The Pension Board of Sutton Council met on Wednesday 5 December 2018 to discuss investment performance, pension administration, and national developments affecting pension schemes. Key decisions included noting the quarterly investment performance report, approving the Pension Administration Strategy, and noting the Government Actuary Department's Section 13 report which indicated the Sutton Pension Fund received a Green flag rating across all four statutory measures.

Member Development - National Developments

Anne Marie Allen from Barnett Waddingham provided a presentation on national developments impacting pension schemes. The discussion covered principles of the Cost Cap, including the Local Government Pension Scheme (LGPS) Scheme Advisory Board Future Service Cost Cap and the HM Treasury Employer Cost Cap. Pension tax implications, such as the Annual Allowance and Lifetime Allowance, were also discussed, alongside the Lifetime ISA (LISA) and Auto Enrolment. General developments within the pension landscape were also covered.

Quarterly Investment Performance Report

Lyndsey Gamble, Head of Investment, Risk and Commercial Finance, presented the quarterly investment performance report for the period ending 30 September 2018. Members noted an improvement in the performance of Newton. The Chair, Councillor Mike Ellsmore, inquired about the performance of M&G and Partners Group, with Ms Gamble explaining that this was due to three capital calls impacting the results. Michael Curran raised a query regarding bond performance, and Ms Gamble committed to investigating this further and reporting back to the Board. The Board resolved to note the performance of the Sutton Pension Fund investments.

Brexit Implications and Strategy Next Steps

The Board resolved to exclude the press and public from this agenda item due to the likely disclosure of exempt information. Lyndsey Gamble presented a report prepared by Hymans Robertson LLP concerning the implications of Brexit and recommended strategy next steps for the Pension Fund. The Chair enquired about the timing of the implementation of the investment strategy recommendations and the percentage of the fund involved. The Board noted the content of the report and the likely impacts of various Brexit scenarios on the Pension Fund, along with the recommendations made by Hymans Robertson.

Pension Administration Update

David Kellond, Pensions Administration Manager, provided an update on pension administration. He highlighted an issue with annual returns where benefit statements for 12 schools using the same payroll provider were not completed on time, leading to a report to the Pensions Regulator and subsequent fines for the schools. Mitigating actions have been put in place to prevent recurrence. An update on Pension Online was given, with information sent to active members to encourage registration, reaching approximately 20% of members. Councillor Ellsmore expressed disappointment at the low registration rate, concerned it could leave the scheme open to challenges. Angela Russell, a Board member, stated she was unaware of Pension Online and was advised that information was sent to pensions contacts on record, with a confirmation to be sought regarding the correct contact point. Chris Reeve confirmed his 2017 statement was available online, with the 2018 statement now also accessible. Mr Kellond also reported on the volume of outstanding work and efforts to increase the administration team's resources. Michael Curran requested that the number of full-time equivalent (FTE) staff in the Pension Administration team be reported in each administration report for tracking. The Board reviewed Key Performance Indicators, and it was agreed that data scores for the Pensions Regulator (TPR) would be provided directly to members via email. The Board resolved to note the pension administration report.

Pensions Administration Strategy Review

David Kellond presented the Pension Administration Strategy, finalised in December 2017. He explained its utility in liaising with employers, clarifying data requirements, and highlighting the services Sutton can provide. The Board resolved to note the final version of the Pension Administration Strategy issued to scheme employers.

Government Actuary Department (GAD) Section 13 Report

Lyndsey Gamble presented the report on the Government Actuary Department (GAD) Section 13 report. Sutton received a Green flag rating on all four statutory measures: compliance, consistency, solvency, and long-term cost efficiency. The Board was informed that under GAD's assumptions, the funding level moved from 80% to 86%, indicating a prudent approach to actuarial assessment. Councillor Ellsmore expressed satisfaction with the overall funding levels and the Green flag ratings. The Board resolved to note the content of the report, the Green flag ratings, the good financial health of the LGPS nationally, and feedback from actuarial advice firms on potential improvements to GAD's approach.

