Transcript

of Trustees I'd also like to mention that this meeting allows for participation by video conference, via Microsoft Teams, and some attendees are participating remotely. For those participating remotely, please note the chat feature is disabled and its use limits the transparency and open discussion we aim to maintain in a public meeting. For those officers who have joined the meeting remotely, please use the raise hand function to indicate that you would like to speak and please mute your microphone and turn off your camera when not speaking. In terms of microphones, for those officers and members in person, can I please ask anyone presenting to speak clearly and directly into the microphones and when called on to speak, use the right hand button and start speaking when the red light is on and please turn it off when it's finished. So, I think we're ready to start. First item is apologies for absence and substitutions. Thank you, Chair. So, we've got apologies from Councillor Clare Malcomson and Councillor David Harmer. David Harmer is attending remotely. Thank you. Minutes of the previous meeting, that was the 13th of December. Can I record that as a true record of the meeting? Are we agreed? Thank you. And are there any declarations of interest that a member has in respect of any item to be considered at the meeting? Go on. Thank you, Chairman. In accordance with the conflict of interest policy, I should declare that I'm a member of the scheme, but I believe it's a non-prejudicial interest. Thank you. Okay, we've got six public questions and I'll ask the questioners to come forward and submit their supplementary should they have one. So, the first question is from Shashank Khan and it's about the divestment policies. David? David, do you have your hand up? Yes, I do. I'm sorry. I had admitted to consider that I also am a member of the pension scheme, a retired member, but nevertheless, I'm a recipient of the results, hopefully. So, if I could just declare that as an interest. We haven't typically declared those in previous meetings, but I should also note that I'm also a retired member of the local government pension scheme. Full completeness. And I guess many of the officers here are members. We will get to the conflict. We're all members. I think we're pretty much members. But we do not consider that an interest that needs, as the conflict of interest policy states, it doesn't consider a conflict of interest in this case. Anyway, you're very welcome to declare it. Thank you very much. So, Shashank Khan, your question. Your supplementary. Thank you, Chair. When I actually received, I actually asked my question, it was, I was trying to be clever to try and assist a response. But, I mean, my point being, if the pension fund can restrict investments in firms that are manufacturing cluster munitions, because, and I quote, these weapons can have an indiscriminate and disproportionate impacts on civilians during and after military conflicts. I was hoping that whoever replied could also acknowledge the fact that this is actually happening in the Gaza conflict at the moment. But whoever answered the question played it with a very straight bat. So, I mean, all I can say really is that BAE systems are a firm that this committee is invested in, or the fund is investing in. And BAE systems are making vital components which are used for F-35 jets, which are, you could say, indiscriminately and disproportionately impacting civilians, just like cluster munitions. Just this week, 600 Palestinians have been killed. So, I'm asking you, as members of this committee, I mean, I can do so little, really, when I see the pictures on TV and I hear the news reporting on the radio. That, you know, all I can do is like buy a t-shirt, go on a march and just ask a question, but you have the power, you members have the power to do something small here. You can say, right, we will not, no more, we will stop investing in companies that have, making these components that are bombing Gazans. So, if you feel that's right, then you should not allow it anymore. But if you don't do anything about this, then I feel in my mind that you feel that it's acceptable for so many civilians to die in this way. So, I'm asking you again, please stop. Will you stop? Will we stop this fund investing in BAE systems? Thank you. Thank you. I'm sure we're all overwhelmed by the situation in Gaza and Israel and, of course, there are other conflicts as well. The duty of this committee relates to its producer duty to pay pensions, which you may regard as a kind of a peripheral thing, but it's really central to what we do. And in adopting a policy, we do follow the relevant acts and UN policies. So, that's really my answer. Thank you. George. Thank you. Actually, I'm quite concerned by this answer, not least because I think it's a rather flippant approach to the use of the term fiduciary duty. Inasmuch as we quite clearly have chosen to honor conventions which we're not legally bound to honor as a pension committee, but we've still chosen to follow them because we believe it is the right thing to do. And because even though there isn't actually money to be made in cluster munitions and areas like that, or indeed in many other areas which we deem unacceptable to invest in, we do recognize in our responsible investment policy that fiduciary duty does not require you to invest in absolutely anything and everything that makes money. It's simply about can you invest in a way that ensures there's a suitable financial return to members. I do, I think in the case of the question that's been asked, it is very, a more honest answer I think would be to say, do we believe that the investment in systems or whoever is so insignificant that to divest for any reason whatsoever would be a direct, would have a direct harmful impact on our fiduciary duty. Because if we don't believe it would have a material impact on the fund in any great way, then quite clearly it is not an issue of fiduciary responsibility. I would also make the point that it's not just about weapons being used indiscriminately. We saw yesterday that the Israeli Secretary of State for Defense was saying, announced that the punishment and bombardment of Gaza would continue and that if Gazans wanted to end the suffering it was up to, it would not stop until Hamas released the hostages, which is collective punishment which is deemed a crime against humanity. We have seen the deliberate and clearly signaled cutting off of all food aid, medical aid and water supply to the Gaza Strip by Israel, which again is a form of collective punishment and a crime against humanity. And that's even before we get on to the fact that many of the actions being carried out meet the legal definition of genocide under the genocide convention. Now for all of these reasons, I really think this merits a more serious response than simply saying, oh, our fiduciary duty and then refusing to look at it any further. If we are serious about, if responsible investment is to mean anything whatsoever, we need to have a more serious look at this than simply saying fiduciary duty, let's move on to the next item, which I'm sorry to say is I feel the only response that we have given thus far. Thank you. Clearly, we have had sessions on fiduciary duty in the summer. It will be an important factor in the investment beliefs we adopt going forward. So that will be something for the committee to consider. Thank you. It hasn't actually responded to anything I said, but I accept the word gets me a false answer. You have made some comments which are recorded in the minutes. Kelvin. Thank you, Chairman. It's one of those sort of moral questions really, isn't it? But obviously, BAE systems create systems for our own defense and for keeping this country safe. Now you might decide that morally we shouldn't invest in any weapons manufacturing businesses. But I think the question of whether weapons are exported to any other country is a question for the government. They're the one that awards export licenses. They're the ones who make those decisions. They're the ones who should be lobbied to stop the sort of things that you're talking about. I believe that we need to have companies here for our own defense. We can see that quite clearly, but that doesn't mean necessarily that we have to export those around the world. But that is a government decision, not a decision of this committee. Thank you. We'll go on, if we could, to question two. Jackie Macy. Thank you for your detailed response to my question. It's clear that the issues that climate change presents are receiving significant consideration. Progress has been made in reducing holdings that exacerbate the problem. Whilst the reduction of the exclusion threshold from 75 to 25 percent for oil sands appears to be very positive, 25 percent is still a high level considering just how damaging this product is. It's been responsible for extensive environmental damage, particularly in Canada, where rivers and forests have been polluted. It takes enormous amounts of fresh water to mine tar sands, and it produces 17 percent more emissions than conventional oil. Will the committee use their influence to further reduce the 25 percent threshold, and accept that investment in companies such as Conoco Phillips is not acceptable whilst they're so heavily