This meeting included several reports on the work that has been done since the last meeting, including the approval of the 2023/24 accounts and the Pension Fund Annual Report, the Pension Discretions Policy and the training of the Joint Pensions Committee. It also included the consideration of reports on risk management, pension administration, ethical investment decisions, and a report on the matters discussed in a recent meeting of the Joint Pensions Committee.

Pension Fund Annual Report and Accounts 2023/24

The report included for consideration by the Board is for the year ending 31 March 2024. It contains sections on the overall fund management, governance, financial performance, and investments and funding.

The external auditor, Ernst & Young LLP, expects to give an unqualified opinion on the accounts. There has been an overall deficit on the fund for the year of £15.9m. The report pack contains the draft audit report at Appendix A.

The fund paid £12.2m in management expenses, which is a 9% increase since the previous year. This is because the fees are linked to the value of the investments, meaning higher fees usually indicate growth in value. The report pack includes a breakdown of the fees at Note 12.

The accounts show an overall surplus for the year of £817.9m. This was calculated using the requirements of the International Accounting Standard IAS 19 Employee Benefits, which is different to the requirements of the triennial actuarial valuation, and has therefore been reported separately in Note 28 of the accounts.

Training - Discretions Policy

The Local Government Pension Scheme (LGPS) gives the Council, as scheme employer, and administering authority, powers to make decisions on elements of the scheme. The administering authorities and scheme employers are required to:

formulate, publish and keep under review a statement of policy on certain discretions which they have the power to exercise in relation to members of the LGPS

The report included for consideration by the Board is a policy statement that covers each of the discretions, providing information about when and how they will be applied to members of the Wandsworth Pension Fund.

The report pack contains the full policy statement at Appendix A.

Risk Management

The report included for consideration by the Board updates the risk register for the Fund.

The report highlights a number of risks that are being managed, including:

• The risk that inaccurate information will lead to the qualification of the accounts. This is being managed by ensuring the accurate recording of financial information.
• The risk of poor investment performance. This is being managed by appointing expert fund managers, adopting a diversified portfolio that is reviewed regularly, putting in place currency hedges, and providing training to the members of the Joint Pensions Committee.
• The risk that assets will increase more slowly than liabilities. This is being managed by monitoring both the assets and the liabilities and reviewing the asset allocation on a regular basis.
• The risk of lacking sufficient cash to make payments. This is being managed by holding sufficient cash, investing in assets that can be readily liquidated, and through the ability to borrow from Wandsworth Council, who are the administering authority.

The report also highlights the following risks that will need to have control changes made:

• The lack of staff to undertake administration. This is being managed by appointing trainee pensions officers and providing training to the team.
• The unavailability of key systems. The main systems are externally controlled so the Council relies on those organisations managing the risk.
• The risk that third party data provision will be insufficient. This is being managed by cross-checking the data provided and ensuring that regular data updates are received.
• The risk that the actuarial assumptions used for the valuation are incorrect. This is being managed by undertaking a valuation every 3 years, charging for ill health costs at the time of retirement, building a prudence allowance into the discount rate, and using a strategic allocation to ensure that assets are aligned to the relevant assumptions.

The report pack contains the full risk register at Appendix A.

Pension Administration Update

This report included for consideration by the Board is an update on the work being done by the Pensions Shared Service, including its performance against its targets for the year.

The Pension Shared Service is a partnership between Camden, Merton, Richmond and Waltham Forest Councils, and administers the pensions of employees of those Councils.

The report details a number of achievements since the last meeting, including:

• completing the annual benefits statements for all members
• implementing the McCloud Remedy¹
• conducting a shared Internal Audit
• soft market testing to prepare for the renewal of the contract for the pensions administration system

The report also highlights a number of key areas of work, including:

• guaranteed minimum pension (GMP) reconciliation²
• the i-Connect project, which is intended to allow employers to more easily submit data
• promotion of member self-service

The report pack includes a full breakdown of the service's performance in Appendix A. Appendix B includes the service's work plan.

Next Steps on Ethical Investment Decisions

This report included for consideration by the Board summarises the discussion of a petition submitted by the Friends of Palestine to the Joint Pensions Committee at its last meeting.

The report explains that the petition asked that the Council disinvests from companies:

actively facilitating the Israeli military action against Palestinians.

The report contains a summary of the Scheme Advisory Board (SAB) guidance on how to make ethical investment decisions, stating that non-financial considerations may be taken into account:

provided that doing so would not involve significant risk of financial detriment to the scheme and where they have good reason to think that scheme members would support their decision

The report pack contains the full SAB guidance document at Appendix A.

Update from Joint Pensions Committee

This report included for consideration by the Board is a summary of the matters that were discussed by the Joint Pensions Committee at its meeting held on 15 October 2024.

The report does not provide any information about what was decided at the meeting.

The matters that were discussed included:

• a presentation of a petition
• a deputation from the Wandsworth Friends of Palestine
• a report from the external auditor on the 2023/24 accounts
• the Pension Fund Annual Report for 2023/24
• a report on the investment performance of the fund for the first quarter of the year
• General Matters
• A commercial proposal, which was discussed in a private session of the meeting

The Committee Reports and minutes summarising the business and decisions at each meeting are available on Wandsworth Council's website.