Interim Valuation

Lyndsey Gamble presented the interim valuation report, which showed an increase in the overall interim valuation results from 80% to 92% as of 31 March 2018, with a significant increase in the overall value of assets. She cautioned that this should be considered a helpful guide rather than a full valuation. The Board resolved to note the outcome of the roll-forward Pension Fund valuation and to consider this report in conjunction with the Update on Pensions Landscape report.

Pension Fund Annual Report & Accounts

Lyndsey Gamble presented the Pension Fund Annual Report and Accounts for 2017/18, which had been audited by Grant Thornton and received an unqualified opinion. Councillor Ellsmore commented positively on the outcome and the positive cash flow position. Ms Gamble noted that recent modelling suggested a potential future cash flow deficit, for which actions could be taken. The Board noted the audited Annual Report and Accounts, the Committee's approval of these documents including the Governance Compliance Statement, and the delegation of authority to the Strategic Director Resources to make necessary amendments and arrangements for publication by the statutory deadline.

Grant Thornton External Audit Report

Lyndsey Gamble presented the external audit report from Grant Thornton. No questions were raised on this item. The Board resolved to note the content of the report and appendix, the unqualified financial audit certificate for the Annual Report and Accounts 2017/18, and to read this report in conjunction with the Pension Fund Annual Report and Accounts - 2017/18 report.

London CIV Update

Lyndsey Gamble provided an update on the London Collective Investment Vehicle (CIV). Key areas discussed included changes to governance arrangements, with total savings generated by the CIV now exceeding its costs. For Sutton, 41% of assets are now pooled. The CIV has published a responsible investment policy, which the Pension Committee will consider in more detail at a development session in February. Members commented that the CIV appeared to be delivering real savings. The Board noted the key points of the presentation, recent developments at London CIV, and that the Council had served notice on the London CIV to revoke its delegation of functions, accept new governance arrangements, and support the dissolution of the Pensions CIV Joint Committee (PCSJC) with appointments to the new Shareholders Committee and Board.

Update on Pensions Landscape

Lyndsey Gamble presented a report providing an overview of recent key developments, including the actuarial valuation of Public Sector Pension Schemes (PSPS), the LGPS Scheme Advisory Board (SAB) Separation Project, and the SAB review of LGPS third-tier employers. The report considered the likely implications for the LGPS, highlighting proposed four-yearly valuations and the separation project, which is examining options for holding pension funds separately from administering authorities. The Board resolved to note the content of the report.

Review of Risk Register

Lyndsey Gamble presented the Risk Register, highlighting the addition of a new risk concerning cyber security. Going forward, presentations will focus on elements of note. Members discussed risks rated as red, and Councillor Ellsmore raised concerns about covenant risk due to the increasing number of employers. Ms Gamble assured the Board that close contact is maintained with key employers who were previously part of the council. The Risk Register will be presented to the Board on a quarterly basis. The Board resolved to review and note the Sutton Pension Fund Risk Register.

Additional Voluntary Contribution Review

David Kellond presented the findings of a review of Additional Voluntary Contribution (AVC) arrangements, conducted by Barnett Waddingham LLP. Issues identified and proposed mitigation actions were discussed, including inviting AVC contributors to review their fund selections and promoting AVCs to members. Consideration was given to inviting AVC providers to host workshops for scheme members. Councillor Ellsmore emphasised the importance of communication in raising awareness and encouraging members to review their fund decisions. Chris Reeve mentioned that tax advisors had been in contact regarding the promotion of shared cost AVC schemes. The Board resolved to note the content of the report and consider the proposed actions.

Review of Work Programme

Lyndsey Gamble presented the proposed work programme for 2018-19 and 2019-20. Members discussed additions to the programme, including the investment strategy review and Environmental, Social, and Governance (ESG) considerations for the April meeting. A presentation on the interim actuarial valuation after January 2019 was requested. The Board also expressed a desire to be invited to training events for the Pension Committee and to be updated on the cost cap impact of proposed changes and any benefit changes. The date for this update is to be confirmed. The Board resolved to agree the work programme for the coming year.

Date of Next Meeting

The next meeting was scheduled for 3 April 2019.