involved in the production of tar sands? Thank you. Thank you for the supplementary question. One of the, this may be a bit of a roundabout answer, but one of the issues that we, at the last meeting in December, when we looked at the border to coast policy that we looked at, we did, and it was a light touch review last year, we did say that we wanted further information or a better definition of engagement with consequences. So that is something we have asked to be addressed as a committee and with border to coast when we next see the update. Thank you. Thank you. I hope that produces something. Next question is from Kevin Clark. Is Kevin online? Yes, I'm online. Good morning. My question was about plastic production. Well, thank you for the response, and it's encouraging to know that both yourselves and border to coast are also concerned. So my question is, will you therefore take into account that investment in the oil and gas sector not only affects climate change, but also promotes plastic production? Thank you. I'm sure this will be a factor when the policy is looked at again. Okay. Thank you. Okay. Question four is from Luciana Cole. Are you online? I am, yes. Thank you. Morning. Yes, I wanted to thank you for your response to my question. It was about the move to unitary authorities and how that may affect pension funders. And so thank you for your really detailed response. It was good to hear about all of the different things that have been considered as part of that. So my supplementary question is whether you have kind of plans in place to keep pension fund members updated and all of the different possible options that may happen and the steps that will be taken during that to any transfer to ensure that they're protected. Next. Thank you. The current situation is the minister has invited a response on local government reorganization, which has gone in from the county and the boroughs and districts. The submission date is today. There's a second submission date due in the beginning of May. I would have thought that thinking on the matter, an important matter like the pension fund, won't be a subject for that next item. But clearly, very soon thereafter, there will need to be discussions about where the options for the administration authority of the pension fund. And the response has some of the factors to be considered. But yes, we will keep members updated. I think the most important thing is members benefits won't be impacted in any way. Contributions will continue. The fund will be there. There will be risk in terms of transferring to a new employer in any number of aspects, and those will need to be managed. And we will be reporting to members on that in our usual mechanisms. Thank you. Thank you. Thanks. George. Just to follow up on that topic, I would probably agree with your assessment that it is unlikely that this, that the topic of the pension governance is likely to be included in the next round of papers submitted to the government in May. I suspect that in many ways it will probably be an afterthought given just how many areas are going to be involved in this in the organization. And I imagine that if we compare ourselves against things like, say, social care and children services and education, I imagine we've probably come quite down the list of what people are thinking about in terms of the council leaders and decision makers at the moment. I was just wondering if it might be worthwhile perhaps adding an item to our own agenda at a future meeting to discuss potential options, because I think of the three options, I can only see one which looks like it would be quite unworkable in my view. But perhaps it might be helpful if we as a committee were to discuss it and perhaps offer a suggestion to the district and borough and council leaders in terms of what options we think might be the best way forward on behalf of members when LGR takes place. Yes, just to respond to that. I think in some other unitary moves it's been an afterthought. I've already had discussions, as has Neil, with the 151 officer and it's really very much in the, I won't say at the forefront, but certainly it's one of the important issues to be addressed. So you're right, it needs to be incorporated in the program. And I would have thought most of our meetings quarterly would have an update on this. And indeed there's a high level paper in this set of papers. I'd also add that we've also raised it with the leader as well, specifically as being needed to be a consideration. Andy. Thanks, chair. Just to confirm that you raised it, I certainly had the discussion with Neil as well. There was a paper today, and obviously the views of the committee will be sought, but it's something that is on my radar when it comes to disaggregation. Social care will feature, but so will pensions as well. So I can just reassure the committee that it's certainly on my radar. And in leading the submission in the business case from the county council's perspective, pensions will be featuring in terms of the options going forward in the next business case submission. But also then it will feature in any implementation that comes forward post that submission. Thanks, chair. Thank you. So moving on to question five. Lindsay, welcome. Thank you, chair. Thank you for your detailed response that I received. My supplementary stays in the field of climate scenario analysis. On the 7th of February this year, the government's actuary department published recommendations to help guide and support public sector organizations in Scotland around the implementation of climate scenario analysis. The recommendations include A, climate emission pathways or temperature scenarios, including the fact that organizations should consider at least two degrees Celsius and four degrees C Celsius. B, scenario analysis should cover both chronic and acute physical climate hazards and should be updated every three to five years. Although this guidance has been produced for Scotland, does this committee think it a logical way forward for public sector organizations in England? And will they seek to include the recommendations in their investment beliefs when they are agreed later this year? I can't give you a detailed response, but I was unaware of that in the Scottish scenario. I'm sure we will take it into account, and I'd be intrigued to understand why it was only applicable to Scotland. Maybe England's behind on this as it often is. Neil, any comments on that? Not in addition to the answer to the question in outcomes. Jennifer, welcome. Good morning. My question has to do with BP and the benefit of anybody who was not able to read it. Essentially, what I'm noting in the prologue to the question is the disappointment that I have and I'm sure very many of us have to British Petroleum's announcement that it will abandon its goals previously to embrace a more green agenda and will double down on its exploitation of fossil fuels. My question, which is in the papers, has some specific excerpts from their comments so you can see the many billions of dollars of change they're talking about in each direction. So why did this happen? And essentially, this was under the pressure of shareholders who, unlike yourselves, wanted to see more performance from the fossil fuel actions of BP and demanded basically that a change happen or they would sell their shares. They would divest. So it's quite clear that British Petroleum, or BP, I guess I should call it properly, they can respond to shareholder pressure when it's a certain kind of pressure, not the pressure you all have been bringing for some years, which has not worked. But what does work is the threat to sell, which was brought by certain hedge funds and others on BP. And they didn't just reluctantly say, yeah, fine. What they did is they had press conferences, they had press releases, they've been very proud of the changes that they're making. So my question to you was really about, have you seen enough yet? Do you realize that they are not going to engage in terms of action on the points that have been raised by yourselves and various other shareholders wanting to see a more green company at BP? Thank you for your reply, which significantly deferred comments to border to coast. I'm assuming there's some border to coast people here today, so my question now very much comes from your comments. I believe your comments where you talk about the various steps of engagement that have been taken make my point, not yours. You've done a lot, it has not worked. That's obviously clear from the facts on the ground. And given that, my question I suppose, Chair, to the committee is how would you assess the effectiveness, this is my follow-up question, how would you assess the effectiveness of the group of shareholders that demanded immediate response from BP under the threat of divestment to the effectiveness of the multi-year process of engagement, which obviously has not worked in the case of BP? Can you honestly say that BP is listening as hard to you guys as they are to the folks who demanded that they abandon the green agenda? Well, I would say it's disappointing very clearly, as you said and I think as we've said. I think repeating a response to the earlier question, we have the engagement with consequences and I think it's not clear what happens at the end of the engagement. And