Transcript

Good evening everyone and welcome to the Incheon Committee meeting. Note the following meeting procedure. No, that's fine. That's okay. This meeting is being held. This meeting is being held. Person, committee, member and key participants are present in the meeting. Only the committee member present in the meeting room will be able to vote. The person will be also attending remotely, committee member and other who have chosen to attend remotely have been advised by the committee officer that should technology difficulty prevent this full participation in the meeting. It may proceed in the option of the feeling necessary. I will be remind member of the meeting to only speak on my direction and speak clearly into their microphone to ensure that their contribution can be properly record. Can everybody ensure their mobile phone and switch off on silent mode? I will now ask the committee member present to introduce themselves. Good evening, Councillor Mayim Thalouda. Any declarations? No, nothing to declare. Good evening. Good evening to members. Councillor Abdullah, St. Catharines and Wapping, nothing to declare, but I've had a number of emails from... Good evening, Councillor Myshapek. Nothing to declare. Good evening, Councillor Faruq Ahmed and I have nothing to declare. Hello, everyone. This is Councillor Campbell who said I'm joining remotely, so I couldn't be attending in person. I've got nothing to declare apart from I've received some email from trade union representatives. Thank you. Yes, Paul. Thank you, Chair. Paul, I will do interim head of pensions and treasury. Hi, Abdul Raza Qasim, Director of Finance, Procurement and Audit. Asan Khan, Strategic Head of Finance and Chief Accountant of the Council. John Jones, Chair of the Local Pension Board. Colin Robertson, Independent Advisor to the Fund. Sandeep Chandarana, Investment Consultant for MRSA. Tony English, Head of LGPS Investment at MRSA and standing in for your consultant, Steve Turner, this evening. Barry Dodds, Fund Actually to the Fund from Hyman's Robertson. And I'm for Hana Zia, Democratic Services Officer supporting the Pensions Committee this evening. There's any apology or absence? Yes, Chair. There's an apologies from Councillor Jahed Chowdhury, who is chairing the Overview and Scrutiny Committee, and we have Councillor Mayim Talukda, who is substituting. We've also had apologies from Mr. Steve Turner and Mr. Tony English is representing MRSA on his behalf. Chair, lateness from Councillor Sai, he's just entered the building, so I'll be here soon. Now the item on the agenda. Agenda Item 2, Declaration of the Interest, page 7-8. We have already done the Declaration of the Interest. Can I invite member of the approach of the unscripted minutes of the meeting? Hold on. Sorry, are the minutes agreed and approved by members of the Pensions Committee? Thank you. Thank you, Chair, and good evening, Councillors and other guests, and thank you for the opportunity to address the committee this evening. I am Kerry-Ann. I am the Branch Secretary of Tower Hamlets, Unison, and I've been paying into the LGPS fund for about 24 years. I am joined by... Hello. I'm Rupert Franklin. I'm a social worker here at Tower Hamlets, and I'm a member of the scheme. And Rupert is also representing the local branch of the PSC. Just for some context, Unison is the largest trade union in the Council and the largest union branch in Greater London with members eligible to join the LGPS. We also have many retired members and former members whose livelihoods depend significantly on the scheme and members eligible to join. So I just want to start by acknowledging that one of the benefits of working in local government is that at the end of our working lives, we have access to a really decent occupational pension. But nobody wants to live off of dirty money, blood money, money made from companies involved with or profiting from human rights abuses and planet destruction. And at the moment, we are concerned that this may be the case in relation to some of our pension fund assets. And it's not surprising, really, is it, that many people who spend their lives providing public services don't want to see their pension pots invested in companies that profit from death, destruction and the military occupation of Palestine. So we are pressing the Council to start a process of identifying, and if there are any, then divesting from any funds invested in companies supporting, profiting from the Israeli state, oppression of the Palestinians, the military bombardment of Gaza, weapons manufacturers, suppliers more generally and fossil fuel companies. We are realistic that untangling millions from pooled investments can't happen overnight, but we submit that planned divestment accompanied by, we hope, an ethical investment strategy can ensure that the scheme is healthy and that its obligations are met. So we are pursuing a commitment followed by work at a steady pace undertaken in a transparent manner to get to that point. Why now? The defeat of the Tory anti-boycott bill in May has now opened up the landscape for councils to be able to make much more pronounced ethical investment decisions based on their local community values. And of course, we've all watched the horrific images of plausible genocide that have been live streamed from Gaza. And we want no part in profiting from any arms or surveillance technology involved. Three minutes is gone. Okay, I'm nearly finished. Is that it though? Thank you. Alright, okay. I'm happy to take any questions and we did send in a written statement too. Thanks. Sorry, you're going to send a written response. Okay, no one wants to ask us any questions. Well, I was going to say first, well, thank you for that. And my question wasn't going to be a question. I was going to say, did you want to finish that? My question was to allow you to finish that. So I'm going to give you my 30 seconds to see if you want to finish that. Great, thank you so much. We're nearly there. I just wanted to conclude by saying that Tower Hamlets has a long tradition of standing with the oppressed and a concern for social justice. And we believe our divestment campaign stands in that righteous tradition. The significant amount of money involved in pension investments has the huge potential to reshape our environment, society and beyond, for better or for worse. Our pension scheme has a part to play in this. We hope we're pushing it an open door here because it's the right thing to do. If not, our motto is disclose, divest, we will not stop, we will not rest, so we won't be going away. But we really would hope that the pension committee wants to work with us on plotting a new way forward. Thank you. Agenda number five, submission from the Pension Board, page number 17 and 18. Can I invite John Pearson to present the report? Thank you, Chair, and good evening, everyone. There is a report from me on pages 17 and 18 of the agenda. I think all the reports that we considered when the board met two weeks ago were on your agenda this evening. So what I'm going to do is just highlight a few issues now because you'll have an opportunity to discuss these points later. I think paragraph three of my note, we talked about the employer engagement and communication strategy. And we're fully supportive of the proposal to hold a forum for employers and members early next year. So we think this is a very welcome development and something the board's been urging for some time now. The other point I would make on the communications plan in the new strategy, if you set it out at the back of the document, there are means and targets set out there and really these should be monitored and reported on as part of the regular performance of the team. Paragraph five deals with training and development and I know I've raised this before on several occasions, but just to reinforce the point that I would encourage committee members to