Agenda and minutes

Apologies for absence were received from the Chair, Cllr C. Harris, for whom Cllr Egan was acting as substitute, and from Earl Ramharacksingh.

Cllr Thompson, Vice-Chair of the Committee, chaired the meeting.

The Chair will consider the admission of any late items of urgent business. Late items will be considered under the agenda item where they appear. New items of unrestricted business will be considered under agenda item 10, new items of exempt business will be considered under agenda item 13.

There were no items of urgent business.

A member with a personal interest in a matter who attends a meeting of the authority at which the matter is considered must disclose to that meeting the existence and nature of that interest at the commencement of that consideration, or when the interest becomes apparent.

A member with a personal interest in a matter also has a prejudicial interest in that matter if the interest is one which a member of the public with knowledge of the relevant facts would reasonably regard as so significant that it is likely to prejudice the member’s judgement of the public interest and if this interest affects their financial position or the financial position of a person or body as described in paragraph 8 of the Code of Conduct and/or if it relates to the determining of any approval, consent, license, permission or registration in relation to them or any person or body described in paragraph 8 of the Code of Conduct.

Cllr Mallett declared a personal interest as a contributing member of the Haringey Pension Scheme.

Cllr Wilson declared a personal interest as an employee of the National Association of Pensions Funds, and a prejudicial interest in respect of agenda item 12, the Custody Fee Review.

Cllr Winskill declared a personal interest as a contributing member of the Haringey Pension Scheme.

Cllr Thompson declared a personal interest as a contributing member of the Haringey Pension Scheme and as having attended training events at which he had received hospitality from some of the Fund Managers.

David Corran declared an interest as a pensioner member of the Haringey Pension Scheme.

To confirm and sign the minutes of the Pensions Committee meetings held on 17 September and 12 October 2009.

RESOLVED

That the minutes of the meetings of the Pensions Committee held on 17 September and 12 October 2009 be approved and signed by the Chair.

Report of the Assistant Chief Executive, People and Organisational Development, to consider regulatory changes affecting the administration of the Local Government Pension Scheme together with relevant issues covered in circulars issued by the Local Government Pensions Committee (LGPC) and Department for Communities and Local Government (DCLG).

Ian Benson, Pensions Manager, presented the fund administration update. The report included information on the Heyday Judgement, in which the High Court had upheld the law allowing employers to force an employee to retire at 65 without redundancy, following a challenge by Age Concern. It was noted that a government review of the default retirement age had been brought forward to 2010. The report also covered the TUPE transfer of Learning Skills Council staff to Local Education Authorities, as part of which three staff would be transferred to Haringey, for which costs would be covered by a bulk transfer payment. Civil Service Scheme retirement dates for the staff affected would be protected in accordance with the Fair Deal provisions. An update was also provided on the Councillors Scheme to advise that the intended CLG consultation paper on councillors’ pensions would be produced by the end of the financial year. The report also included updates on early and flexible retirements and appeals.

Further to an enquiry made by the Committee at the previous meeting, the Chair provided information on those scheduled and admitted bodies whose contributions had been received late by the Pension Fund.

The Committee noted that the earliest age at which an employee could be involuntarily retired would be raised from 50 to 55 from 1 April 2010, and asked whether there was any intention to make use of the intervening period to make any retirements from age 50. Mr Benson confirmed that there was no intention to do this. In response to a question from the Committee regarding the difference between flexible and early retirement, Mr Benson advised that early retirement was when an employee left their post, whereas flexible retirement meant that an employee remained in employment at reduced hours or at a lower grade, enabling the Council to retain their skills. The Committee asked about the employing bodies’ ability to exercise discretion in determining the approval of early retirements, in response to which it was confirmed that any such decision by an employing body would require a contribution to the Fund to cover the capital costs, so that there was no cost to the Fund as a result of such decisions.

RESOLVED

That the Administration Report update be noted.

Report of the Chief Financial Officer to consider the latest investment performance data for the Pensions Fund and for each of the Fund’s investment managers, to compare responsible investments information provided by our Fund Managers with that supplied by LAPFF and to report 2009/10 budget monitoring to the end of September 2009.