I think we need to be clearer and we have asked Board of the Coast for their policy when it is updated to be clear on that particular topic. We do have a representative from Board of the Coast and we have our own investment group here. Milo, I don't know if you want to add something that would help clarify. Thank you, Chair. I'm joined online by our Head of Responsible Investment, Tim Manuel. The engagement with BP is a very live and active topic. Appreciating that perhaps doesn't directly comment to the supplementary question that you've raised there, but more than happy to pass to Tim on the line to give an update on some of our recent discussions with BP. Tim. Thank you, Milo. So just to sort of reiterate some of what we heard, it is very disappointing, some of these changes that we've seen BP make. We've been engaging with BP over a number of years now and over that time it has included voting against the re-election of the Chair of the Board, supporting shareholder release resolutions that align with the objectives of the climate agreement, voting against management resolutions, for example. One thing I would say is that up until some of these more recent changes, BP did have one of the better developed net zero commitments and transition strategies amongst their peers. And to some extent, I think that position had arisen because of the engagement of a number of climate sensitive investors. So I think to some extent there has been some success in that engagement in getting to BP where they were prior to some of these changes. So I think it's to some extent that supports what can be effective engagement. Like I said, it's very disappointing some of this rollback, though, that we've seen over the last few months. You know, during that time, we have publicly declared our disappointment. We're one of the only large investors to do that. More recently, we've co-signed a letter with other shareholders to raise our concerns and request that they do put any changes to a shareholder vote. We've also met with management at BP really to discuss the inadequacy of what we see as being the rollback on these medium term targets in particular. And we have told them that as things stand, we will be voting against the chair at the forthcoming AGM. We do believe that by being an investor, it's important that we use the authority and the influence we have to put the case across for long term climate interested investors. And we'll continue to do that. And at the moment, that's our position. George. Actually, I've been. I think it's helpful to go back to first principles. The reason why we've been engaging with BP and with others is because our starting point has been that their business practices that the current business directory trajectories are incompatible with our responsible investment beliefs. And also, we believe there is a significant financial risk attached to that in the form of risk of standard assets should they not align with an effective transition strategy. That has been why we've been engaging. And I remember when I was first left and first joined this committee, we were told the policy was engagement with consequences. We've been had the virtues of engagement talked up over and over and over and over again. And our policy is clear as a pension fund that we believe in engagement with consequences, as has been quite accurately pointed out. Quite clearly, BP have listened to engagement. They have listened to the threat to sell shares to divest from them, but not from our side, from the other side of the argument. What I find beyond belief is the written response on border codes, which is effectively saying we believe we should still keep on engaging and we believe engagement will be successful. What planet can somebody living on to possibly think, to say that, to possibly be able to say with a straight face that engagement is still the best policy? BP are a business. They have multiple different shareholders. They're fully entitled to make whatever business decisions they wish. But it is long past the point where we should abandon any pretense that they're going to go from, they're going to suddenly do a screeching about U-turn on their current approach and go back to an approach which we support. So for border codes to continue to say that that engagement is that, quote, it is only by remaining engaged that we can affect change, end quote. It shows that they're clear, not only that there cannot be any credibility left in border code statements about engagement, because I do not see how it is it might be credible to say that with a straight face. It also shows quite clearly that when it comes to responsible investment, border to coast is, in this case, better illustrates better than the other. Border to coast is failing to implement our own responsible investment policy in what it dictates. Engagement with consequences means there have to be consequences in some exceptional circumstances. Maybe not in most, maybe not even in a significant minority, but at least once in a while there must be consequences. It is hard to think of a more timely, more apt, more opposite case where consequences should be applied, and yet we still have border codes saying there's no need, no engagement is the only way to make meaningful change. The question I'm left asking is why on earth are we as a committee continuing to believe that border to coast can deliver a responsible investment policy when we have here in black and white that they are effectively refusing to follow the consequences part of engagement with consequences? Thank you. I'm going to come in here and actually I'm going to substantially agree with George. I think we have reached a point here where the management of BP have, by their rejection of what we started previously got, shown their true colors, frankly. And I also think, again, if we are having a policy of engagement with consequences, we do need one or two people to have consequences in order to encourage the others to actually listen to us. So I think we are reaching a point where we need to make our voice much louder on this. David. I absolutely agree. The last three speakers. It was the only two. Thank you. Yes. Just to say that I agree. And the only thing is with the policy of engagement with consequences, we have to be actually clear when those consequences are going to apply. And that's the bit that I find difficult to actually put into words. And I would say that unless we're black and white, as to when we're going to apply those consequences, and they don't really have any impact, and this would be a good example really of implementing that policy. I thank you, Committee, for making those points, which I think build on what you're saying in generalities about this back in December. I won't ask for Board of the Coast to respond here and now, but I will ask officers to follow up and have a dialogue and report back to the Committee. I hope that's satisfactory. Thank you. Thank you for your question. Thank you, Chair. With the Chair's permission, could I turn off the mic and just stay here so I can hear the meeting on headphones? Would that be acceptable? Yes, of course. Yes. Thank you. So, let's move on to Item 5, page 23, glossary, action tracker and forward program of work. Neil, over to you. Yes, thank you, Chair. Take the actions tracker as read, unless members have any particular comments on that. In Annex 2, which is page 29 of the electronic pack, I just wanted to elaborate a little further on our forward program of works. Firstly, obviously the Committee's approval or not of the strategic plan and budget is a contingent on us slotting in other areas of work later in the year and planning towards that. So, this forward program will be captured more comprehensively in our June meeting. I also wanted to highlight that we have, as members will be aware, postponed our discussions on investment beliefs until such time as we are aware of the Government's positioning. Because that will have a material effect on the circumstances in which we will be able to define our investment beliefs and it will clearly have a very high impact on our relationship with border to coast. How we define with border to coast what our investment beliefs are, both as a fund and within the wider partnership. I can't give you any clear indication of when that will be, although I expect something to be in the spring statement. I do expect a pensions to bill to be consulted on later in the year and I would propose when we are aware of the details of that consultation that we can then plan for these sessions. So, George, we'll come to you in a moment. So, Neil, we'll have the session, which I guess will be a whole Committee subgroup, on investment beliefs and how would that lead into the investment strategy and relate to the actuarial valuation. Could you talk about that? Yes, the investment beliefs is the cornerstone of how we build out the investment strategy. So, although the areas are co-aligned, it is the investment beliefs which is the driving force of that. So, the investment beliefs will be interpreted into the asset allocation alongside the actuarial valuation. Thank you. George. Thank you. I also wanted to ask about that exact item, which is the responsible investment update. I think it's worth noting that, as it states, the key issue was that we were