Agenda and minutes

To receive any declarations of interest.

The Head of Pensions Governance and Investments presented a report which set out the Board’s Terms of Reference in relation to the roles of Chair and Deputy Chair.

In accordance with the Terms of Reference, the Chair was asked to appoint a Deputy Chair from the Board’s three employee representatives.

ORDERED that Paul Thompson was appointed Deputy Chair of the Teesside Pension Board for a period of two years from the date of this meeting.

The minutes of the meeting of the Teesside Pension Board held on 15 December 2021 were taken as read and approved as a correct record.

A copy of the minutes of the Teesside Pension Fund Committee meeting held on 8 October 2021 was submitted for information.

NOTED

Verbal Report

The Head of Pensions Governance and Investments provided a verbal update on agenda items considered at a meeting of the Teesside Pension Fund Committee held on 15 December 2021. Items considered by the Committee included:

• Investment Activity Report
• External Managers' Reports
• Border to Coast Update
• Investment Advisors' Reports
• CBRE Property Report
• Risk Register Review
• Border to Coast Responsible Investments and Voting Policies
• Governance Policies Review
• XPS Pensions Administration Report

In terms of Investment Activity, the Fund continued to favour growth over protection.  Cash levels were approximately 11% which was high given inflation was currently 5-6%, although the maximum agreed limit was 20%.  Cash was being held as a protection asset on the advice of the Fund’s Independent Advisers.  The value of the Fund had increased to £4.87 billion and had actually gone above £5 billion for the first time during December, although it had now fallen back.

A Board member highlighted that the Fund was not currently meeting its asset allocation strategy.  The Head of Pensions Governance and Investments explained that the Committee had discussed this issue and made a commitment to reduce from its position of 72% listed equities to 65% by the end of March 2022.  The Fund was on target to meet that figure.  The Independent Advisers challenged the Fund regularly on this point and the Asset Allocation Strategy would be reviewed again as part of the actuarial valuation.  Fund Managers were constantly seeking opportunities to invest in suitable asset classes.

The Border to Coast update included discussion about China.   BCP emphasised that going forward, China was expected to be a growth story and its own region,  rather than being included with emerging markets.  It was highlighted that the Fund would only invest where proper due diligence had been completed in terms of Environmental, Social and Governance issues.

CBRE had acted as advisor on a real estate loan to a retail park.  Over a 4 year period the Fund would receive a 3.7% return.  The loan was secured on the property itself.

Climate Change had been added as a new risk to the Risk Register.  This addition was welcomed by Board Members.

Following a suggestion by the External Auditor, the Committee had reviewed and updated some of its policies including Communication, Compliance, and the Pension Admin Strategy.  A Charging Policy had been added to the Admin Strategy which could be used as a tool to encourage Employers to provide accurate information when requested.  It was stressed however that the Fund preferred to work in partnership with Employers rather than fine them.

Finally the outcome of the procurement process for a new actuary was reported and Hymans Robertson had been appointed.

AGREED that the information provided was received and noted.

The Head of Pensions Governance and Investments presented a report to provide Members of the Teesside Pension Board (the Board) with an update on current issues affecting the Pension Fund locally or the Local Government Pension Scheme (LGPS) in general.

The following issues were highlighted:

• LGPS and ‘Levelling Up’
• Government Actuary’s Department Section 13 Report – Main Findings
• Government Actuary’s Department Section 13 Report – Fund Comparisons
• Triennial Actuarial Valuation as at 31 March 2022
• Department for Work and Pensions (DWP) Consultation on the Draft Pensions Dashboard Regulations 2022

LGPS and Levelling Up

The Government published its “Levelling up the United Kingdom” White Paper on 2 February 2022.   The scope of the White Paper was broad: its stated objective was to take radical steps to improve UK prosperity by “tackling the regional and local inequalities that unfairly hold back communities and to encourage private sector investment right across the UK”. 

The White Paper included information about the role the Local Government Pension Scheme will be expected to play with a number of references to Local Government Pension Scheme (LGPS) Funds being used to support local investment.

There was huge potential for institutional investment to support levelling up, across infrastructure, housing, regeneration and SME finance.  Institutional investors currently held UK pension assets of over £3.5 trillion.  Within that, the LGPS had total investments of over £330 billion, making it the largest pension scheme in the UK.  Only a tiny fraction of those funds were currently allocated to local projects.  If all LGPS funds were to allocate 5% to local investing, this would unlock £16 billion in new investment.