take advantage of training opportunities. The pensions regulator is very keen that decision makers should receive the right training and development, have the right skill set in order to make informed decisions. And I know that officers of the council are liaising with board and committee members on new training arrangements. If opportunity rises, I would urge you all to take advantage of that. We looked at the, on the risk register, we looked at the updated risk register and our view is that the report should be amended to include more information on mitigation actions and also target dates for completing tasks in the future. And this, we feel, should help make it into a more useful and viable document. And finally, we did have a long discussion around human rights issues and how this interacts with the fund's current investments and obviously we've just heard a presentation just now and you've got an opportunity to discuss that in more detail later on. So those are the issues I just wanted to highlight, but if there are any questions or points anybody wants to raise now or later, then happy to address those. Thank you. Does the committee have any question of the committee it is wish to speak? Thank you, Chair. Yeah, it's just relevant to point seven about the risk register that suggested, suggested was to amend it. I just wanted to know, I mean, where we are with, if there's anything. I mean, sorry, I wasn't at the previous meeting, so. No, I think the risk, I mean, Paul, I'm sure, will comment, but the risk register has been reformatted and I think the board's view that the mitigation actions that are being taken could be set out in a bit more detail together with some dates and timetables for completing tasks so that it becomes a more, a fuller document for you and for the board. It probably should be discussed later on rather than just now, but I saw there were some changes made to the risk register, which I find very surprising indeed, but I'm not sure what the governance of processes for making changes to the risk register. Is it being put to this meeting the changes or how does it work in practice? That's probably one for Paul, I guess. We can take that one later on. Yeah. Okay. Can the report and recommendation be noted? Agenda number five, yeah, item or consideration, agenda number 5.1, training by human robot, actual evaluation, page number 19 and 42. Thank you very much, Chair. Yep. This starts on page 19 of your pack. What I'll do is I'll share my screen as well. So hopefully you can, we can all be looking at the same thing at the same time. If with the wonders of technology, it will actually appear. Doesn't seem to be going to plan. I'll try one more time. And if not, I'll just talk through with the page numbers of your packs. Right. Doesn't seem to be going to plan. I'll just talk through and I'll see the page numbers as I go. Hopefully everyone has the pack and it's, as I said, page 19 is where we're starting from. So I'm here today to give a bit of a kind of recap of one actually evaluation is the next valuation is due 31st of March next year, so 31st of March, 2025. And some of you may or may not have been through an actual valuation before. And so kind of some of this might be a little bit basic for you if you have been through it before, but hopefully it's useful for those who are new to the process to to get a bit of kind of basic background as to the actual valuation. The purpose of it will also I'll also talk a bit about kind of latest funding update we've done. I can have estimate of what the funding position looked like fairly recently, and then I'll talk a bit about kind of the challenges and opportunities that might arise as part of the 2025 valuation. And as part of that, there'll be a bit of a discussion about kind of what's happened in the last two years or so since the last valuation within the economy to kind of frame what those opportunities and challenges might be. Do feel free to ask questions as we go along, or you can save them up for the end if you wish. So moving on to page 21 of your packs, this is the very kind of basic how the funds work, how the fund works. So the fund collects money in the form of contributions, both from current employees who are members of the fund, but also from their employers as well. That money gets invested and those are what we refer to as the assets of the fund and the money that's invested, those assets are used to pay out the benefits to the members of the fund. It's important to remember that the sole purpose of the fund is to pay out the benefits of those who have earned earned them throughout their careers. Obviously, there's a lot of investment discussion goes on about how best to invest those assets, but the main purpose is to pay out the benefits. Now, the overriding goal of the valuation is basically to make sure there's enough money to pay those benefits in the coming decades. Moving on to page 22. So how do you actually get the sides to balance between kind of you've got on one side, you have the contributions from the employees and from the employers. You've also got the investment returns on those contributions that have come in and on the other side, you've got the benefits to be paid out. Now, you'll see there's a few kind of icons on this slide in red. Just a reminder, page 22, you'll see a couple of padlock icons there and those are elements which are basically kind of written into the regulations. So you can't there's no way for the funds to change those. And that's the benefits that are earned by members. They are written in the regulations. You can't change those as a fund and the employee contributions. Again, what the employees pay in is written in the regulations. So the other two elements here are employer contributions and investment returns. Now investment returns are kind of unknown until you actually kind of until you earn them over the years. And so the main tool that we have really to control the balance of this cost is employer contributions. And that's why that's I mean, that is the main focus of the valuation every three years is to work out how much each employer should pay for the coming three years. Moving on to page 23. So why else do we do a valuation? I've already mentioned calculating employer contribution rates. That's one of the key, key focus focuses of the valuation. We're also required to do it under the legislation. So that's a good reason to. It's also a good opportunity to analyse what's actually happened in the pension fund and in the economic environment between the last valuation and this valuation. So we can analyse the actual experience against what we assumed at the last valuation. And we can review what's called the funding strategy statement, which is kind of the the Bible, if you like, of the fund that tells you how employers are treated. Excellent. And tells you how they how the employers are treated from when they enter the fund while they're in the fund and when they leave the fund as well. So we have a full review of that at each valuation too. It's also a good opportunity to do basically a kind of health check on the solvency of the fund. So how well funded are you? How are your assets that you have now compared to the benefits that have been earned by members up until now? So all in the triennial valuation is basically a kind of risk management exercise for the fund that's done every three years. Moving on to page 24. So how do we do the valuation? Well, we have inputs and one of the key inputs is the data that we receive from Paul's team for all the membership of the fund. We also make quite a lot of assumptions because we're projecting these benefits decades into the future as to what might happen in terms of the membership and in terms of financial conditions. So financial assumptions are very key to the whole process. I'll touch on a few of them later on. And demographic assumptions are also important. And