going to have a meeting to discuss responsible investment and investment beliefs, but in particular that the topic of divestment was due to be considered at that meeting, which feels very timely given the conversation we've just had. But I'll point out, obviously, that that meeting and where that was requested was June 2024. Our next meeting after this one will be June 2025, which is a year on. Now, I do completely appreciate the point that we're waiting to see what the government's going to say about the future of pooling. There's like a government organization or the rest of it. And so I can sound reasonably excited to potentially delay a little bit to have a better clarity as what's going to happen or what the shape of things to come may be. However, investment beliefs are investment beliefs. Our ability, we should be able to state what our beliefs are and discuss what our beliefs are and what we want to see in irrespective of what is possible. Because once you can you set out what you want to do, then you see what is possible and you and you cut your you cut your cloth accordingly. We don't know what's going to happen with pooling. We don't know what's going to happen with the government organization yet, but I'm not entirely sure I quite see an argument to keep to delay continually a discussion, which is simply discussion about principles, not about practical implementation. Practical implementation is always going to have to be subject to what is possible. But the actual discussion of the beliefs and what we are seeking to accomplish should be able to be had pretty much at any time. So I guess my perspective of I really would not want us to be in a position where we get to our next meeting in June, a year one from when this action was raised and still not have carried out. I think I think I'll leave out. I think I don't need a response to that. And I think I'll leave out offices decide to have a lot to handle that. But just my perspective, I think it would be a real shame if we got to June a year one without any actual progress on the action. I do recognize the point, but I think we have to. You know, I think the government response could be so overwhelming or restricting. And the white paper was very well, the consultation paper was really quite unclear in these sort of areas. So I think practicalities are important. But your point is made and taken. Thank you. No points from other members. Could I just suggest in the action tracker, Neil, that we move 1524 to green status? It was an update on how many members are using online. No doubt it will be tracked going forward, but I think we can take it out of this. So can I suggest we move to note the content of the report? I don't think we have any recommendations for local pensions board on this. And that we will monitor implementation of recommendations from previous meetings in annex one. And review in notes any change to the forward program of work in annex two subject to the comments we've made at this meeting. Does that agree? Thank you. So let's move on to item six, summary of the local pensions board. And I'm hoping that Tim Evans is online. Yeah, I'm here, Chairman. Can you see me? We can now. Thank you very much. Yeah, you can see me and hear me. See you and hear and hear you. So if you can present your report, please. I will. Good morning to you all. I'm following up on an interesting and stimulating discussion that you already had on a number of different points. But this report for the local pension board is actually relatively short, as I think reasonably clear. Most of it is business as usual. The first page, I think, covers things that the committee itself has already dealt with or has on its own agenda. So I won't cover those. I'm not going to read the report to you, but I will just highlight a couple of things that have come up on page 35. There's paragraphs 30, 31 and 32. It's nice to see the update on the general code of practice. I think we're getting towards the end of that. And that's good. The change management report shows that we were nominated for the defined benefit scheme of the year. That was going to happen in early March. I haven't heard that we won that award, so I rather have to assume that we didn't. But still, at least we were nominated. Paragraph 32 talks about the local government reorganization. But bearing in mind the question four that came from Luciana Cole and the discussions you already had on that topic, I don't think I need to add any more, apart from to say that this whole subject is clearly something that is on the radar for the local pension board, as well as as well as the committee and as well as the council as a whole. And I noticed that the Section 151 offer is here. So he's heard all the comments that have been made there. So I don't think I need to say any more about that. Moving on, I think a service delivery overview. Once again, I think we need to congratulate Tom and his team on the continuing improvement. This has gone on in the latest local pension board minutes show that that improvement has been continued. They only came out yesterday, so you won't have seen them yet. But there are a number of different areas that the thing is moving forward in the right way, which, of course, brings me to the the most difficult aspect of this report, as ever, the sting is in the tail. And it is Annex 2, which talks about the updates to my serie against something that's been on the committee's radar, the local pensions board radar and the council's radar, because it impacts so many aspects of the of the council's business, but very particularly the deleterious effect it's had on the pension funds. Nick and I tend to have a meeting once a month with Tom to talk of the updates as to where this was going. We passed on that meeting this particular month on the grounds that not much has happened since the previous one that we've had, but a great deal more was going to happen quite soon. And indeed, do I assume, Tom, that you're going to be able to report on that at this meeting? Because as you read through Annex 2 of the local pensions board report, you will see that quite a number of things are due to happen before the end of the month. And the end of the month is really quite close. Now it's March the 21st today. So I don't know whether you are in a position or have to have chucked a hot potato at you, Tom, but I don't know whether you are in a position to give us an update on that. And while you think about it, I would just say, although this particular report seems to be pretty much business as usual, we do still have, I think, three major issues that continue to exercise as we go forward. One of them is going to be LGR, which you've talked about. Another one is going to be my Sari, which we're about to talk about. And the third one is the impact, I think, on the administration of the scheme of the proposed changes to inheritance tax and how that will affect death benefits paid from the funds. So those are the things that I think are going to exercise us going forward on the local pensions board. But with that, I'll pass, if I may, to you, Tom, to see if you've got anything to say. Or if you're saying, not fair, Tim, you shouldn't have asked me this now, I'll come back to you. I think Tom is always prepared to talk about performance and where it stands. Thank you. Yeah, you don't need to invite me too many times. No, thank you, Tim. No, it's actually fine. So I can give a few updates. So I'll start on the, I think the last time we met, there were still some concerns over the data that was coming in from the county council and from our membership. I'm pleased to say that that is now fully up to date and we are now back on track of that being done in a live month. So we are back to an even playing field. The data is flowing through, records are being processed. Obviously, I think I mentioned there was a backlog caused by the fact that we hadn't had the file for close to a year. And that equated to about 2,100 cases, predominantly deferred cases where the members have left post. But the team have made some great efforts on that already in our three-quarters of the way through completing that work. So that's been really, really good to see. So from a data perspective, that's looking good from a member perspective and in terms of the casework. There is still some work to be done around the configuration for pensions in terms of how my Surrey is working. I am pleased to say that that is edging closer and closer to a full completion as well. One of the biggest areas that needed resolving was for the configuration for how the employer contributions were being calculated consistently. That has led to some work required where now there are members records over the course of, since the go live, of either missed contributions or the way in which the employer contributions haven't been calculated need to be resolved. There is a team now in place from Surrey County Council who are working on that and we are advising and supporting where we can. There is a considerable number of, you know, amount of money that's required to come in. The figure is in, you know, from an employer's perspective, it's somewhere in the region of one and a half million pounds. And then I'd say probably half that amount for employee contributions. So there is plans in place. We, again, we've