Agenda, decisions and minutes

Apologies were received from Councillor Stewart Lilly and City Councillor James Fry.

Councillors Fooks, Owen, Service and Sibley each declared personal interests as members of the Pension Fund Scheme under the provisions of Section 18 of the Local Government Act 1989.

To approve the minutes of the meeting held on 5 June 2015 (PF3) and to receive information arising from them.

The Minutes of the meeting held on 5 June 2015 were approved and signed as a correct record.

With regard to Minute 27/15 – Membership of the Local Pension Board – Mr Collins gave an oral update on progress on the appointment of Board members to the Local Pension Board.

With reference to Minute 32/15 – Future Management Arrangements – In response to a query, Mr Collins reported that the new management structure of Pension Services had not yet been agreed but would be circulated as soon as it was available.

There were no requests to address the meeting or to submit a petition.

The Committee is RECOMMENDED that the public be excluded for the duration of items 6, 15, 16, 17, 18 and 19 in the Agenda since it is likely that if they were present during those items there would be disclosure of exempt information as defined in Part 1 of Schedule 12 A to the Local Government Act 1972 (as amended) and specified in relation to the respective items in the Agenda and since it is considered that, in all the circumstances of each case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

WITH THE EXCEPTION OF THE WRITTEN REPORT AT AGENDA ITEM 15 THE REPORTS RELATING TO THE EXEMPT ITEMS HAVE NOT BEEN MADE PUBLIC AND SHOULD BE REGARDED AS STRICTLY PRIVATE TO MEMBERS AND OFFICERS ENTITLED TO RECEIVE THEM.

NOTE: In the case of item 19, there is no report circulated with the Agenda. Any exempt information will be reported orally.

The Committee RESOLVED that the public be excluded for the duration of items 6, 15, 16, 17, 18, 19, and 20 in the Agenda since it was likely that if they were present during those items there would be disclosure of exempt information as defined in Part I of Schedule 12A to the Local Government Act 1972 (as amended) and specified in relation to the respective items in the Agenda and since it was considered that, in all the circumstances of each case, the public interest in maintaining the exemption outweighed the public interest in disclosing the information.

10:05

Karen Thrumble from the State Street Company will give her annual presentation on the performance of the Fund, including performance relative to benchmark and to other LGPS Funds.

The UK Local Authority Annual Review booklet has been enclosed within Members’ document pack.

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

RE-ADMISSION OF PRESS AND PUBLIC

Karen Thrumble of State Street Company attended to give the annual presentation on the performance of the Fund, including performance relative to benchmark and to other Local Government Pension Funds (LGPF), including performance relative to benchmark and to other LGPF funds.

Her views were sought from members of the Committee in relation to the following areas:

-       Fossil Fuel Investment;

-       The split between Equity and Bond returns, the risks for each, and how that reflected on the UK economy, and, in particular, on the Local Authority universe;

-       The individual performance of Oxfordshire’s Fund Managers and her views on any action required;

-       The possibility of achieving a similar performance for Overseas tracking funds as that of UK Equity tracking funds.

The public were excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

At the conclusion of the question and answer session, the Committee

RESOLVED: to note the presentation and to thank Karen Thrumble for her presentation.

10:40

As part of his Spring Budget, the Chancellor announced a future consultation on further collaboration/pooling in the Local Government Pension Scheme, This item will allow for an oral update on the position, including feedback from round table discussion with officials from the Department for Communities & Local Government (DCLG) and Her Majesty’s Treasury (HMT).

The Committee is RECOMMENDED to note the report.

Sean Collins gave an update on work in progress with respect to the Pension Fund Collaboration work following the Chancellor’s Budget Statement. He reported that officials from the Department for Communities & Local Government (DCLG) and Her Majesty’s Treasurer (HMT) had met with officers from the LGPS Funds to outline thinking to date and future arrangements to develop proposals. Further meetings with officers and Chairs of Pension Fund Committees had been arranged to take place on 7 September and 16 October respectively.

He further reported that the DCLG had suggested that a consultation document would be published in early November 2015 to cover:

·         The criteria by which collaboration would be assessed. These would be for information and not subject to further consultation. They would likely cover issues of size (indicative figures of £30b had been mentioned), cost and governance;

·         Changes to the Investment Regulations to ensure that they were sufficiently flexible to cover the new collaborative proposals;

·         ‘Back-stop’ Regulations, which were likely to be based on a new power for the Secretary of State to direct a Fund if they did not come forward with proposals in line with the agreed criteria.