The Chief Financial Officer introduced the Fund Performance report for the quarter ending 30 September 2009. It was reported that the annualised performance of the Fund had underperformed the gross benchmark by 2.65% and underperformed the gross target by 4.29% up to 30 September 2009. The report covered the performance of the individual fund managers, responsible investment issues and the budget position.

In response to concerns raised by the Committee regarding recent media reports relating to Shell, one of the Fund’s main holdings, Colin Duck, Corporate Finance, advised that the information provided in the Fund Performance report only covered the period to September 2009 and that more recent activity would be reported to the next quarterly meeting. Mr Duck requested that Members supply him with details of any information of concern in relation to responsible investment issues, for forwarding to the Fund Managers in question for action. It was reported that such issues would also be highlighted by the LAPFF. The Committee emphasised the importance of responsible investment issues.

RESOLVED

i)                    That the Fund performance position as at end of September 2009 be noted.

ii)                  The responsible investments information be noted.

iii)                That the budget monitoring position to the end of September 2009 be noted.

Attendance by Fund Managers for a presentation and questions from Trustees, the Advisor to Trustees and the Chief Financial Officer.

7:15pm Pantheon

7:45pm Capital

The Committee received presentations from two Fund Managers as follows:

PANTHEON

Pantheon presented information on the performance of the private equity mandate. Pantheon set out the position on current performance and answered questions from Trustees.

The Committee asked about the apparent difference in the amount of funds drawn and the amount reported as allocated. It was reported that this was as a result of recent activity which would be reflected in the figures presented to the next meeting. In response to a question regarding the anticipated maximum net investment over time, Pantheon agreed to provide an estimate on the basis of the portfolio and it was agreed that the Committee would find this useful.

In relation to the issue of responsible investment, the Committee asked whether Pantheon held a list of the companies they held stakes in. Pantheon advised that confidentiality agreements applied to certain companies they held, but agreed to provide a representative list in as great detail as possible on the request of the Committee. Pantheon reported that they were the first private equity manager to sign up to the UN Principles of Responsible Investment.

It was requested that staffing issues be included in future reports to the Committee.

The Chair thanked Pantheon for their presentation.

CAPITAL

Fund performance for the equity mandate was 1.74% below the benchmark and 3.74% below the target in annualised terms in the 30-month period to the end of September 2009.

Fund performance for the fixed income mandate was 1.03% below the benchmark and 2.03% below the target in annualised terms in the 30-month period to the end of September 2009.

Capital explained the reasons for current performance and answered questions from Trustees. It was noted that the Committee had not been provided with revised versions of the performance information, and Capital agreed to supply these outside the meeting.

The Chair thanked Capital for their presentation.

RESOLVED

That the presentations and answers to questions given by the Fund Managers be noted.

Report of the Chief Financial Officer to present the statutory Annual Pension Fund Report for the year ended 31 March 2009.

The Chief Financial Officer presented the Annual Pension Fund Report for the year ended 31 March 2009, which formed part of the audit process now that the Pension Fund accounts were audited separately. The accounts presented in the annual report were the same as previously reported to the Committee and had now been signed off by the Auditors. The information contained within the report had been presented to the Committee at previous meetings, but there remained a further statutory requirement for the Annual Report to be presented for formal approval by the Committee, which was the purpose of this report. It was confirmed that this was a new requirement following from the separate audit of the Pension Fund accounts, and that a similar report would be produced on an annual basis.

The Committee asked about the requirement for the Pension Fund to aim to be fully funded, and it was confirmed that this was a Government requirement under current regulations. The Chief Financial Officer reported that changes to this requirement were among the options being explored by CLG as a way of easing pressure on pension schemes.  It was noted that there was a 20-year deficit recovery scheme in place for the Haringey Pension Fund, and that this would be reviewed in detail as part of the actuarial valuation process. The Committee enquired about the significance of the reference to the Council as a statutory body with tax raising powers, and it was confirmed that this was to differentiate from those bodies who only contributed to the scheme for a shorter period. The Committee asked what the position was in respect of the merger between CoNEL and Enfield College, and it was confirmed that negotiations were ongoing between actuaries regarding the value of the transfer. As CoNEL was the larger of the two bodies, it was confirmed that current Enfield College members would be joining the Haringey Pension Scheme.