been feeding into that. All the feedback and all the interactions we've had is all promising. So I think we are going to resolve, it is going to take some time to sort out the employee contributions. I know there's a plan there to communicate with those members who have been affected. But in terms of the employer contributions due, that's likely to start coming through in the next sort of two to four weeks because that is reliant completely on the configuration work. So once that's put in, it can be run back retrospectively and then we can start to reconcile that money coming in. And I would say there has also been progress. One of the biggest areas that we've now sort of highlighted and I think both Surrey Pensions and the Counter Council have recognized the size of the risk is on the accounting and the banking controls. So we have highlighted some areas where the system is still not operating in such a way that would allow us to carry out our reconciliation of our bank accounts and our invoicing and various other areas. That has now gone through a full period where the requirements have been fully documented, it's been fully understood on both sides. And we're now in conversation about what that looks like for a solution within the Unit 4 system itself. And the question we pose back is to the Counter Council which they are working on responses to provide us with what resources that would require to deliver that and some estimated timeframes and the costs so that we can have that discussion about how we take that forward. So I'm hoping that in the next sort of couple of weeks we'll have a bit more understanding of the timeframes and how that might look moving forward. Thank you. I would invite Andy, Andy Brown if you want to make any comments on this particular topic. Yeah, happy to Chair. I mean just to emphasize the importance I place on financial control and the financial environment. I won't go into detail around the history. You're probably more aware from a pensions perspective around that. But just to emphasize from my perspective the resolution of the employer contribution. So this is speaking with my Surrey County Council hat on is priority within the stabilization program. Tom and credit to Tom and the other Tom in the Surrey payroll team as well working together collaboratively to resolve this. We have put resources in to resolve that situation because that is an employer issue in terms of contributions and the backlog ever since the system went live. I am also aware of other issues that we need to resolve and Tom's mentioned those around the ledger, the accounting and the banking aspects. And this will play into LGR as well in terms of whatever solution looks forward in terms of unitaries going forward and what the solution is for the pensions administration and indeed the Surrey pension fund going forward. But we are working through those and it's on the list in terms of stabilization and moving into optimization, which we will be next month as we go forward. And then those issues will be inevitably put on the LGR aspect as well because we will be having to look at potentially what that involves with our district and borough colleagues as well. But just to confirm and exactly what Tom has been saying, that this is a priority in terms of the pension contributions for Surrey County Council. It is a significant financial impact, but there's also reputational aspects in terms of those employees that we will need to contact around their contributions and ensuring that that is accurate going forward. But a significant amount of resource, one-off resource, has gone in to resolving that issue from the County Council. Thanks, Chair. Thank you. 31st of March is a very important date. It's the date we do actuarial evaluations as of and we extract the data for our actuary. And it's also the date for submission of the same data for annual benefits statements. So are we, from what I'm hearing, we're in a good state in relation to those two aspects. Do you want to talk to that, Tom? Absolutely, yes. So from a valuation perspective, I've had discussions with Stephen, who's here, obviously, around the fact that there is that slight deficit that we're aware of. But obviously, if that money is to come in soon, that will probably make that a slightly different approach. But I don't see that the money side of it playing too much of an issue and I think Stephen is quite clear that that will, that we can negotiate that okay. From a data perspective for year end, there are, I foresee there still to be some issues in some of those records because they are yet to be reconciled from an individual member level. So as an employee of the Council, if you've suffered an issue with your contributions, it's likely that your, some of your care pay, for example, you know, your pension pay would be lower than expected. So, and there are still areas where that data is yet to be fully reconciled from the previous year. So they asked, it's likely that there will be some members who will not be in a position to receive a benefit statement this year. But we won't know that until later on and we will actually work with the reconciliation team in the County Council to give them a period of time where, as they're working through these corrections, we have agreed a process with them in which we can accept that data and interface that into our system in batches after the sort of date that we would start on the bulk work. So we will give as much time as we can to produce these, but I think there's probably likely to be some who are still in the similar situation to last year. Thank you. Finally, I think we should just acknowledge, and this is on page 36, the performance levels, we're at an overall 97 percent, which is extremely high and very creditable. So I would congratulate the team on that. And we also to comment on the benchmarking data, which was submitted in outline to the Board, I did probe into that. I think that's a very valuable source of information about improvements to the service in terms of where things are going well and where things need attention. So perhaps that's something that the Board might look at in the year to come. Happy to do so, Nick, but you will note that the CEM benchmarking has been uploaded to the governance hub on SharePoint, so everyone can access it. Thank you. So are there any other comments, questions? No. So we're asked to note the report and make recommendations if required. So I think if we can ask that the Pensions Board looks in its forward work program at the benchmarking data to draw insights, that would be useful, I think. So is that agreed? Thank you. Chairman, may I add something at this stage? Just to say that I've been working with you now, I suppose, for about eight years. I haven't really counted it back, either in the role that you're now performing or in my role as the Chairman of the Local Pensions Board. We've swapped over, as you know. So all I want to do is to say go well on your way after this meeting and thank you very much for all the support you've given me in both roles over those eight years. Or is it more? I can't remember. It might be ten. Thank you. It might be slightly longer, so thank you very much for those comments. Thank you. So let's move on to Item 7, the Pension Team Overview, quarter three. That's on page 41. And this is over to Neil. Thank you, Chair. You'll see an annex from page 45 in the electronic pack. That's the dashboard information that I also have been sharing with you. They're not weekly updates anymore. They're a little bit less frequent because I try to share stuff which is going to add more value. So do tell me if you'd like to hear from me weekly again. I'm more than happy to do so. Just to highlight a few areas. We're meeting our investment target, but our performance is below benchmark. We're 152% funded, and as has already been mentioned, the performance in the areas that really matter to our members is our performance KPIs in the Service Delivery Team. Which is well-nigh perfect. We've also reduced our legacy down almost entirely in the Service Delivery Team, and up to 82% now in our Accounting Governance Team. And we will capture the balance of that through the audit process this year. Our external auditors have now signed off our financial statements, so I can confirm that. I'm happy to take any questions, but it really is, as I say, is really just an overview in information some of you will have already seen in my updates via email. Thank you, Neil. Members? Duncan? Yes, thanks ever so much, Neil. I just wondered if I could have a little bit more explanation about paragraph six. Contributions in this quarter are lower. They're quite significantly lower, and as are the contributions out as well. And I just wondered whether unallocated receipts actually refers to and why they should vary by quite significant amounts. I don't know if you want to provide Duncan with some granularity there. Thank you. Yes, I can. So contribution receipts. We had the figure for the quarter three was lower than previous because we have, as it says, unallocated. So the money is sitting in the bank account, but yet to be correctly allocated into the ledger. So that accounts for it. And we're doing that catch up now in this quarter. So we should reflect an increase in contributions the next time we report at