the most important demographic assumption that we make are the most the one that has the most impact is life expectancy. Obviously, when we're paying pension benefits, it's very important to to estimate people's life expectancy as accurate as you can. So we do that using and using our sister, a partner company of ours called Club Vita. And again, I'll touch a little bit on that later on as well. And the LGPS benefit structure, as I mentioned earlier on, the benefit structure is going to written into the regulations. So we obviously have to use that as an input when we're working out what benefits are going to be paid out. In the middle there, there's a fairly old photograph of me and my colleague Richard, who also works with me on this fund. And we use our actual models along with those assumptions and the data that's been fed in to work out the three kind of primary input, primary outputs rather on the right hand side. So one of the outputs is what we call the funding level, which is basically the ratio of the assets that you hold compared to the benefits, the value of the benefits that have been earned up until that point in time. Two other primary outputs are to do with the contribution rates that are payable going forward for the following three years, and that's a crucial part of the valuation process is working out what those contribution rates should be. And the contributions payable are split into two different elements. So there's what's called the primary contribution rate, which is the cost of the future benefits being earned by members in the coming years. And then there's the secondary contribution rate, which is basically the balance to make sure you have enough money overall to pay all of the benefits, both those that have been earned to date and those that will be earned in the future. Moving on to page 25. So a key decision of the valuation is where this pink line on this chart is set. So I mentioned the funding level earlier, and the funding level is basically the result of the two bottom boxes there. So there's a blue box at the bottom left, which is kind of on the liability side, is the value of the benefits that have been earned up until now. Now, the dark green box on the right hand side is the assets now. So the ratio of assets to the value of the benefits earned to date is what's called the funding level. So if you've got more assets than the value of your liabilities, your funding level will be more than 100 percent. But it's important to note that that second of snapshot at a particular point in time, it changes daily because it relies on both the value of your assets, which changed daily, but also the value placed on your liabilities, which changes based on market conditions as well. Now, you'll notice from this that actually those two elements, the assets today and the benefits earned to date are the smaller boxes on the slide. So actually. The benefits to be earned in the future are actually far more likely to be far more significant than the benefits that have been earned to date, because these benefits are going to be earned decades into the future. And so are the contributions and investment returns that you're going to be gaining on those investments as well. So a key funding strategy decision is where you place that pink line, which is how much are you relying on future investment returns and how much are you relying on future contributions? So I'll come back to this a little bit later on, but it's important to note that that kind of where you place that pink line is is ultimately kind of one of the key decisions of the valuation. Moving on to page 26. So it's a bit of a balancing act here. So on the left hand side, you've got the cost of the benefits and the investment returns and contributions, how that's being split up on what you might call a higher risk funding strategy. And under the higher risk funding strategy, you're placing more reliance on the investment returns and less reliance on the contributions that are coming in from employers. The reason this is a bit higher risk than the one on the right is because the investment returns are quite unknown because you don't know what you're going to get investment returns into the future. So the more reliance you place on that, the more risky your funding strategy is. On the right hand side, we've got what we've labelled kind of a lower risk investment strategy, and that's going to be the other way around. So you're placing more reliance on the employer contributions and you're saying, let's be a bit more careful about how much reliance we place on the investment returns. And that's not to say that you should go kind of for one of the extreme or the other in this slide. It's basically all about kind of how do you balance that and balance the risk. So you've got to come up with an appropriate level of prudence, i.e. risk in terms of the approach you take here. So moving on to page 28, we're kind of moving on a bit now to what's actually happened since the last valuation. Now, this slide shows two lines on it, and the green line at the top is the value of the assets held by the fund. And the blue line is the value placed on the liabilities. It's a good news story in the sense that the green line is higher than the blue line so that the asset value is higher than the liability value and has been since the last valuation. In fact, the funding level so that the kind of ratio of assets to liabilities has improved from one hundred and twenty three percent at the twenty twenty two valuation to a bit over one hundred and sixty percent at the end of June. Now, we are urging kind of caution at the moment about those numbers. And obviously, these numbers depend quite a lot on the assumptions that you make and how prudent you are with making those assumptions. And at the moment, these assumptions and well, these assumptions rely heavily on the investment return assumption into the future. And that's something that's fairly volatile at the moment in terms of what you might what you might get in your investment returns over the coming years. And so we're urging some caution in terms of of when we move into the twenty twenty five valuation, looking at the numbers. What we're going to do is we'll look at a range of different scenarios, a range of different assumptions to show you what the impact of maybe being a bit more prudent with your assumptions would be and see what the resulting funding level and contribution rates look like. Now, the asset returns over that period have actually been a bit were a bit lower than expected up to September 2023, but have since improved quite a bit. As you can see by the jump up in the assets towards the end of the chart there. And there's been rising interest rates and high inflation over the last couple of years. So I think it's it's I think most of you in the room will have noticed interest rates have jumped up quite a bit over the last couple of years. And indeed, inflation over the last two years has been considerably higher than we assumed at the last valuation. So those are both had an impact on the funding level that we're showing here. And I'll get into that in a little bit more detail shortly. But ultimately, that's led to a higher expected return on the funds assets in the future. And generally speaking, if there's a rise in interest rates and you can get a better return on more secure assets, then the kind of assets that you're invested in, you would also correspondingly expect to get a higher return on those because they are a bit more risky than the kind of secure cash or or other alternatives that are a bit more secure. So moving on to page twenty nine, a little bit of a chart of inflation. So this chart shows CPI since since kind of May 2014 up to May 2024. Now, you notice quite a spike in the last couple of years, and that, as you will have noticed yourselves in your own your own personal lives, has been a big jump