Mr Collins added that Ministers did not wish to be prescriptive about the result, but believed that size provided a better opportunity to deliver cost savings and widened the range of investment opportunities. Similarly they did not wish to be prescriptive on active and passive mandates but remained to be convinced about the net benefits of active management. Solutions were likely to be similar to the current Common Investment Vehicle (CIV) proposals, with a body responsible for managing the investments on behalf of a number of Funds, whether through using external fund managers or in-house investment staff.

Keeping the above in mind, the Committee were asked to give a steer to Mr Collins and the Chairman, for use at meetings, on what would be acceptable in relation to the extent of discretion for local Pension Fund Committees to have in the future on investment matters. Options given included:

-       Option 1 – Asset Allocation at a high level – for example, specification of a target return and risk level, or a split between growth and defensive assets. Actual asset allocation decisions to be made by the ‘pool’.

-       Option 2 – Asset Allocation at a broad level – for example, in respect of equity, fixed income and property. The ‘pool’ to determine fund manager and precise allocation.

-       Option 3 – More specific Asset Allocations – for example, in respect of UK equity, emerging market equity and high yield debt.

Following discussion, the Committee

RESOLVED: (unanimously) to

(a)  give a steer to the Chairman and Mr Collins at future meetings that this Committee finds option 2 above the most acceptable; and

(b)  request the Chairman and Mr Collins to keep all members of the Committee informed of the unfolding position following each meeting attended.

10:50

The draft Annual Report and Accounts are presented for comment and any final amendment (PF8). Representatives of the External auditor (Ernst & Young), Sue Gill and Tom Crous, have been invited to present any findings from their audit work to date. Their findings are also attached at PF8.

The Committee is RECOMMENDED to receive the draft report and accounts for 2014/15.

The draft Annual Report and Accounts were presented for comment and any final amendment (PF8).

Sue Gill and Tom Crous, representatives of the External Auditor, Ernst & Young, presented their findings from their audit work to date. These were also attached at PF8.

RESOLVED: to receive the draft Annual Report and Accounts and to thank the officers for their excellent work undertaken during a background of significant change.

11:00

The report (PF9) analyses the actual spend by the Oxfordshire County Council Pension Fund during 2014/15 against the budget and highlights the reasons for any material variances.

The Committee is RECOMMENDED to receive the report and to note the outturn position.

The Committee had before them the budget outturn report (PF9) which analysed the actual spend by the OCC Pension Fund during 2014/15 against the budget, which highlighted the reasons for any material variances.

RESOLVED: to receive the report and to note the outturn position.

11:05

The report (PF10) provides details of the annual review of the Pensions Administration Team, including key performance indicators.

The Committee is RECOMMENDED to note the report.

The Committee considered a report (PF10) which provided details of the annual review of the Pensions Administration Team, including key performance indicators.

Sally Fox responded to questions from Members of the Committee on how the significant challenges facing the service during the year in the form of the move to the career average pension; the school change – over to academy status; and the move to the Integrated Business Centre (IBC) at Hampshire had reflected on the service.

RESOLVED: to note the report.

11:15

The report (PF11) covers the key operational issues around individual employer membership of the Fund, including the latest performance information as well as any new applications for admissions and cessations.

The Committee is RECOMMENDED to:

(a)  note the position regarding scheme employer performance;

(b)note the position regarding previous applications;

(c)   note the position regarding withdrawn applications;

(d)agree the admission of Age UK Oxfordshire providing that either a bond or pass through arrangement is put in place; and

(e)  note the position regarding closure valuations.

The Committee considered a report (PF11) which covered the key operational issues around individual employer membership of the Fund, including the latest performance information as well as any new applications for admissions and cessations.

Sally Fox reported that, in line with the majority of other Funds, she had been unable to produce the members’ annual benefit statements by the deadline of 31 August, due to matters beyond her control. She had reported it to the Local Government Association and was in discussion with the Regulator. She had also placed a note on the website and was writing to scheme members and employers to inform them of this.

RESOLVED: to

(a)  note the position regarding scheme employer performance;

(b)  note the position regarding previous applications;

(c)  note the position regarding withdrawn applications;

(d)  (unanimous) agree the admission of Age UK Oxfordshire, providing that either a bond or pass through arrangement is put in place; and

(e)  note the position regarding closure valuations.