quarter four for benefits paid out. That came down to when I investigated that that came down to we had processed a lot more transfers out of member benefits. And those transfers themselves on average were higher than the previous quarter. So more work to do on the receipts, but the outgoings are. Reality. Yes, absolutely. Outgoings are as is and there will be what they will be. But from the allocations receipts, yes, we need to be allocating more of those as soon as we can. Thank you. Any further points? No. Thank you. So we're asked to note the content of this report. Is that agreed? Thank you. Let's move on to item eight, change management reports. Neil, you and your team. Yeah. Thank you, chair. The head of change management, Nicole Russell, isn't with us today. As we are talking about people leaving Nicole, this will be her last committee meeting as well, because she's moving back to New Zealand. But in her absence, I will just briefly go through some of the key areas in communications. Tim Evans gave you a spoiler about the pensioners age. No, we didn't win it. But an LGPS fund did win it. So it was a Northern Ireland LGPS fund. So the LGPS was the winner, as they say. In learning and development, we just want to let you know, we have issued and are currently collating the results of our pension fund team poll survey. It is the key area for driving our workforce strategy and the enablers for that. So we'll be bringing back a report to committee and board regarding how that has gone. We also had a talking talent session, which has been a really successful session in understanding the development requirements across the team so that we can build out career pathways in the team. We had that earlier this week, and it's been a very successful session. In transformation, we have appointed digital transformation support, which is currently going through some discovery work. We also think there will be some clear digital quick wins within our accounting and governance team, directly speaking to issues like the reconciliation that we spoke about. At the moment, we are having to work around some system issues with combat abilities. And finally, in our projects, we've completed a piece of work on customer insights, which has been filtered through. And the service delivery team and the accounting governance team are taking a board with regarding our member and employer engagement. And I'll hand over to Tom on the GMP progress. GMP has been a bone of contention for the whole of the pensions industry for as long as I seem to have been in the pensions industry. So, Tom, if you want to update the committee on where we are with that. Yes, thank you. I can just bring some updates in that. So, obviously, this was a piece of work that was related to the contracting out periods in which the government and ourselves had to do a comparison of our data around the liability. That's right, around the liabilities and to make sure that what who held the correct data and it was in the correct space. We've come to the end of that point where we've been able to do that and we've now written to all members who will have been affected by this. So that might be some cases where there was an underpayment of their pension. Now that this reconciliation work is done, equally there will be some who have incurred an overpayment. And so for those who are underpaid, that equated to 71 members, that was 43 pensioners and 28 dependents. And that was total amount owing of 177,000 which has been, will be backdated and paid in the March payroll. From an overpayment perspective, so just to be, just to note that this is quite some time ago, but the board and committee has agreed that we would make the changes to members payments going forward, but we would not recover any overpaid pension during the period in which they received that. So, but we have made changes to members records as of March. They were written to, with giving them a month's notice so they were made aware that the changes were coming. Some of that we would have liked to have done that earlier, but we were sort of dependent on a third party supplier in that case. But the total number of members affected were 305, 245 of those were pensioners and 60 of those were dependents. And that equated to 509,000. So, as I say, we've made the changes to their payments going forward, but we will not be seeking to recover any of that money from them. Could I ask if we've had any feedback from those members? Because I imagine being told your pension is going to be less going forward will be, will cause some challenges. We've had some queries come through our customer relationship team. We obviously gave them suitable information and so that they'd be able to hold those conversations and provide the necessary information. So, yes, we've had some. I wouldn't know off the top of my head actually how many that they've had specifically. I know there has been one or two that have come through to myself as you'd expect because one of them they were quite significant in terms of the annual amount. I think the highest one of all in total was equated to about 2,700 a year. So that one did find its way through to me through various routes in which we obviously provided information back to that member. And we're absolutely sure that we're now paying the right amount. We are. I mean, yes, so this has been, I mean, the hours and hours of effort from our offices to quality assure that data reconcile it, make sure they're comfortable with it. There are still a number of cases probably in, I'd say in the region of 600 to 700 that have fallen out of an exception that need to be investigated further to make sure, because the data supplied had some nuances which we felt that we wouldn't be comfortable using. So we will investigate those manually. And there are, there is a team going to be in place from April to take that work on. Thank you. So perhaps we can, the committee can have an update on that at the next meeting. Yeah. Thank you. Could I just draw the committee's attention to the consumer insights project, which is reported as complete? When I delved into it, I did find it very helpful indeed. And it was not bland, okay, or it was not, you know, we're not happy. It was very specific, and I think it would be extremely helpful to the pensions team to look at its processes and operations for employees as well as the employer population. And could I ask the committee to refer that to the pensions board again to use that data and receive reports on how it's being activated in the coming year, if that's agreed by the committee? So with that, we're asked to note the content of the report. Does that agree? Thank you. Agreed. Nick, Chairman, I heard that, so the committee will get it. Thank you very much. Thank you, Tim. Right. Let's move on to item nine, the communications and training policy. And that is, I think, Neil, you're leading that and you've got a couple of officers assisting you. Yeah. Thank you, Chair. The full policy is shown as a link, and we just really included the changes from last year. It's a requirement to have these policies agreed by the committee. Key changes I wanted to highlight. In the communications policy, there's been a lot of work by the communications team, and I think Beth is on the line, to ensure that we are compliant with accessibility requirements. So on our web pages, through our email documents, through our hard copy documents, we are now meeting best practice in that area. As regards to training policy, you will note to see we have, after consultation with the board and some changes to the way the language is on this, we have put in an escalation process. This is specifically dealt to support members. There is currently a statutory requirement for knowledge and understanding for the board. The proposals in the governance consultation will make that the case for the committee, too, and officers stand ready to support members in meeting that obligation. However, if they don't, then we will take measures to support them. And if they still don't, then we will have to take further measures. Chairman? I'm just going to pop in on that. Neil's comments, I think, about the training policy are very germane. It is absolutely essential that members have the training to maintain our status as a professional investor, and to be able to demonstrate that the decisions we are taking are done with due care and understanding of the subject. Thank you. I think this is the first time, we've always said it's mandatory, but I think it's the first time we've set out sanctions, so I think that's timely. Any comments from members on either of the policies? No? Okay, we're asked to approve the communications policy statement 2526, and to approve the training policy 2526. Is that agreed? Thank you. Agreed. Conflicts of interest policy, and I think Colette is going to deal with this. Thank you. Thank you, Chair. Yes, this report is presenting a pension fund specific conflicts of interest policy, which has come about as a result of change in the terms of reference for the committee, which were to consider and approve an annual conflicts of interest policy. So the policy will apply equally to all parties involved in the administration, management and governance of the fund going forward, as detailed in paragraph four of the policy of the report, sorry. The