In response to a request for clarification of the bullet points under the Basis of Preparation heading in the report, Mr Duck advised that the change from mid-market prices for investments to bid prices had had a negative impact on the Fund, and that as there had been no derivatives in the previous year, the impact of the change in the way these were valued was not yet known. It was clarified that figures relating to schools did not include teaching staff, who were part of a different Pension Scheme.

RESOLVED

That the Annual Pension Fund Report for the year ended 31 March 2009 be adopted.

Report of the Chief Financial Officer to review the Fund’s asset allocation position.

David Crum of Hewitt presented the quarterly asset allocation update. The Committee was reminded that the purpose of the report was for Hewitt to make recommendations on how to amend the asset allocation of the Fund in order to maximise performance, based on Hewitt’s analysis of how the market was likely to change. This would enable the Committee to manage the asset allocation of the Fund on a more regular basis than the review of the investment strategy every three years. Further to the previous recommendation that a small percentage be moved from UK gilts to corporate bonds, it was reported that the Fund had benefited from this change by around £500k.

Mr Crum reported that further to the production of the report, volatility in the market meant that Hewitt were no longer recommending any change in gilt holdings, but were still recommending a reduction in corporate bonds by around 2%. It was suggested that this be held in cash, for subsequent investment in property by the property manager.

In response to a question from the Committee, Mr Crum reported that equities were considered on the basis of performance and company fundamentals rather than geographical location. The Committee asked the meaning of the phrase “overtaken reality” in relation to performance. Mr Crum advised that this referred to the belief in certain sectors that things were back to ‘business as usual’, and Hewitt’s belief that this was over optimistic and not sustainable.

The Committee asked why Hewitt were not recommending an increase in gilts, in response to which Mr Crum advised that this was as a result of the high price of gilts at the current time. In response to a question from the Committee regarding the impact of recent concerns relating to Dubai, Mr Crum reported that the extent of any impact would depend on the level of exposure of UK banks to Dubai holdings.

The Committee expressed concern regarding increasing the amount of the Fund held in cash, which was not earning significant interest at this time. Howard Jones, the Committee’s Independent Advisor, reported that, at a recent meeting of the Committee, the Fund’s property manager ING had been cautious regarding the outlook for investment in property, and asked whether Hewitt disagreed. Mr Crum responded that Hewitt did not fundamentally differ from this view. The Committee asked whether Hewitt would be making the same recommendations if it were known that ING were not going to draw on the money to invest, in response to which Mr Crum advised that Hewitt would still be likely to recommend a reduction in corporate bonds, which were overweight in the current allocation.

The Chief Financial Officer suggested that ING be asked for their view on the likelihood of investment opportunities arising for which they would require funds. If they were confident that funds would be required, it was suggested that the recommendation to transfer 2% from corporate bonds to cash be acted on, otherwise the position would remain as at present. In respect  ...  view the full minutes text for item 136.

There were no new items of urgent business.

The following item is likely to be subject of a motion to exclude the press and public from the meeting as it contains exempt information as defined in Section 100a of the Local Government Act 1972; namely information relating to the business or financial affairs of any particular person (including the Authority holding that information).

RESOLVED

That the press and public be excluded from the meeting for the following item.

Report of the Chief Financial Officer to agree to a revised tariff of custody fees in order to achieve ongoing annual savings and to consider the introduction of a securities lending programme in order to mitigate the overall costs associated with the provision of custodial services.

Cllr Wilson declared a prejudicial interest and withdrew from the meeting for this item. Cllr Winskill also left the meeting.

The Chief Financial Officer introduced the report on the custody fee review, and David Crum of Hewitt explained the content of the report in further detail and responded to questions from Trustees.

RESOLVED

i) That a revised custody tariff be agreed in order to achieve ongoing annual savings of approximately £25,000.

ii) That a further report on the issue of securities lending be presented to the next meeting of the Committee.

There were no new items of exempt urgent business.

The meeting closed at 21:50hrs.