in inflation over the last couple of years. That has led to pension increases, which are much higher over the last two years than we had assumed at the last valuation of ten point one percent and six point seven percent in the last two years. Now, that has an immediate impact on the fund's net cash flow position. So that's something that we need to look out for at the next valuation and going forward is what is the cash flow of the fund look like? Now, what I mean by that is you're receiving contributions in from all the employers, but you're also paying benefits out. Now, up until now, most of the funds across the LGPS have been cash flow positive or kind of on the verge of kind of cash flow neutral, which means they've been receiving in more contributions and they're having to pay out in benefits. However, going forward, we see that position potentially changing in the coming years. And so that's something that all LGPS funds are having a look at just now to make sure that there's enough liquidity in the investments that you've got to cope with any kind of cash flow requirements that you have. And that's partly due to pension increases being higher than assumed over the last couple of years. So you're ending up paying out much more than you thought you were going to be. And it's also something to bear in mind when we look at the valuation, if we're thinking about potentially reducing contribution rates, then that will have a knock on impact because you're going to be getting less money in from the contributions. So that might have an impact on your net cash flow position, too. It's worth noting that future inflation remains uncertain. It's obviously come down quite a bit, as you can see by the end of that chart. It's come down quite a bit in recent months, but it is still fairly uncertain, quite unpredictable and potentially quite volatile. So, again, another of the assumptions we'll be making at the valuation that we'll be making sure we look at the potential implications of options. 30 touches on the investment outlook in general. I mentioned earlier that expected returns are higher now than they were two years ago at the last valuation. And that's for all asset classes. This chart shows the comparison of where they were at the 31st of March 2022 compared to where they were at the end of June 2024. Now, as you can see, that overseas equity dot at the top right there, back at the valuation, we were assuming you would get maybe around six percent per annum on overseas equity investments, as at the end of June, that was more like eight percent per annum. A few percent might not sound that big a number, but when you're doing that, when you're getting that every year for decades into the future, it makes quite a big difference to the value that you end up placing on the liabilities now. As I mentioned earlier, these higher returns have been driven by increased interest rates and it leads to a lower value being placed in the funds liabilities, which has been the primary driver of that higher funding level, is a lower value being placed on the liabilities. As I mentioned, there's caution required at the 2025 valuation. We're talking about expected future investment returns here. Nobody knows exactly what those are going to be. And so we'll look at the prudence and the different kind of returns you might receive on your assets and how that impacts on the funding level as part of the valuation. So along the same theme on page 32, we have a chart which shows basically what your funding level would be under different investment return assumptions. So the funding level is driven partly by the future investment return that you assume. If you think you're going to earn more money in the future on your assets, then you need less money now to pay those benefits and vice versa. If you assume you're going to earn less money on your investments in the future, then you need more money now to make sure you have enough in the future. So this chart shows the green line is where your prudence level was at the last valuation of saying we want a 65% chance of returning this investment return. We're happy with that level of prudence is where you were at the last valuation. Now that, as at the end of June, had your investment return assumption just around about six and a half percent per annum. And that's where you've got the funding level on the vertical axis there, just over 160%. Now, what we'll be looking at as part of the 2025 valuation is prudence levels. And do you want to use this as an opportunity to be more prudent going forward and see, right? Actually, we want a bit more security in terms of how much return we're going to get in the future in terms of what assumptions we're making. And that's where, for example, if you used an 80%, if you say we want to actually be 80% sure of getting this return. Just look at the 80% dot there. It's around about just over 5% per annum. And if you were to assume that investment return assumption, then your funding level is actually closer to about 130%, 135 rather. Somewhere around there. So this is because what you're seeing here, if you're being more prudent and saying we don't want to take as much credit for future investment returns as we might get. We want to be a bit more prudent and say we want an 80% chance. That means there's a lower investment return assumption is what you're seeing. You see, we want to be more prudent and say we won't earn as much investment return in the future. And that means you need more money now to pay those benefits. So the value of liabilities is higher, which means the funding level is lower. So this, we'll be looking at this, we'll look at this chart again as part of the valuation when we have the up to date data and we redo the numbers. And we'll show you kind of what the different funding levels would be on different levels of prudence. There is not one single funding level that is the correct answer. This is all based on assumptions. And so prudence is going to be key in terms of the discussions we have, how prudent you want to be and what does that mean your funding level looks like. On to page 33. I mentioned earlier cash flow. Just to preempt any questions, this chart is not your fund. This is just a sample LGPS fund. But it's there to kind of show that some of the general trends we're seeing across the LGPS. So the pink bars on this chart are the total projected contributions into the fund every year going forward. And the green bars are the total projected benefits going out of the fund. And then that black line in the middle is basically the net position. So that's kind of if you take one off the other, where do you end up? Do you have enough money coming in every year to pay the benefits that are going out? Now, this particular fund is actually already slightly cash flow negative. So that black line is below the middle there, which means they're actually paying out more benefits than the contributions are that are coming in. And so they'll be in a position where they are taking income from their assets that they've got invested to be able to pay all those benefits out. Now, that's becoming more likely because of the inflation scenario over the last couple of years and potentially even more likely if there are reductions in contributions going forward from the next valuation. Because it may be that if we see high funding levels at the next valuation, that there'll be the opportunity to reduce some of the funds, some of the contribution rates for the employers. So what we're going to do with the fund is carry out cash flow monitoring a bit more often. Make sure that you're in a position where you know your cash flow requirements and any implications from an investment perspective can be looked into and dealt with accordingly. Page 34 highlights something I mentioned earlier. So another of the assumptions we make is about life expectancy or longevity. This chart shows kind of