policy in particular wanted to recognise the differences between Surrey County Council as the administering authority of the pension fund, and as one of the largest, one of the employers in the fund, albeit the largest employer in the fund. The policy has been presented to the local pensions board for consideration and noting, and the policy is attached at appendix one for any comments, please. Thank you. George. Thank you. I was just going to note that in some ways it's quite charming to have this given the conversation at the start about conflicts of interest. What I do find, and I think what is quite helpful in there is the form which appears on page 83 of the pack or page 89 of the PDF pack, which is sort of a declaration to be completed by officers and by members. I think it's quite helpful. And I mean, but what do you know about this is actually a lot of the things that we've been treating as a not necessarily worth declaring as conflicts of interest, technically speaking, are conflicts that should be declared under this policy. So I think actually moving to a position of just having a single register done once a year is a lot better than having to do it manually at every meeting, which in theory we are meant to be doing. So it does seem very sensible and presumably once this is adopted, these forms will be circulated to all of us to fill in, I presume, Neil. I can see Neil nodding, so yeah, thank you. And I'll add to that that I think it's very important that actually there is a publicly available register that can be checked in relation to this. It's an important facet of the process, so I think it's very welcome. Good. Can I just draw attention to one change we made in the preliminary session? It's on page 84, question one. It's asking you for a receipt of an LGPS pension. Well, the form is being revised, so if you're a member, an employer, an employee, or a deferred member, so any status of member, not just those receiving the pension, that will be declared. So I see no more hands up, so is that agreed? Agreed. Thank you very much. Moving on to the actuarial updates, we have Colette. I think we're going to provide an introduction and then Stephen building on his appearance earlier in our training session. So Colette, first of all. Thank you, Chair. Yes, this is a cash flows report. The committee previously agreed to receive an annual review of the cash flow position of the fund. And you should recall that at the last review, which was actually December 2023, the actuary reported that the fund was looking to become cash flow neutral in the financial year 2023 at that time. And however, now it's looking at being cash flow negative by 2028. Annex 1 has all the details. And as Chair, you've just stated, Stephen Scott, our actuary is in the room and can answer any questions on the slide deck. Thank you. Thank you, Stephen. Thank you, Colette. Thank you, Chair. With your permission, Chair, I might just spend a few minutes giving an overview of the advice that I provided. So this is a regular update that we provide to the committee on the emerging cash flow position of the fund. What we do is project forward the future contributions that we expect the fund to receive and compare that to the projected level of benefit outgo in order to determine whether the fund is cash flow positive. That's where contributions are in excess of outgo or cash flow negative, where the benefit outgo is in excess of contributions. If we look first at page 94 of your pack, what I'm showing here is the cash flow position over the last three years. So looking over the position from the accounts over the last three years, we can see that over that period, in each year, the fund was cash flow positive. And that is contributions and transfers in, that's the pink and the yellow bars, were greater than benefits paid out. That's the green bar, and transfers paid out. And what that means is that the fund were able to pay pension benefits without having to rely on income from the assets and indeed having to sell assets in order to pay pension benefits. But what we can see from this chart is that there has been a reduction in that net cash flow position, and that's largely due to two factors. First of all, the effect of inflation on pension benefits. And we saw a high pension increase order in 2023, that was 10.1%. And then again in 2024, a pension increase order of 6.7%. So benefits payable to members has increased in recent years. And on the contribution side, in response to improvements in the funding position, at the 2022 valuation, we've started to see a reduction in contributions payable by employers. And we'll expect to see further reductions in contribution rates following the 2025 valuation. So the fund, as Colette mentioned, is approaching this position where the value, the amount of contributions paid in to the fund will be lower than pension benefits paid out. And so in a position where it needs to think about realizing income from assets in order to pay pension benefits. There are two key factors that influence the position. First of all, future inflation, and then future contribution rates. So what I've shown on page 97 is just a summary of the different inflation scenarios that we've used for the purpose of preparing this analysis. We've looked at three scenarios. The baseline scenario is the first one to explain that's really just a market consensus for future inflation. A slight bit of volatility in the short term, but then trending to 2% per annum going forward, which is slightly in line with the Bank of England target. We've then looked at higher inflation scenarios that could arise due to a number of reasons, not least some of the geopolitical concerns that exist at the moment and the possibility of trade tariffs coming in. And then also looked at what the effect would be if we saw a lower level of inflation than the current market consensus. And what I'll show shortly is the effect of that on the future cash flow position. The key thing to note is that these inflation scenarios affect the projected benefit outgo. So they have no impact on the assumed level of contribution income. We're assuming that the payroll assumption is constant under each scenario. On page 89, sorry 98, I've set out the different contribution rate scenarios that we've modeled. Now, no sort of extrapolation from this to the actual level of rates reductions we'll see at the 25 valuation should be taken. What I've simply shown here is a different level of reduction under these three scenarios in order to provide an indication of what the future cash flow position may look like under different levels of contribution rate reductions. First of all, looking at a phase 1% per annum reductions over the next three years, then a phase 2% per annum reductions. And then for information, I'm not expecting to set rates in this way, an immediate one or 5% reduction in contribution rates so you can see the effect that that would have on the emerging cash flow position. If we look at page 100, we can see a projection of benefit outflows. So this is based on the current valuation data, looking at the benefits expected to be paid out over the next 20 years and split between different categories of members. And this, for the avoidance of doubt, includes future service that's still yet to be accrued by active members. And we can see the funds currently paying just over 200 million pounds in benefits, yet in 20 years time I would expect that to increase to about 375 million pounds in benefits. But that's uncertain because we don't know what future inflation will be. If you look at page 101, we can see how the benefit projection could change depending on the different inflation scenarios that we presented. Now, some of these scenarios may seem quite extreme, but what you can see from this analysis on 101 is the variability in future benefit payments. And the point here is that the future sort of cash flow position is highly sensitive to future levels of inflation, as we've seen over the last three years. If we then look at 102, we can see the projection of contribution income, shown by the pink bars, split between employer contributions and employee contributions. In this projection, we're assuming a full replacement of active, so no change to the size of local authorities, and that payroll increases in line with the assumption set at the valuation. So let's combine both of these charts. If we look at page 103, we can see the baseline position. So this is based on the market expectations of inflation, and it's assuming no change to contribution rates going forward. And what we can see, you know, for the next 10, 15 years, very, very broadly, the fund is cash flow neutral, okay? In some years, benefits may be higher than contributions, and other years of converse may be true. So, you know, very, very close to this position of cash flow, sort of being cash flow negative, I'm not concerned about the fund's ability to generate income to meet the cost of benefits, but clearly the fund needs to have a process in place in order to make sure that it can realize cash if it has to, in order to pay pension benefits. If we look at pages 104 and 105, we can see the position under different inflation scenarios, and what I'll do here is highlight 105, where we can see the high inflation scenario. Clearly, if we see