The detail of the White Paper’s aims in respect of LGPS investment in local areas was expected to be included in a forthcoming consultation document expected later in the year.   There were however some significant issues that needed clarifying which were outlined in the submitted report.

Since 2016 the Pension Fund had put in place a protocol to enable local investment opportunities to be considered and, where suitable, approved by the Pension Fund Committee. The Fund defined “local” within the context of its own geographical area, so local investments in this context were those within the Teesside area (the areas covered by Hartlepool, Middlesbrough, Redcar & Cleveland and Stockton-on-Tees Councils).

The Fund’s investment approach allowed up to 5% of its assets to be invested in local projects.  One of the important criteria for assessing any potential local investment was to ensure it had the right risk and return characteristics to meet the Fund’s financial objectives.  Any local investment in itself needed to generate an acceptable economic return for the Fund.   The Fund could not factor into its calculations, secondary benefits, such as social or any other non-economic benefits that did not provide direct investment return.   Having an appropriate governance structure around the investment was also very important, as was the need for the Fund to acquire and act on appropriate specialist advice as required when deciding whether to progress with a local investment.

Over  ...  view the full minutes text for item 21/27

A report of the Director of Finance was presented to provide Board Members with information on items scheduled in the work plan for consideration at the current meeting.  A copy of the work plan was attached at Appendix A to the submitted report.

Reporting Breaches

Under the Pensions Act 2004 certain categories of people involved with a pension scheme had a duty to make a report to the Pensions Regulator where they had reasonable cause to believe that:

a) a legal duty relating to the administration of the scheme had not been or was not being complied with; and

b) the failure to comply was likely to be of material significance to the Pensions Regulator.

This duty applied to the following people:

•           a trustee or manager of an occupational or personal pension scheme

•           a member of the pension board of a public service pension scheme

•           a person who was otherwise involved in the administration of an occupational             or personal pension scheme

•           the employer in relation to an occupational pension scheme

•           a professional adviser in relation to such a scheme

•           a person who was otherwise involved in advising the trustees or managers of             an occupational or personal pension scheme in relation to the scheme.

The Fund had a policy on reporting breaches, which was reviewed and approved by the Pension Fund Committee at a meeting held on 15 December 2021 and was enclosed at Appendix B to the submitted report. The policy included information on how to report a suspected breach of regulations and how a reported breach was evaluated to assess how it should be dealt with, and whether it should be reported to the Pensions Regulator.  The procedure, and the requirement to report breaches had been in place since 2015. 

The current Breaches Log was attached as Appendix C to the submitted report. This contained one recent addition relating to the provision of benefit statements to deferred members.  A significant number of deferred members had not received their annual benefits statements.  The entry in the Breaches Log outlined the position, and explained that a decision had been taken to record but not to report this breach, as it had a straightforward explanation, did not result in a loss to the individual, and steps were being taken to address the issue. 

Initial discussions had taken place with XPS regarding actions that could be taken to trace people who had gone away.  However, there was a cost and typically people made themselves known when they were ready to claim their pension.  It was a common problem across pension schemes.  If the issue continued next year, the Fund would need to reconsider whether or not to report it as a breach.

The Breaches Log would be brought to future Pension Board and Committee meetings.  A useful summary of dealing with breaches of the law in the LGPS produced by Hymans Robertson in 2019 was enclosed at Appendix D to the submitted report for information.

Pension Fund  ...  view the full minutes text for item 21/28

A report was presented to provide an overview of administration services provided to the Teesside Pension Fund by XPS Administration.

The following items were highlighted:

•           Membership Movement.

•           Member Self-Service.

•           Additional Work – Guaranteed Minimum Pension reconciliation exercise.

•           Complaints.

•           Common Data.

•           Conditional Data.

•           Customer Service.

•           Service Development.

•           Performance.

•           Employer Liaison.

•           Annual Benefit Statements.

•           Performance Charts.

There had been increases across each cohort on Membership which was good news in terms of size and cash flow. 

Efforts continued to promote membership self-service and a video clip had been produced which would be referenced in all correspondence to pension fund members.  Board members suggested member self-service could also be promoted at exit interviews and training days or information sessions for employees.

There were currently two complaints at the Internal Dispute Resolution Process stage and one with the Pensions Ombudsman.

 In relation to Customer Service, the scores remained static and showed a good level of service experienced by scheme members. 

The lead person on Employer Liaison had moved to other employment and XPS was currently recruiting to fill this position.

Details of the Annual Benefit Statements issued for deferred members was included in the report.

AGREED that the information provided was received and noted.

None.