11:25

The report (PF12) identifies any changes required to the Fund’s governance arrangements, and in particular to the Fund’s discretionary policies and the Scheme of Delegation following changes to the management structure of the Council.

The Committee is RECOMMENDED to:

(a)  amend the Scheme of Delegation to replace all delegations to the post of Chief Executive to the post of Head of Paid Service, and to review the position again on completion of the Council’s review of senior management arrangements; and

(b)consider amending the requirement for a medical certificate before starting a contract to pay Additional Pension contributions to cases where the additional pension is being purchased over a period greater than one year.

The Committee had before them a report (PF11) which identified any changes required to the Fund’s governance arrangements, and in particular to the Fund’s discretionary policies and the Scheme of Delegation following, changes to the management structure of the Council.

RESOLVED: to

(a)  amend the Scheme of Delegation to replace all delegations to the post of Chief Executive to the post of Head of Paid Service, and to review the position again on completion of the Council’s review of senior management arrangements; and

(b)  (unanimous)(amendments in bold type) to:

amend the current discretionary policy to read:

‘a medical certificate is required before starting a contract to pay Additional Pension contributions for all cases where the additional pension is being purchased over a period greater than one year.’

11:30

The report (PF13) will provide the Committee with summary details of the amounts written off in the last quarter in accordance with Financial Regulations of the Fund.

The Committee is RECOMMENDED to note the report.

The Committee had before them a report (PF13) which provided summary details of the amounts written off in the last quarter in accordance with Financial Regulations of the Fund.

RESOLVED: to note the report.

11:30

Tables 1 and 2 are compiled from the custodian's records. The custodian is the Pension Fund's prime record keeper. He accrues for dividends and recoverable overseas tax within his valuation figures and may also use different exchange rates and pricing sources compared with the fund managers. The custodian also treats dividend scrip issues as purchases which the fund managers may not do. This may mean that there are minor differences between the tabled figures and those supplied by the managers.

The Independent Financial Adviser will review the investment activity during the past quarter and present an overview of the Fund’s position as at 30 June 2015 using the following tables:

In addition to the above tables, the following graphs have been included:

Graph 1 – Market value of the fund over the last three years

Graphs 2-5 – Performance of the fund managers attending committee for the quarter ending 30 June 2015.

The Committee is RECOMMENDED to receive the tables and graphs, and that the information contained in them be borne in mind, insofar as they relate to items 16, 17 and 18 on the agenda. 

EXCLUSION OF PRESS AND PUBLIC

The Independent Financial Adviser reviewed the investment activity during the past quarter and presented an overview of the Fund’s position as at 30 June 2015.

Mr Davies noted that the overall value of the Fund had fallen by a further £45million to the end of August.

RESOLVED: to receive the tables and graphs and that the information contained in them be borne in mind insofar as they relate to items 16, 17 and 18 on the Agenda.

11:40

Report of the Independent Financial Adviser (PF15).

The report sets out an overview of the current and future investment scene and market developments across various regions and sectors. The report itself does not contain exempt information and is available to the public. The Independent Financial Adviser will also report orally and any information reported orally will be exempt information.

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

The Committee is RECOMMENDED to receive the report, tables and graphs, to receive the oral report, to consider any further action arising on them and to bear the Independent Financial Adviser’s conclusions in mind when considering the Fund Managers’ reports.

The Committee considered a report of the Independent Financial Adviser (PF15) which gave an overview of the current and future investment scene and market developments across various regions and sectors. The report itself did not contain exempt information and was available to the public.

The public was excluded during this item because its discussion in public was likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

RESOLVED: to receive the report, tables and graphs and to bear the Independent Financial Adviser’s conclusions in mind when considering the Fund Managers’ reports.

11:50

(1)          The Independent Financial Adviser will report orally on the performance and strategy of Baillie Gifford drawing on the tables at Agenda Items 14 and 15.

(2)          The representatives (Anthony Dickson and Iain McCombie) of the Fund Manager will:

(a)       report and review the present investments of their part of the Fund and their strategy against the background of the current investment scene for the period which ended on 30 June 2015;

(b)       give their views on the future investment scene.

In support of the above is their report for the period to 30 June 2015.

At the end of the presentation, members are invited to question and comment and the Fund Managers to respond.

