Agenda and minutes

To receive any apologies for absence.

Cllr Dowden sent his apologies.

All Members who believe they have a Disclosable Pecuniary Interest in any matter to be considered at the meeting must declare that interest and, having regard to Part 3 Paragraph 1.5 of the County Council's Members’ Code of Conduct, leave the meeting while the matter is discussed, save for exercising any right to speak in accordance with Paragraph 1.6 of the Code.  Furthermore all Members with a Personal Interest in a matter being considered at the meeting should consider, having regard to Part 5, Paragraph 4 of the Code, whether such interest should be declared, and having regard to Part 5, Paragraph 5 of the Code, consider whether it is appropriate to leave the meeting while the matter is discussed, save for exercising any right to speak in accordance with the Code.

Members were mindful that where they believed they had a Disclosable Pecuniary Interest in any matter considered at the meeting they must declare that interest at the time of the relevant debate and, having regard to the circumstances described in Part 3 Paragraph 1.5 of the County Council's Members' Code of Conduct, leave the meeting while the matter was discussed, save for exercising any right to speak in accordance with Paragraph 1.6 of the Code. Furthermore Members were mindful that where they believed they had a Personal interest in a matter being considered at the meeting they considered whether such interest should be declared, and having regard to Part 5, Paragraph 4 of the Code, considered whether it was appropriate to leave the meeting whilst the matter was discussed, save for exercising any right to speak in accordance with the Code.

Cllr Smyth & Cllr Leggett declared that they were both members of the trade union UNISON with regard to items 11 and 12 of the agenda that UNISON had previously made representations on.

To confirm the Minutes of the meeting held on 25 March 2022.

The minutes of the Pension Fund Panel and Board held on 25 March  2022 were confirmed.

To receive any deputations notified under Standing Order 12.

There were no deputations.

To receive any announcements the Chairman may wish to make

The Chairman welcomed new Members of the Committee; Cllr Smyth from Portsmouth City Council and Cllr Leggett from Southampton City Council. Cllr Smyth will be the employer representative for the coming year, and Cllr Leggett the deputy. Cllr Kemp-Gee thanked Ms Sarah Manchester who has stepped down as the deputy scheme member representative, and Dr Liz Bartle who will be stepping down as an employer representative at the end of the year. The Pension Fund will shortly be seeking applications for their replacements.

The Chairman reminded Members that following changes agreed by the ACCESS Joint Committee there will be the opportunity for Pension Board observers to attend the Joint Committee. Two representatives from Hampshire are invited to the Joint Committee meeting on 5 December 2022.

The Chairman thank Members for the recent training they had undertaken, particularly the progress being made with the Hymans online modules, which the Chairman reminded Members that they had previously agreed they would all complete the modules in a year (by December 2022) when it was agreed to commission the training. Cllr Kemp-Gee reminded members there were opportunities for members to put themselves forward for the training at the LGC Investment and Pensions Summit, Ballie Giffords’ Local Government Conference and the LGA Fundamentals Course. The Chairman Informed Members that Training Needs Analysis forms (TNAs) will shortly be sent to Members for their completion to identify the training requirements for the committee for the coming year.

The Chairman informed the Panel and Board that he, along with the Director of Corporate Operations and Pension Fund Officers met with Christine Holloway from the Hampshire Pension Fund Divest group to discuss the Pension Fund’s Responsible Investment Policy. The Chairman added that he would meet with any other bona-fide group to discuss relevant matters.

To receive the minutes of the ACCESS Joint Committee held on 7 March 2022.

The Panel and Board received the (non-exempt) minutes of the ACCESS Joint Committee on 7 March 2022.

To consider a report from the Director of Corporate Operations asking the Panel and Board to agree appointments of members and deputies to the Responsible Investment sub-committee.

The Panel and Board considered a report of the Director of Corporate Operations (item 6a in the Minute Book) for appointments to be made to the Pension Fund’s Responsible Investment Sub-Committee.

RESOLVED: 

(a)         That Cllrs Kemp-Gee, Thacker, Mocatta, and Hiscock, Dr Allen and Cllr Smyth were appointed to the Responsible Investment Sub-Committee. 

(b)         That Cllrs Mellor, Dowden, Dr Bartle and Ms Gowland were appointed as deputies to the Responsible Investment Sub-Committee. 

To consider a report from the Director of Corporate Operations providing Pension Fund Panel and Board with the Chief Internal Auditor’s opinion on the adequacy and effectiveness of Hampshire Pension Services’/Hampshire Pension Fund’s framworks of govenance, risk management and control for the year ending 31 March 2022.