the Tower Hamlets surrounding areas. And it's a heat map of life expectancy. Basically, this is from a company we work with called Club Vita. Who analyse millions of data points of pension scheme members throughout the UK. So they cover most the vast majority of the LGPS. They have data on all the LGPS, the vast majority of the LGPS. But they also have private pension scheme data as well. So they analyse basically life expectancy currently throughout the UK and also do some work on what that might look like in the future in terms of how that might improve in the future. They use various different elements to it. So there's postcode, so kind of where they live is a factor. Lifestyle is a factor. Gender is a factor. And one more, which I'm forgetting right now, but there's four main factors that they use to analyse this. And it's kind of proven to be very accurate in terms of current life expectancy. Obviously, looking forward at what future life expectancy improvements might be is a bit more subjective. But they do quite a lot of analysis of what's happened in the recent past and are doing a lot of analysis of data, for example, of what's happened during the pandemic and what might happen going forward from this position as well. So in this chart, the darker the blue, the lower the life expectancy and the more green it is, the higher the life expectancy. This varies quite a lot throughout the UK. And the key thing to focus on is when we're doing the valuation, we use this data and it's specific, specifically your data for your membership that we look at. See where do they live, what's the life expectancy in that area and take that to have the most bespoke kind of life expectancy assumptions that we can for your particular fund. There's a link at the bottom there to Club Vita's website. It's quite interesting if anyone's interested to go into there and you can see heat maps of all the different parts of the UK and so on. Page 35 is still in longevity. As I mentioned, what happened during the pandemic and the impact of that on longevity is somewhat uncertain because we're not that far past it. And so actually look into what happened during it and how that's moving on since then is still a bit uncertain. But improvements have been slowing down since about 2011. So this chart can show us what kind of life expectancy looked like since the year 2000. And obviously you can see it's kind of flattened out a bit since about the year 2011. And you'll see obviously a big drop during the pandemic there at the end. How that then changes going forward is something we'll be looking at and kind of analysing and showing you kind of potential different impacts of different future assumptions of how life expectancy changes into the future. The LGPS, I've noted there, is kind of bucking the trend on excess deaths. So it's still higher than kind of previously in terms of excess deaths and more deaths than you would have expected. But it's not as much of a difference as the UK population in general. So the LGPS has had a more kind of subtle impact in terms of excess deaths than the general population. Another risk on page 36 is climate risk. Obviously very important to look at this as part of the valuation. We did so as part of the last valuation as well. But we're continually developing our models to make sure that we're being as realistic as we can and kind of developing real world examples that are useful for funds to look at and consider as part of their overall thinking. So as part of this modelling at this valuation, we're doing more of a kind of narrative based approach, looking at specific examples of, for example, a global food supply shock here. This particular example is similar in nature to what we saw with kind of grain shortages when the Ukraine war started. So we saw that around about then. And so we're looking at real world examples and how events cascade through supply chains and so on in these different scenarios and what the overall impact is, not just on your assets, but also on your liabilities. So we're looking at kind of life expectancy, how that might change based on climate risk and so on as well. So we can do it both based on the liability side and on the asset side in conjunction. So we'll be looking at that as part of the 2025 valuation as well. Obviously a very important thing to be considering at the moment. So page 37 kind of highlights the kind of challenging environment we're in. I've covered most of these points already. That's just a kind of summary there. So basically we're in a bit of a new economic cycle at the moment. So financial assumptions are quite uncertain, but it's not just financial assumptions that we're looking at and that's not the only challenge that we'll see. So as part of the 2025 valuation on page 39, coming back to this same chart again, page 39. Where do we put this pink line? Funding level, as I mentioned, is only past service based on what you've earned to date. The majority of the contributions that are paid in from employers are in relation to future service. So actually paying for the benefits that are being earned going forward is where the majority of the contributions come from. So that's something very important to look at and where that balance sits. Page 40 just touches on a few different options in terms of if we are in the position of of having of reporting a surplus at the next valuation. What are the options? So there's four different options we put here. This is not in any particular order. And it's not to say that you would just use one of these options. You can use a combination of more than one of these options when it comes to the time. And we'll look at all these different options as part of our analysis when we come back to you during the valuation. Number one, reduce employer contributions. That is a possibility. If we are in a good funding position, then that is one of the options. We're conscious that a lot of employers are in a position where a reduction in contributions would be very beneficial at the moment. And if we're in a good position, then that's an option. Number two is to change the investment strategy to make it a little bit lower risk than it is just now. So that's an option to look at as part of the valuation as well. Number three, increase the prudence levels. I mentioned that was something we will be focusing on during the valuation is do we want to take this as an opportunity to be more prudent with our assumptions? And number four, retain some surplus. So at the moment, what we do is we target being 100 percent funded. What you could do is have a buffer. You could say, right. Do we target being 110 percent funded, 120 percent funded? That's kind of subjective judgment where you want to put that if you want to go down that road. And so that's an option as well. Do we actually aim to have a bit of a buffer in case of future events not going the way we hoped? So as part of the valuation, we'll we'll look at all these options and and give you the impact of those different options. And it might be a balance of a combination of these that we look at eventually. And the final slide on page 41 is a bit of a roadmap of the valuation itself, just with the main main elements on this one. And so it just takes you through. I'm not I'm not touching any individual point too much, but basically there's various different elements from looking at the data, making sure the data is good. Looking at the assumptions kind of middle of next year, running all the calculations and coming up with the whole fund funding position. And then after that, what we do is we look underneath the bonnet at each individual employer and see what's your funding level underneath it all. And we model the contribution rates for the council and also for all the other employers that are in the fund as well separately. We then finalise everything before the March 2026 deadline and then the new contribution rates