Agenda item

To report the following in respect of the quarter to 31st March 2011:

•           Investment asset allocation and strategy

•           Investment performance

•           Responsible investment activity

•           Budget management

•           Late payment of contributions

 In keeping with the committee’s statutory responsibilities, the committee received an update on the performance of the pension fund and review of the investment strategy.  This entailed an update on the: investment asset allocation and strategy, investment performance, responsible investment activity, budget management and, late payment of contributions. The committee were advised that half of the corporate bonds along with UK Gilts had been moved out of the fund and index linked gilts now invested in. This was in line with the requirements of the revised investment strategy previously agreed by the Pensions committee. The next stage in this revised strategy would involve the recruitment of passive fund managers with an advertisement to be placed in the Official Journal of the European Union. The interview process was expected to commence in early September with an appointment decision expected to be put forward to the Corporate Committee at the ordinary meeting on September the 27^th 2011.   The committee noted that investment performance in the quarter was on target with out performance in bonds, property and private equity outweighing underperformance in equities.  The committee further leaned that the budget was overspent by £8.2m due to lower dividend income than anticipated, higher lump sums due to additional early retirements and higher than average transfer values paid. TLC was the only employer making late contributions despite monthly reminders of the statutory timescales.

Comment was made on the value of the financial service comments in the report and whether these provided the committee with meaningful information.  The committee was advised that this information was to be regarded in the context of the change in investment strategy which was still quite recent and had involved a key shift of discontinuing with Active fund managers who were paid to select investments that they believed would perform better than the whole market but where there was found to be excess returns in some areas but underperformance in others.  The decision now was to enlist passive fund managers that will hold investments in an index. They cannot select investments that perform better than average but the pension fund can expect to get same proportion index rate of return in investments as indicated by the FTSE.  It was further clarified to the committee that this was one part of the pension fund structure which had been examined and changes made to the remaining part of the pensions fund structure still needed to be addressed.   The chair recommended re- establishing the pensions working group which had consisted of 3 non voting members of the corporate committee, a Labour and Liberal Democrat member of the pensions group to take this work forward.  

In regards to section 15 of the report which set out the performance of the individual categories of investments compiling the pension fund, request was made to specify the benchmark/index information the performance was related to provide a better understanding of under or over performance. It was agreed to provide this information in future reports.

Understanding was sought why there had been an increased cost to the pension fund incurred by increased redundancies. It was noted that officers which were made redundant that were 55 and over also had access to their benefits from the pension fund.

Information was sought on the actions being undertaken to address the late payments being made by TLC, an admitted bodies, to the pension fund.  In response the committee were advised that this situation was monitored on a monthly basis.  These were the only employers making the late contributions to the fund.  The interest charge accrued by the organisation was 81pence and there therefore it would not be financially beneficial to the council to charge them interest for their late payments. This organisation would continue to be monitored and any necessary action would be undertaken.

 RESOLVED

That the information received in respect of the activity in the quarter to 31 March 2011 be noted.