The Panel and Board received and noted a report of the Director of Corporate Operations (item 7 in the Minute Book) providing the Pension Fund Panel and Board with the Chief Internal Auditor’s opinion on the adequacy and effectiveness of internal control of the Pension Fund. ‘Substantial Assurance’ can be placed on the Pension Fund’s framework of governance, risk management and management control and audit testing has demonstrated controls to be working in practice. 

To consider the report of the Director of Corporate Operations providing the Pension Fund Panel and Board with the Internal Audit Plan for 2022-23 together with an indicative plan for 2023-24 to 2024-25 for Hampshire Pension Services / Hampshire Pension Fund.

The Panel and Board received and noted a report of the Director of Corporate Operations (item 8 in the Minute Book) providing the Pension Fund Panel and Board with the Internal Audit Plan for 2022/23 for the Pension Fund. The aim of internal audit’s work is to provide independent and objective assurance to management, that the frameworks of governance, risk management and management control are appropriate and operating effectively, and risks to the achievement of the Pension Fund’s objectives are identified, assessed and managed.

To consider a report from the Director of Corporate Operations updating the Panel and Board on administration performance for 2021/22 and developments affecting the pension scheme in the first part of 2022/23.

The Panel and Board received a report from the Director of Corporate Operations (Item 9 in the Minute Book) on the administration of the Pension Fund in 2021/22. Pension Services have performed well against the four key measures for good administration in 2021/22. The 2021/22 administration cost per member was £12.82 (£12.57 in 2020/21). The increase in cost from the previous year was due to the work on the McCloud remedy for which the Fund’s share was £62,000 (32p per member). There will be further costs of the McCloud remedy over the next two to three years. In addition, the Fund will also incur costs in 2022/23 on two further projects; pension dashboards and GMP rectification.

The McCloud remedy project has continued with the large majority of employers having provided data for the period 1 April 2014 to 31 March 2021. Returns for the period 1 April 2021 to 31 March 2022 have in the main been delayed as employers have prioritised end of year queries.

Employers have provided their annual returns to Pensions which provides information on active members and is used to produce annual benefit statements and valuation data. All these returns have been uploaded onto the pension administration system, although there has been a higher level of queries raised this year due in part to employers experiencing resourcing pressures.

It was confirmed at the meeting that the table in paragraph 10 on page 49 had an incorrect subtotal.  The correct table is shown below.

This error also meant that the percentages detailed in paragraphs 5, 30 and 31 of the report were incorrect.  These should have read that 40% of pensioners have now registered for the Portal (not 43%), 26% had opted to receive annual paper payslips and P60s (not 28%) and 34% had neither registered nor opted out (not 29%).  The errors did not impact on the point of paragraphs 30 and 31 which was to identify a cohort of pensioners (34%) who had not engaged with the Fund either by opting for a paper payslip or registering for the Portal.  Officers confirmed the intention to contact this group to reiterate the options available to them. A new reporting facility has been developed so that use of the Portal can be monitored to inform future developments and communications.

Work on reviewing cyber security has continued over the last six months with the results of the first annual vulnerability assessment now with the software supplier and Hampshire IT for consideration. No critical, high or urgent vulnerabilities were identified by the exercise.

At the start of 2022, the Department for Works  ...  view the full minutes text for item 76.

To consider a report of the Director of Corporate Operations providing the panel and Board with information about the valuation process in the LGPS and and update on progress for the 2022 valuation.

The Panel and Board received and noted a report from the Director of Corporate Operations (Item 10 in the Minute Book) on information about the 2022 actuarial valuation process. Work is underway for the current valuation which is as at 31 March 2022. Membership data will be supplied to the Fund Actuary by 21 July 2022 and initial whole of Fund results will be presented to the Panel and Board by the Actuary at their meeting on 30 September 2022 before being shared with employers at the Annual Employer meeting in October. Initial individual employer results will be provided to all employers by the end of December 2022, with the rates and adjustments certificate being finalised by 31 March 2023. New contribution rates are payable from 1 April 2023.

The Director reminded the committee that one of the three aims of the Fund as set out in the Funding Strategy Statement is to enable primary contribution rates to be kept as constant as possible (subject to the administering authority not taking undue risk). It is with this aim in mind that the key assumptions used in the valuation are determined. The Actuary has done initial work on the assumptions that will be used at the valuation:

·         Agreeing the best fit market data for demographic assumptions from the latest version of the CMI mortality tables published in March 2022.

·         Determining the likely funding target for different groups of employers, which will remain unchanged from the 2019 valuation for employers in the Scheduled Body Group.

·         Agreeing the CPI and pay growth assumptions, which is 2.3% plus a one-off uplift on the scheduled body funding target for the short term inflation to take account of the 2022/23 pay award.