come into payment on the first of April 2026. Questions? I'm sure you do. I hope you do. Does the committee have any question or comment it wish to speak? Yeah, my question is page 39. I just wanted to know, is there an idea of what is the potential future contribution could be? Just I know it's difficult, but just roughly. It's difficult to say without doing any modelling. There is, I can say without too much nervousness that there may well be the opportunity to reduce contributions. This part of this valuation, how much that reduction is, very much depends on kind of the four elements that I mentioned there and what routes you take and what combination of those you use. But yes, I'd say there's unless something fairly catastrophic happens in the markets over the next few months. I would imagine there will be an opportunity to reduce contributions. What level of reduction that is is kind of difficult to see at this stage. One thing I would say is for the council is has what's got what's referred to as a stabilisation mechanism to their contribution rate. So it can only go up by one percent of payroll or down by one percent of payroll in any given year, ordinarily under that stabilisation mechanism. So that's that's the intention behind that mechanism is to make sure that in the good times that you're you're not going to just dropping contribution rates to the floor. And then having to suffer in the bad times by throwing them back up again. And so what happens is in the bad times, the contribution rates step up gradually and in the good times they would step down gradually. So it smooths out the contribution rates over the good times and the bad times is the intention. Thank you, Chair. Thanks for the presentation. I just want to understand one thing on what happened since 2022. The liabilities seem to drop in September 2022. Just want to understand what were the causes at that point for the liability to drop. And my second question was on the investment outlook, where we sort of see expected future investment returns from various sort of different investment parts. Just wanted to know how much of what we heard from the campaign today is sort of incorporated within that area. Does it touch anything like that? Are there any areas we should be aware of? OK, thank you very much. I'll take your first question first. So the chart on page 28. Yes, there is a very significant drop round about September 2022. You may remember something reasonably significant happened in the markets back then. And that was the mini budget by Liz Truss, which had quite an impact on markets, which led to significant jumps in government bond yields in particular at that point in time. And so basically. The higher expected return on a given asset class or or any of all of the asset classes, which took a bit of a jump at that point in time. And the lower the value is placed on the liabilities, because if your government bond yields jumped up and as a result, the expectation of what you would earn on your investments jumped up quite a bit into the going into the future of this is future investment returns jumped up quite a bit. And therefore, you didn't the expectation would be you wouldn't need as much money now because you can earn more money on the investments in the future. So that's why the value of the liabilities dropped quite a bit at that point in time. So that's that's the indication there. And your second question about the chart on page 30 and how much of the how much these figures are impacted or otherwise by by what was presented earlier in terms of. And in terms of that, Luke, what what we do to model these investment returns isn't it's that kind of asset class level. So kind of overseas equities is looked at as overseas equities overall. It's not a granular it's not as granular as looking at particular areas of the world. And specifically, it's looked at as one kind of overall asset class. It's a bit kind of higher level than what was being discussed earlier. So any impacts of disinvestment from particular particular areas or particular industries or or so on wouldn't necessarily have an impact on these figures. Thank you for your presentation. I understand we have a report to consideration part of the agenda as item number seven, seven to engagement and communication report page number 43, 46. Can I invite forward to present your report? Thank you, chair. This report is for both noting and also offices seeking the committee's approval to hold a pension fund information forum, otherwise known as an AGM for both scheme employees and members in January 2025 at the town hall. And offices will be bringing a further report and update to the November committee for for consideration of the proposed agenda for the event. I think the key point of this report is essentially to highlight the new complexities, the risks and opportunities facing the LGPS and the need to engage employers and scheme members. In fact, all stakeholders robustly to essentially communicate clearly what is happening across the LGPS. For example, the ongoing pensions review and the call for evidence that's just closed and some of the issues that we've sort of touched on. Already this evening, issues around climate change, et cetera, and the impact of all of that on the pension fund strategy. So a strong and proactive engagement with employers, I think, would encourage the fund to obviously get more and better information from employers, which in turn will help to administer the fund better. Chair, I'd like to pause there for any questions. Thank you. The committee have any questions? Thank you, Chair. I think I agree it's a good strategy and the event should be really good, I think. My question is, I'm looking at 3.1, so is the union not involved or they're not part of this? The unions will be involved, I think, in another report. We stress that the unions will be actively engaged in helping to ensure that there is active participation of employees. So there will be involved. Thanks, Paul. This is timely. This is something that as a committee we've been hoping would happen a lot sooner. So, yes, this is very welcomed. One thing that I wanted to raise in that engaging with staff is maybe we can get some of our fund managers to sponsor the event. Is that something that you guys can outreach so that the day is a fun-filled, packed event for everyone to enjoy? Thank you. Yes, when the agenda is developed we will see how all that can be reflected and if sponsorship is possible then, yes, we will consider that we'll engage with fund managers. I remember in the previous conversations about some, not low intake, but there are some people who choose not to be involved with the pension and so forth. Will there be internal comms pre the engagement to make people aware? And just following what my colleague said around getting one of the stakeholders, i.e. one of the pension funds to sponsor, make it more attractive. I'm sure that's something that they will be happy to do because we are a good client, I'm sure, and they want to keep us. Absolutely. I think this is all about the long-term sustainability of the pension fund. Certainly we want to attract new members to the fund because we're currently missing out on valuable contributions that we should be getting into the fund. So, yes, that is actually one of the key reasons for engaging proactively with employees because we are aware that a good many of the employees don't currently participate in the pension fund. So I think it could be an opportunity for us to actually communicate the benefits of the fund to them. Thank you. The report and recommendation to note it, which is our page number 43, agenda 196. Can I invite Paul to present your report, please? Thank you, Chair. This report is for noting and also to inform the committee about some of the current issues around the LGPS. The Government Actuaries Department, GARD, published its 2022 section 33 