The meeting report pack contains discussions on the Guaranteed Minimum Pensions (GMP) project, the McCloud project, the Pension Dashboard project, the council's pension website and updates on the council's pension investments. It also contains UNISON's motion about the fund's exposure to Israel. The most significant topic for discussion is the Chancellor of the Exchequer's Mansion House speech, which sets out reforms to the Local Government Pension Scheme.

Mansion House Speech

The report pack contains a report on the Chancellor's Mansion House speech, delivered on 14 November 2024 by Rachel Reeves MP. In her speech, the Chancellor outlined a number of reforms to the pensions sector, including plans to consolidate Local Government Pension Scheme assets into larger asset pools. These reforms are viewed by the government as key drivers for pension funds to support the future economic growth of the UK. Following the speech, the Ministry of Housing, Communities and Local Government (MHCLG) published a consultation for the Local Government Pension Scheme covering asset pooling, UK and local investment and governance, which closed on 16 January 2025.

The report pack says that the consultation focusses on three key areas.

• Asset pooling - The report pack says the government's view is that pools are not well placed to deliver future reforms under current arrangements. It says that the MHCLG proposes that all listed assets should be transferred to asset pools by 31 March 2025, and all legacy assets by 31 March 2026. The report pack contains a quote about the government's views on the current state of asset pooling: > The 8 pools each have different models: 5 are standalone FCA-authorised investment management companies (‘LGPS pool companies’), 2 have an outsourced model that relies on external providers, and one has a model in which a joint committee provides oversight, but the partner funds retain management of most assets. As shown in Table 1 below the pools vary in their capability to provide advice and/or internally manage assets, in their number of partner funds, the total assets held by those partner funds, and the degree to which those assets have been pooled.
• UK and local investments - The report pack says that the government has ambitions for greater collaboration across AAs, combined authorities and pools, to increase local investments and benefit local communities across the UK. For example, in London AAs would work with the Greater London Authority (GLA).
• Fund and pool governance - The report pack says that the MHCLG has set out a number of proposals based on recommendations from the LGPS Scheme Advisory Board (SAB), as part of its Good Governance project. For example, it says that AAs would be required to appoint a senior LGPS officer who has responsibility for management and administration of the Fund. It also says that pool companies would be required to appoint representatives from partner AAs on their Boards and would be required to publish asset performance and transaction costs.

The report pack recommends that the committee note and comment on the proposed reforms to the LGPS. It says that officers will draft a response to the consultation and circulate it to committee members for comment.

UNISON Motion: Exposure to Israel and the Occupied Territories

The report pack contains UNISON's motion on divestment from companies involved in breaches of international law and human rights in Palestine.

It says that the motion was passed on 10 June 2024 by UNISON Westminster Branch members. It contains a quote from the motion:

Westminster Unison asks that Westminster pension contributions are divested from companies that are complicit in breaches of international law and human rights, particularly in the occupied territories and illegal settlements in Palestine.

The report pack says that the motion asks that the council immediately remove investments from companies that are complicit in breaches of international law and human rights, particularly in the occupied territories and illegal settlements in Palestine. The report pack lists a number of companies deemed complicit in those breaches, including Airbus, Boeing, Cisco, Hewlett Packard (HP) and Rolls Royce. It also asks the council to divest from investment funds unless they are ethically screened to exclude companies involved in such practices.

The report pack says that the council's exposure to those companies is £10.1 million. It also says that as at 30 September 2024, the council had £247,000 of direct exposure to Israeli government, Israel Chemicals and Teva Pharmaceuticals bonds, and £900,000 of exposure to Mobileye Global Incorporation, an Israeli company that produces driver assistance and autonomous driving technologies, based in Jerusalem. It says that since that date PIMCO have sold the Israeli government and Israel Chemicals bonds they held.

The report pack contains an opinion provided to the LGPS Scheme Advisory Board (SAB) by Nigel Giffin KC on 24 October 2024. It says that he argues that it is not unlawful for LGPS funds to invest in companies or other entities involved with Israel's actions concerning Gaza or other Palestinian territories.

The report pack makes a number of recommendations to the committee about the motion. In particular it recommends that it should not divest from any companies involved in Palestine or from Israeli government bonds. It says that:

• The council should not interfere with its investment managers' day-to-day decisions. It should focus on ensuring that their policies on environmental, social and corporate governance (ESG) are in line with current best practice.
• The council should engage with and encourage companies to take positive action on ESG issues rather than divesting from them.
• Divestment would incur significant fees and might result in financial detriment to the fund.
• It is not appropriate for political preferences, whether local or national, to take precedence over what is required under the fiduciary duty.
• Nigel Giffin KC's opinion is that international law does not require LGPS funds to avoid such investments.
• There is no evidence that any of the council's investment managers have breached international law.

The report pack says that the committee should encourage positive change on ESG issues, and monitor investment performance, taking into account human rights, international law and other ESG issues.

Pension Administration Update

The report pack contains an update on the performance of Hampshire Pension Services (HPS), the council's pensions administrator.