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

The Committee is RECOMMENDED to note the main issues arising from the presentation and to take any necessary action, if required.

The Independent Financial Adviser reported orally on the performance and strategy of Baillie Gifford drawing on the tables at Agenda Items 14 and 16.

The representatives, Anthony Dickson and Iain McCombie presented their approach to investments in relation to their part of the Fund and their strategy against the background of the current investment scene. They also gave their views on the future investment scene.

At the end of the presentation they responded to questions from members.

The public were excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

RESOLVED: to note the main issues arising from the presentation.

12:30

(1)          The Independent Financial Adviser will report orally on the performance and strategy of Legal and General drawing on the tables at Agenda Items 14 and 15.

(2)          The representatives (Chris Lyons and Nick Griffiths) of the Fund Manager will:

(a)       report and review the present investments of their part of the Fund and their strategy against the background of the current investment scene for the period which ended on 30 June 2015;

(b)           give their views on the future investment scene.

In support of the above is their report for the period to 30 June 2015.

At the end of the presentation, members are invited to question and comment and the Fund Managers to respond.

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

The Committee is RECOMMENDED to note the main issues arising from the presentation and to take any necessary action, if required.

The Independent Financial Adviser reported orally on the performance and strategy of Legal & General drawing on the tables at Agenda Items 14 and 16.

The representatives, Chris Lyons and Nick Griffiths presented their approach to investments in relation to their part of the Fund and their strategy against the background of the current investment scene. They also gave their views on the future investment scene.

At the end of the presentation they responded to questions from members.

The public were excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

RESOLVED: to note the main issues arising from the presentation.

13:10

The Independent Financial Adviser reports (PF18) on the officer meetings with UBS and Wellington, as well as updates the Committee on any other issues relating to the Fund Managers not present including issues in respect of the Private Equity portfolio.

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

The Committee is RECOMMENDED to note the main issues arising from the reports and to take any necessary action, if required.

The Independent Financial Adviser reported orally on the main issues arising from the officer meetings with UBS and Wellington in conjunction with information contained in the tables (Agenda Item 14).

The public were excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund.

RESOLVED: to note the main issues arising from the report.

13:15

The Independent Financial Adviser will, if necessary, summarise the foregoing reports of the Fund Managers and answer any questions from members.

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, in that such disclosure would prejudice the trading activities of the fund managers involved and would prejudice the position of the authority's investments in funding the Pension Fund. 

The Independent Financial Adviser reported that no summary was required.

13:15

This confidential report seeks the Committee’s views with regard to a closure of a scheme employer (PF20).

The public should be excluded during this item because its discussion in public would be likely to lead to the disclosure to members of the public present of information in the following prescribed category:

3.         Information relating to the financial or business affairs of any particular person (including the authority holding that information) and since it is considered that, in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information in that such disclosure would prejudice the commercial position of the parties involved and would prejudice the position of the Authority’s investments to the detriment of the Council’s ability properly to discharge its fiduciary and other duties as a public authority.

The Committee is:

(a)  asked for their views on the options for repayment; and

(b)to delegate the negotiation and final agreement of the amount to be repaid to The Service Manager, Pensions, Insurance & Money Management.

The views of the Committee were sought with regard to a closure of a scheme employer (PF20).

Following discussion the Committee

RESOLVED (unanimously) to (amendments in bold type) delegate the negotiation and final agreement of the amount to be repaid, using option (b) as specified at paragraph 10 of the report, to the Service Manager, Pensions, Insurance & Money Management, following consultation with the Chairman of this Committee.

13:20

An oral report will cover any issues concerning Corporate Governance and Socially Responsible Investment which need to be brought to the attention of the Committee, including an updated position on fossil fuel investments.

Mr Ley reported that there were no issues concerning Corporate Governance and Socially Responsible Investment which needed to be brought to the attention of the Committee.

The Committee AGREED to accept Baillie Gifford’s offer to give a presentation to a future meeting on their involvement in fossil fuel investment.

The Committee also noted the improved information contained in the report from Wellington and requested that they report in more detail on this at a future meeting.

ON THE CONCLUSION OF THE MEETING MEMBERS’ WERE ASKED TO NOTE THAT THE PROVISIONAL DATE FOR THE ANNUAL PENSION FUND FORUM IS 11 DECEMBER 2015.