report in mid-August, and the two appendices to the report are in your pack. And essentially the LGPS funds in England and Wales have got their results presented and sort of compared to what the local resorts actually suggest. And the implication for the upcoming 2025 evaluation is also discussed in the report. And the other things I think is worth noting in the report is the section dealing with exit credit cases. We've got about three or so under consideration, and a previous committee considered such a report. And offices were asked to seek further actuarial and legal support, and that process is ongoing. And, you know, Hyman's here present may care to comment on that. But this report is a loose collection of some of the key issues that we think that the committee should be aware of in the run up to the upcoming actuarial valuation. And the GARD report itself is quite comprehensive. And I'm pleased to say that looking at the tire hardness results, there are no red flags or no issues. They're all green flags, so that is good news. I think the scheme advisory board has been asked to consider whether there is need for, you know, greater consistency, and whether there is need to consider any issues that the committee should be mindful of. And also some guidance as to how to deal with, you know, surpluses and deficits in the fund. So, I think I'm happy to take any questions. Anybody have any question or comment on which to speak?

Thank you, Chair. This report is for noting, and it discusses the admissions in the pipeline and also makes mention of the fact that the admission, the annual benefit statement was a couple of days late. This was the statements that should have gone out by the 31st of August. There was some technical problem that we encountered, so it was a couple of days late. But the reports, the statements were dispatched, you know, a couple of days after the deadline. And the progress that is being made in terms of the ongoing data cleanse, that is going at pace, and the early indications that, you know, things are not as bad as we feared. However, we are making some rectification where such action is required. But the next meeting in November, offices will be bringing a report on this particular matter, the data cleanse, to give the committee a full update on that. Thank you, Chair. Does the committee have any question or comment on which to speak? Can the report be recommended and noted, which is on page 197? Agenda No. 5.5. Can I invite Paul Ode to present your report, please? Thank you, Chair. The report discusses the risk register on exception basis, and this is the review at the end of June. And you will see that the risks that have been discussed are those that have got the sort of severe risk rating attached, i.e., rating of about 16. And you can see that offices have been taking the required actions to control these risks and consider the risks to be moderating, you know, for the reasons explained in the report. The color coding appears to be slightly more than you'd expect. The extra color is medium risk, so you've got the green, the medium risk, and the highest risk rating, 16. So with respect to the risk of increased liabilities due to yields and inflation becoming, you know, out of sync with the actuarial forecast, I think the view there is that the funding level is currently, as at the last measure, was 163 percent. That's compared to 123 percent at the 2022 actual evaluation, and this implies that the probability of the fund achieving the required return, you know, has risen from 78 percent. It was back in '22 to something in the order of the lower 90s, 91 percent, and that's, you know, based on the improving outlook for investment. And the other risk is the risk that the London CIF and fund managers, you know, underperform. This has been consistently rated as, you know, high risk. And it seemed to be a misnomer, because obviously this is intensely monitored, not just by the consultant, the independent advisor, but also by the consultant, obviously. Some may have a different view on this, and to the extent that offices meet regularly with the London CIF and participate in numerous, you know, calls and events where, you know, strategy and managers are discussed, I think there is the presumption that we see and hear enough, and if things, you know, really get out of hand, then that should be picked up as part of the overall governance. So I think a medium risk rating is deemed, you know, appropriate, because if the risk is too high, then it questions why are we still in it. And there are perhaps other ways of articulating, you know, that, you know, risk rating, and I think keeping it at medium risk level allows us room, if things were to get out of hand, then to jack it back up. But I think to just have it as permanently at the highest rating, I think is problematic. The other risk to be looked at is the risk of high pension costs and processing errors, and to the extent that we are conducting a comprehensive data cleanse, and a very thorough job has been done, and the results so far demonstrate that, you know, the picture is not as bad as was feared. So things are heading in the right direction, and concerted effort has been made to, you know, bring the data to where it should be, and to future-proof the data quality going into the year-end and the upcoming actual evaluation. So to the extent that all that's happening, then there is no justification for the risk to remain at the highest point. So that, accordingly, is being reduced to medium risk rating, and we will keep monitoring it, and the aim is to bring that to minimum risk and ensure that it is properly future-proofed, and so we can move things back to business as usual. And officers are actively recruiting, you know, more staff to the admin team, and this month we've managed to recruit three additional members of staff, so things are heading in the right direction, Chair. Thank you. Yeah, thank you. Paul, I'm looking at the risk report and the scores. So, for example, the first one is about, what is it, HRP0009, and also, when you go on to implement it, it says zero. And then I'm looking at the 0014 misstatement accounts, potential qualified or audio opinions, zero. And then I'm looking at the 21 as well, risk, CIV, also zero. So is that, and also, if you go on to the other pages, there are zero when it comes to implement it. Is that something that we might, it's quite worrying, so I just want assurance from you. And also, there's another one, it says HRP0011, key person risk and staff turnover, risk of lost key senior staff, and then again, it says zero. So I just want some assurance from you, and thank you. Thanks, Chair. Yeah, these risks are monitored and re-rated regularly, and it's a very dynamic environment and we see the changes that are coming through, for example, the recruitment of new staff coming through. We see a good piece of work surrounding the data cleanse happening, because obviously data is the dominant issue in the risk register, and that data issue is being tackled most comprehensively. And we are committed to taking that risk, if not out completely, but taking it to the bare minimum to ensure that confidence returns to everything that is based on the data. Because a lot rides on the data that we use in Pentis Admin. Also, the actual evaluation is driven entirely by data, so we are entirely focused on ensuring that we restore that data quality. So that, you know, to give comfort to all those that depend on that data, be it for the calculation of benefits, and also the information that, you know, results from the use of the data. So the level of investment that has gone into the data cleanse, so we know that that will actually deliver the change with so much desire. Just to go back to John's comment on point seven, I think that's really important, and I think, yeah, as part of the risk register, I think they've made a really good