From the work already carried out by the Actuary, it is anticipated that there will be a material improvement in the funding level at a whole of fund position compared with 2019, due to the higher than assumed asset returns. This means that secure scheduled bodies should be able to bank the deficit contribution reduction from the 2019 valuation and still see stable contribution rates at the 2022 valuation; this of course is a provisional view at this stage subject to confirmation once the valuation work is complete. However, given the significant falls, employers with a funding target linked to gilts such as the Higher Education/Further Education sector may see increases in their contributions at this valuation.

To consider a report from the Director of Corporate Operations outlining a proposed amendment to the rules regarding deputations made to the Pension Fund Panel and Board and its sub committees.

The Panel and Board received a report from the Director of Corporate Operations (Item 11 in the Minute Book) proposing amendments to the rules regarding deputations made to the Pension Fund Panel and Board and its sub committees. The current deputation rules preclude deputations being received at Panel and Board meetings from scheme members (active, deferred and retired) of the Hampshire LGPS who live outside of the Hampshire County Council area (including in Portsmouth or Southampton). To ensure fairness and reasonable opportunities for engagement, it is considered that members of the Hampshire Local Government Pension Scheme who live outside of Hampshire should be allowed to make deputations to the Panel and Board, or its sub committees. In order to enable this, the County Council’s Standing Orders and the Panel and Board’s Terms of Reference need to be amended.

            RESOLVED:

·         That the Pension Fund Panel and Board recommends the proposed changes to the County Council’s Standing Orders set out at Appendix 1 of the report to Cabinet for its endorsement and recommendation to the County Council for approval.

·         That the Pension Fund Panel and Board recommends the proposed changes to the Pension Fund Panel and Board’s Terms of Reference, as set out at Appendix 2 of the report, to Cabinet for its endorsement and recommendation to the County Council for approval.

To consider a report from the Director of Corporate Operations recommending amendments to the Pension Fund’s Responsible Investment (RI) policy recommended to the Panel and Board following consultation with Local Government Pension Scheme (LGPS) stakeholders.

The Panel and Board considered the report from the Director of Corporate Operations (Item 12 in the Minute Book) recommending amendments to the Pension Fund’s Responsible Investment (RI) policy following consultation with scheme members and employers. The Director confirmed that every effort had been made to give every scheme member and employer the opportunity to respond to the consultation, including emailing every scheme member that Pension Services held email addresses for.

The RI policy was proposed for consultation at the Panel and Board’s last meeting in March 2022, following the inclusion of updates based on feedback received from the RI consultants Minerva and key areas that have been brought out in Members’ discussions and representations from scheme members. The most significant additions to the policy are:

·         that the Pension Fund supports the objectives of the Paris Agreement, and believes that keeping a global temperature rise this century to well below 2?C relative to pre-industrial levels is entirely consistent with securing strong financial returns;

·         to address Climate Change there needs to be a transition to a low carbon economy, but that must be an orderly transition that is inclusive and does not leave anyone behind – this is referred to as a Just Transition; and

·         that the Pension Fund commits to the aim for its investments to have net-zero greenhouse gas emissions by 2050.

            The consultation asked a number of questions to test whether the Fund’s proposed policy on its climate change aim and approach to fossil fuel companies was clear and understood by respondents. 701 responses were received that showed:

·         At least 92% of respondents were aware of important international standards responding to Climate Change.

·         83% understood the rationale to aim for investments to have net-zero greenhouse gas emissions by 2050.

·         67% understood the rationale for not disinvesting from fossil fuel companies at this time.

·         85% understood the rationale for continuing to reduce the climate impact of the Fund’s investments by disinvesting from Thermal Coal.

Following the responses received the Director outlined a number of changes being made to the RI policy:

·         that the Fund’s RI policy be amended to state that the Fund intends its adoption of the Paris Agreement is the aim to limiting temperature rises no more than 1.5 deg C,

·         clarifying that the Pension Fund wants its investments to be net zero by 2050 at the latest, and

·         to be clear that being net zero in Green-house Gas emissions means scope 1, 2 and 3 emissions.

RESOLVED:

That the responses to the consultation were noted and the proposed updates to the Responsible Investment policy were approved.

To consider a report of the Director of Corporate Operations updating the Pension Fund Panel and Board on the policy for managing the Hampshire Pension Fund's cash balance.