It says that HPS has met 100% of its key performance indicators between September and October 2024. In particular it says that as at the end of October 2024 HPS had 327 outstanding cases:

The two areas that have the most cases are Interfund and transfers into our Fund. This is primarily because we are waiting for information to come to us from other Funds. The next largest is death benefits, these cases must be handled carefully.

The report pack says that 46.7% of the fund's members have signed up to the member portal. It says that 14 deferred members are 75 or older, meaning they are required to draw their pension but have not signed up for the portal. It says:

We are focussed on working with HPS to see if we can track these members or their beneficiaries about claiming pension entitlements.

The report pack says that the Strategic Pension Lead attended the LGPS Managers conference in Torquay. It says:

It was an interesting experience for us both to pick up on what other Funds are doing and to take some pointers for areas we need to focus on in the year ahead.

The report pack says that the Pension Fund is reviewing its Additional Voluntary Contribution (AVC) provision. It says that the Fund's current AVC provider, AEGON, does not offer shared cost salary sacrifice AVCs. It says that if employers could use a provider that offered shared cost AVCs:

then the potential for the member and the employer to save on National Insurance could be significant.

The report pack says that the common data score for the fund's data, which is reported annually to the Pensions Regulator, has risen from 85% to 90%. Common data includes information like addresses, that most schemes have to record. Conditional data is specific to the type of scheme, and the conditional data score rose from 92% to 93%.

The report pack says that the improvement in the common data score was largely due to the GMP project. It also says that it does not believe significant improvement in the scores will be possible. It says:

I am waiting for a detailed breakdown of the remaining data errors from HPS so I can review. However, I already know that missing address information is going to be a large percentage of the common data errors.

It says that the fund does not believe bulk address tracing will be cost effective. It says:

I am hoping that when the pension dashboards go live this will help us to locate some members who we have lost contact with.

Pension Projects & Governance Update

The report pack contains an update on a number of pension projects and governance activities.

Guaranteed Minimum Pensions Project

The report pack says that the GMP project is in its final stages, with final calculations due to be paid in February 2025 payroll. It says that of 241 cases that required full rectification, 195 are expected to go through without issue, 15 are members who have passed away and 31 require additional analysis.

McCloud

The report pack contains an update on the McCloud project. The McCloud judgment is a legal ruling that found that changes to public sector pensions discriminated against younger members. The report pack says that the project is on track. The council's current deadline is 31 August 2025, when annual benefit statements will need to include the underpin. It says that:

At present there are no delays and no concerns on the horizon.

Pensions Dashboard Programme

The report pack says that the Pension Dashboard Programme (PDP) is on track to connect by its deadline of 31 October 2025. It says that Hampshire Pension Services (HPS) has achieved all of its major milestones, including appointing Civica as its Integrated Service Provider (ISP), ensuring good data, contacting AVC providers to get their data included, creating a data matching policy and completing The Pensions Regulator's Readiness checklist. It says that:

There has been a slight delay from the Programme side with getting the ISP connection tested for compliance which means that HPS are expecting the availability of the required software to them in April 2025 which will create a slight pressure given the concentration of pension activities that usually occur at that time.

Pensions Website

The report pack contains an update on the council's pension website project. It says that the structure of the website has been decided, and the content is being completed. It says the project has experienced delays due to the prioritisation of other projects but contains a quote about progress:

the bulk of the GMP project was finished, focus could be drawn onto the website and other projects.

Fund Financial Management

The report pack contains an update on the City of Westminster Pension Fund's financial management. It says that the risk register has been updated to reflect the Chartered Institute of Public Finance and Accountancy (CIPFA) guidance on risk categories. It says that there has been no change to the top five risks to the Pension Fund. The top five risks are:

1. Regulatory and Compliance Risk - Reforms to the Local Government Pension Scheme following the Chancellor's Mansion House speech.
2. Asset and Investment Risk - Volatility and negative sentiment in global investment markets, including the conflict between Russia and Ukraine and Israel and Gaza.
3. Asset and Investment Risk - London CIV has inadequate resources to monitor the implementation of investment strategies, including concerns about staff retention following the departure of the Chief Investment Officer (CIO), the Chief Financial Officer (CFO) and the Client Relations Manager. The report pack contains a quote from this section of the report pack: > Following the publishment of the MHCLG consultation on the future of the LGPS and pooling, there is significant concern about the level of resourcing and recruitment that will be needed by pools to meet these requirements.
4. Liability Risk - Price inflation is significantly more than anticipated in the actuarial assumptions.
5. Asset and Investment Risk - Investment managers fail to achieve benchmark targets over the long term.

The report pack says that the Pension Fund has good cashflow forecasts for the next three years. It says that the annual accounts have been successfully audited, and will be signed off by the Audit & Performance Committee on 22 October 2024.

Quarterly Performance Report

The report pack says that the value of the Pension Fund rose to over £2 billion during the quarter to 30 June 2024. It says that the fund returned 1.4% of fees during that quarter. It recommends that the committee note the performance of the investments, and the updated funding level.

It also says that Westminster UNISON had requested information from officers about the fund's exposure to Israel. The report pack contains a quote from this section of the report pack:

It was clarified that officers had chosen to bring this to December’s meeting to allow time to compile a report while taking into account the wider LGPS response, the work on this was well underway.