suggestion against mitigation and also a timeline for you meeting your objectives in line with the risk. So I do think that that's something that should be noted on the risk register going forward. Thank you. So in my report, I've written about the London SIV and their ability to choose managers, and I'm very scathing of them. They've underperformed in seven of the rate funds, equity funds over three months, a year and three years, which is very bad. They've lost their chief investment officer who resigned within six months of joining. Other funds are stopping giving money to the SIV. They're going to passive funds rather than actively managed funds because of a lack of confidence in the SIV's ability to choose managers. So I think to say that the situation has improved is, from what I'm gathering, obviously, Paul talks to different people than me, it's certainly not what I'm seeing. I'm saying that because it's in my report, so I can hardly not say it given I've written a page on the subject. So I think they're really getting worse and worse, and the situation is more dire, and the resources they're putting in are not aimed at the problem, which is the ability to manage or choose managers. They're putting people into increasing their range of products rather than actually trying to solve the problems they've got. So I think the situation is pretty dire, and I certainly would keep them on read, but that's just my view from what I gather and speaking of a fund. But I think it would be quite good if we had a discussion sometimes about these things, maybe, rather than just putting something down. The other one is I agree the funding ratio is much better, so that reduces the risks. But I think 19 seems to me to be about, if the yields are inflation, go in a particular direction, then what happens to the risk? Well, the higher guilt yields are, in a sense, the bigger the risks are because they can go down, and that would make the position worse. So it's a bit kind of confusing, but the lower the yields are, there's more likely they go up, in which case it's better. That's not a risk. But if they're high and they go down, that is a risk, so it's a bit complicated, I guess. But anyway, the main one I have is the London SIF, which I do feel strongly is not. Thank you. Yes, Councillor Sahid. Thank you. Following from the comments of my Councillor colleagues and Colleen, I just want to ask Paul, how do we then measure these points within this risk register? Can these points be added in? Can we see where we are tracking with London SIF, A? B, can we also have a sort of register to track any investment that's not given us the returns that we want, or any unethical investments? Where do we see that in this document? And also, where we have target dates and in progress, where it's got nil, when are we going to see a timeline with it? Thank you. I think the granularity of the risk register is something that we're already discussing. Jake had the portal generating this information. We've already raised some of these issues as to how much granularity that can be added to it. And I haven't got an answer straight away, but it's something that we are working internally on to develop it further. Because we've been using the current systems for a little while now, but we've been taking on board some of the comments from the committee and the board. And it is a living document and we'll be looking to continue to shape it. Through you, do you think we can have a visual on this by the next meeting in November? Because I think we don't want to let this slide within, you know, meetings after meetings and not seeing something coming to fruition, because we've seen the issues we had with the last financial statements being signed off because of the pension accounts. And I think we just want to stay on top of the issues we raise in this committee and we want to see it coming to paper sooner than later. That's been taken on board and offices will look into all of that and we will make this as granular as possible and link those improvements to specific delivery dates and so on. As to the broader issue of linking things to specific investments, I think that will be looked into. Obviously it depends on what the system is designed to do and how much additional information that it can actually provide, because obviously I'm sure there are limitations to the system, but we will use the system to the fullest extent possible. Thank you, Chair. In terms of the performance of our investments, they will be noted later on. We've got Masa here to comment on those on a quarterly basis and that will accompany the risk register. Thank you. The recommendations are noted, which is our page number 205 agenda. Thank you. Agenda item number 5.6, training page number 2152222. Can Paul present your report, please? Thank you, Chair. Training is a very important issue and I think it's demonstrably the case. You've just had a training session at the start of this evening's proceedings. So this report builds on that. It's for noting and the committee is asked to note the content of this report. In particular, that the members of this committee have all been enrolled on the LGPS online learning academy, otherwise known as LOLA. And you should have all received an email confirming your enrollment and the committee can now access the portal to review the models. I mean the older modules and to start learning at their own pace. Hyman's also launched the national knowledge assessment NKA on the 17th of this month and committee members are recommended to complete the assessment as soon as possible. And a link will be provided if that has not already been sent, but a link will be provided to support committee members to take the assessment. And officers are also requesting that any training and events that committee members attend should be brought to officers' attention so that the information can be logged in the training log. At a previous committee meeting, training was discussed extensively and officers are working collaboratively with Hyman's and others to deliver training on a regular basis. And it is important that committee members are able to engage as much as possible as part of the requirement to be knowledgeable around matters that are within the re-emit. I think I'm happy to take any questions. Thank you. Okay. Those the committee have any question or comment wish to speak? The agenda item number five, work progress page 223 and 242. Can I invite Paul to present your report, please? The work program is included in a pack and the recommendation of this report is that the work program for the committee and the board be noted as appendices one and two to the report and to read the report in conjunction with the separate report titled training which we've just discussed. And the committee having received training earlier this evening, it reacts to note the importance of training and, of course, the reports that this committee received are basically consistent with the training -- sorry, with the work program. And you'll see that the entries in the work program for September is essentially the report that we're discussing tonight. I think on that note, I'm happy for the report to be taking as read. Thank you. Those the committee have any question or comment wish to speak? Can the report and recommendation to note it, which is our page number 223 agenda item six, any other business? Number seven. In view of the consent of the remaining item on the agenda, the committee is recommended to adopt the following motion. Not really, no. Okay. And under the provision of the section 100A of the Local Government Act, 1970 as amended by the Local Government Accessory Information Act, 1985, the press and public surgery from the meeting in the consideration of the session to business on the ground. Consideration information difference examined part one of the scheme 12A to Local Government Act 1972. [BLANK_AUDIO]