The Panel and Board received a report from the Director of Corporate Operations (Item 13 in the Minute Book) on the management of the Pension Fund’s cash balances in 2021/22. The Pension Fund receives cash each month from contributions made by employees and employers, and from investment income. The Pension Fund requires a cash balance to be able to pay pensions and other costs. There are rigorous procedures in place to ensure the security of all cash deposits which are managed by the County Council in separate investment accounts for the Pension Fund. These include criteria for the quality of counterparties and limits on the amount that can be placed with any one counterparty as set out in the Pension Fund’s Annual Investment Strategy for 2021/22 for cash, which was approved by the Pension Fund Panel and Board on 10 December 2021 and has been complied with.

RESOLVED:

(a)          That the outturn report on the Pension Fund’s cash management in 2021/22 was approved.

To consider a report from the Director of Corporate Operations reintroducing the Pension Fund’s Risk Register, part of the Fund’s Business Plan.

The Panel and Board received a report from the Director of Corporate Operations (Item 14 in the Minute Book) introducing the Pension Fund’s Risk Register. The format of the Risk Register has been revised in line with best practice. A more detailed approach has now been implemented with risks identified individually, linked to the Pension Fund’s aims from its Business Plan and rated on a scale of 1 to 5. Further amendments are planned for the next iteration of the Risk Register to be included in the 2022/23 Business Plan for December 2022:

·         Risks will be separated into strategic and operational, to help identify the greatest threats to the Pension Fund’s operation.

·         The evaluation of risk prior to implementation of mitigating actions will be included to highlight the effectiveness of those actions.

            RESOLVED:

That the amended Risk Register was approved.

To consider a report from the Director of Corporate Operations introducing the 2021/22 draft Pension Fund Annual Report to the Panel and Board and providing an analysis of costs incurred in managing the Pension Fund during 2021/22.

The Panel and Board received a report from the Director of Corporate Operations (Item 15 in the Minute Book) introducing the 2021/22 draft Pension Fund Annual Report. The Pension Fund’s accounts are included in the Annual Report. The accounts are subject to audit and it may therefore be necessary to make minor changes to the Annual Report at the conclusion of the audit. The Annual Report includes details of the Fund’s governance, administration, and investments, as well as the Fund’s accounts. The annual report also includes additional information on pooling, including:

·         details of the ACCESS pool’s annual report

·         an update on progress with investment pooling, and

·         updates to sections of the report including investment.

The Director reported the total cost of managing the Pension Fund in 2021/22 which was presented based on CIPFA’s guidance, which includes additional requirements for the Fund’s Annual Report to report on investment management costs for pooled and non-pooled investments. The investment management costs of pooled investments are disproportionately lower than the non-pooled investments because of the different assets in each category. During 2021/22, Hampshire’s  net cumulative saving from pooling with ACCESS increased to £2.6m.

RESOLVED:

(a)  That the contents of the draft Annual Report for 2021/22 was noted and approved for publication.

(b)  That authority was delegated to the Director of Corporate Operations to make any necessary minor amendments to the Annual Report prior to publication.

(c)  That the remainder of the report, including the total cost of managing the Fund, was noted.

That in relation to the following items the press and public be excluded from the meeting, as it is likely, in view of the nature of the business to be transacted or the nature of proceedings, that if a member of the public were present during the items there would be disclosure to them of exempt information within Paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972, and further that in all circumstances of the case, the public interest in maintaining the exempt information outweighs the public interest in disclosing the information, for the reasons set out in the report.

RESOLVED:

            That the public be excluded from the meeting during the following items of business, as it is likely, in view of the nature of the business to be transacted or the nature of the proceedings, that if members of the public were present during these items there would be disclosure to them of exempt information within Paragraphs 3 of Part 1 of Schedule 12A to the Local Government Act 1972, and further that in all the circumstances of the case, the public interest in maintaining the exemption outweighs the public interest in disclosing the information, for the reasons set out in the reports. 

To confirm the exempt minutes of the meeting held on 25 March 2022.

The exempt minutes of the Pension Fund Panel and Board held on 25 March 2022 were confirmed.

To receive the exempt minutes of the ACCESS Joint Committee held on 7 March 2022.

The Panel and Board received the (exempt) minutes of the ACCESS Joint Committee on 7 March 2022.

To consider an exempt appendix in relation to the Annual Report and Pension Fund Costs.

The Panel and Board considered and noted the exempt appendix from the Director of Corporate Operations (Item 19 in the Minute Book) containing details of the Pension Fund’s investment management costs. 

To consider the exempt report of the Director of Corporate Operations updating the Panel and Board on the Pension Fund’s investments since the last meeting of the Pension Fund Panel and Board on 25 March 2022.

The Panel and Board considered the exempt report from the Director of Corporate Operations (Item 20 in the Minute Book) updating the Panel and Board on the performance of the Pension Fund’s investments. [SUMMARY OF A MINUTE WHICH CONTAINS EXEMPT INFORMATION].