that in accordance with Section 100A(4) of the Local Government Act 1972 to exclude the public from the meeting for the business specified in Item Numbers 14 – 17  because it is likely that if members of the public were present there would be disclosure to them of exempt information as defined in paragraph 3 of Part I of Schedule 12A to the Act and the public interest in withholding the information outweighs the public interest in disclosing the information to the public.

Resolved:

That in accordance with Section 100A(4) of the Local Government Act 1972 to exclude the public from the meeting for the business specified in Minute numbers 72-77 because it is likely that if members of the public were present there would be disclosure to them of exempt information as defined in paragraph 3 of Part I of Schedule 12A to the Act and the public interest in withholding the information outweighs the public interest in disclosing the information to the public.

A confidential report by KPMG on the performance of the Fund’s governance arrangements in comparison to their other LGPS clients.

Gemma Broom of KPMG introduced the KPMG Financial controls peer group comparison document which provided a high level overview of how the Wiltshire Pension Fund (WPF) compares to its peer group.   

The areas covered by the report were:

·    Scheme Governance

·    Dealing with Members: Defined Benefit

·    Investments: Segregated Funds

·    Investments: Pooled Investment Vehicles

·    Scheme Accounting

Ms Broom explained that governance arrangements scored slightly better than the average of all other public service schemes, and the Fund also scored extremely highly against all comparators with regards to scheme accounting. For all the above mentioned areas the Wiltshire Pension Fund achieved or exceeded the public sector peer group scores in all areas.

Members questioned why the Fund was lower compared to the all comparators group when it came to Audit. It was explained that many private schemes have their own Pension Fund Audit committee.

Regarding the benchmarking on members’ data, it was highlighted that reconciliations were very difficult based on the large number of employers within the Fund as many corporate funds only have one.

KMPG commended the investment, reconciliations work and record keeping of the Wiltshire Fund. Ms Broom also informed those present that KPMG used independent experts to obtain variations of derivatives due to the size and complexity of the portfolios involved.

Members welcomed the report and the forthcoming CIPFA Benchmarking paper which would provide further comparisons with a greater number of other schemes in relation to the administration of the Fund.

Resolved:

To note the report and verbal update provided.

A verbal update by the Head of Pensions on the latest activity in regards to the administration of the Fire and Police Pension schemes.

The Head of the Pension Fund gave a confidential update on two pension schemes, which the Wiltshire Pension Fund team currently administer on behalf of the Police and Fire Authorities

Resolved:

To note the verbal update provided.

A confidential report on the implementation of the new South West Framework for actuarial, benefits and investment services.

The Head of the Pension Fund spoke to his confidential report regarding the development of the Southwest Actuarial, Benefits and Investment framework.

Resolved:

To approve the proposed approach for the tendering of Actuarial, Benefits and Investment services, as outlined in the report.

A verbal report by the Head of Pensions updating the Committee on the progress of the procurement of the new mandates agreed at the July meeting.

The Head of the Pension Fund gave a confidential update to the committee on officers’ work to move forward the procurement of the new investment mandates agreed at the last meeting.

Resolved:

To note the verbal update provided.

A confidential report is circulated updating the Committee on the performance of the Fund’s investments for the quarter.

The Fund Investment and Accounting manager summarised her confidential report, which detailed the investment activity and performance of the entire Fund for the period up to 30June 2011 together with a look at the performance of individual mandates for the same period.

The committee was also updated on the Fund’s value and funding position following the volatility in the equity markets in August.

Resolved:

1)    To note the contents of the report.

2)      To formally review the performance of the Edinburgh Partners mandate at the February 2012 meeting.

A confidential Annual Report from M&G is attached and Members are asked to consider this along with the verbal report at the meeting.

William Nicoll and Simon Parker from M & G Investments reviewed the previous year’s developments regarding the UK Companies Financing Fund and outlined their plans for the future.

Resolved:

To note the information contained in the reports and the verbal update on investment policy provided by M & G Investments.