higher inflation, that will lead to higher pension benefits, and, you know, the fund entering into this cash flow negative position where income would be required from the assets in order to meet pension benefits. But even under this scenario, the income yield required is about .9 percent, or the maximum income yield required is about .9 percent over the next 20 years, and I would suggest that the fund would be able to invest in a way in order to generate that level of income if it was required to do so. Moving now on to the contribution scenarios, you'll note on page 107 that the benefit outflows are unchanged, so, you know, level of contributions clearly doesn't affect the benefit outflows, but then on page 108 and 109, I'm starting to show the effect of lower contributions on the contribution projection. Scenario 1 on page 108 has been a reduction in rates of 1 percent per annum over the period from 26 to 29. We can see how projected contributions will be lower compared to the baseline position of the dotted yellow line, that blue line. Scenario 2, a higher rate of reduction, so 2 percent per annum reductions, a much bigger gap opening up, and then on page 109, a 5 percent one-off reduction in contribution rates in 26, 27. You can see the significant gap that opens up there in terms of contribution income. In effect, what would be happening there, contribution rates would be cut by about 20 percent, right? So 5 percent of pay is about the same as reducing the income back from employer contributions by about a fifth, okay? So that would be a significant reduction in contribution income. What I'm then showing on page 110 is the combination of that. So we're looking at, first of all, we're looking at the sort of benefits under the sort of baseline inflation assumption, the market consensus, but then applying those 1 percent phase reductions in rates, we can see that leads to the fund being cash flow negative in the medium term and an income yield of no more than half a percent being required based on that projection. Again, I think I would be comfortable in the fund's ability to generate that level of income. If we apply 2 percent reduction in rates, we can see the income requirement being greater. So, you know, it's still below 1 percent income requirement, but the point here is that if there is a reduction in contribution rates at this valuation, the level we're showing here, then it will mean the fund will need to generate income from assets in order to pay pension benefits. And then on page 112, you can see the results of that immediate 5 percent reduction in rates. And I've gone through that quite quickly. My final page is 114 in terms of next steps. I expect the committee will continue to monitor the cash flow position. This is now something we do on an annual basis. So this time next year, I can come back and explain what the position looks like following the valuation and confirmation of those rates, also considering what inflation is looking like at that point of time as well, and then we have a better understanding of the effect of some of the sort of trade policies coming out of the U.S. by then as well. Any questions on any of that? Thank you very much. That's very interesting. One of the things that is a worry from the direction I'm coming in is there will be a significant drop in the number of people employed in local government in the future. And I just wondered whether you could say a little bit. I mean, you mentioned the impact of that, but that perhaps expands a little bit on that as it is a concern, I think, that going with the various reorganizations that we're all aware of at government level and our level, that there will be a reduction in the number of people employed and therefore contributions. Yeah. Thank you for asking that question. You're right. That would be really significant. And what that would do is it would reduce contribution income, but it wouldn't have any impact on benefit-outgo, or at least it wouldn't reduce the benefit-outgo. Those benefits have been promised to members. They've been built up over time, and those benefits will still be paid. In fact, what it could do in the short term is even increase benefit-outgo if those members are made redundant. If they're taking pensions early, then it could accelerate some of that pension benefits. So in a scenario where we see any reduction in local authority employees, then, yeah, that would have a detrimental impact on the cash flow position. Once we have a better understanding of what things may look like going forward, then we can model that and come back to the committee. Yeah, certainly that's the case. Thank you for the question. I've got George next. I was going to make a comment on the exact same issue. I think local government organization does mean that obviously staff numbers will presumably continue to decrease, and that therefore presumably we will increasingly find ourselves in a cash flow negative position going forwards. Although, with that being said, I think my understanding is that whilst it's probably a bit premature for us to be able to model what that will look like, most pension funds over the very long term tend to end up in a cash flow negative position towards the end of it, because once you stop, once you have fewer people coming in than you have going out effectively, then it's only natural that over time you start winding down the size of pension funds, because obviously we don't need to be worrying about meeting our future obligations to our members. So if we go from, say, having 1,000 local government employees in the county to 500, then in the long term we'd assume that we'd be looking to reduce the size of pension fund by half once obligations are paid out. So it feels to me as though, well, it's going to be an interesting transitionary period for the fund. It doesn't appear on the face of it to me to be anything to be particularly worried about as long as we manage that transition well. Thank you. Nolan. Yes, question for Steve. Have you modeled any models being done where the number of sort of employees being reduced that you get the point where you get negative cash flow? So, yes, I mean I think given that we are expecting to see a reduction in contribution rates at this valuation, I'm hopefully quite clear in saying that from 26-27 the fund is highly likely to be in a position where benefits are in excess of contribution income. So the fund is going to have to move to that position and start managing that appropriately, and I know the officers are thinking about that. Any reduction in the workforce would then exacerbate that, right? So it would then increase the gap between contributions and benefits. And so once we understand the effect of this sort of devolution, local government reorganization, we need to understand what that means and, yeah, the fund will need to be careful in terms of making sure it can generate the income required to pay pension benefits and continue to monitor that going forward. Yeah, I'd just like to note that the state pension itself is suffering from some of the same things in that the pension payments required are rising all the time. But the number of people or the proportion of the population of working age supporting that pension has dropped. As a result, they are being forced to raise the state pension retirement age and are now talking about raising it as far as 72, which I certainly find scary because I'm 72. Yeah, we could reach the point where we're obliged to go back to work, but it's got an obvious impact in terms of cash flow for people as they reach that sort of age. And that will also have impact on choices made at retirement in terms of pensioners. So I think it's something we need to watch very carefully. I don't know if you have any comments on that, Stephen? I'll just make one comment. So it's certainly the case that that's an issue facing the state pension age, but as Councillor Porter mentioned earlier, this is actually a perfectly natural position for a pension fund to be in, to be in that position where benefits are in excess of contribution income and it's simply a matter to be managed going forward, looking at income and making sure that the investment strategy reflects the income needs of the pension fund. I wouldn't be overly concerned about things in the short term. Thank you, Chair. I'll just come back to Duncan and George's point as well. Regarding the situation, if members of the scheme are made redundant and they are of pensionable age, they will be entitled to an immediate non-reduced pension. But the employer will face a capital, one-off capital cost to fund that. So the effect on cash flow in the short term will not be detrimental. I just wanted to make a comment. I mean, when you go into a contract that you're going to be retiring at 7-8 and if that retirement age is changed, it's a real concern for the working person. I think there should be a rebellion against any change in the state age pension. We'll note that, but it's sort of above our pay grade, I think. I mean, there's no signs of the government amending the LGPS along those lines, as far as I know. So can I thank Stephen on your behalf and ask that we note this report? Thank you. The strategic plan, item 12. Over to you, Neil. Thank you, Chair. I won't go through the preamble. It's made up of two parts. It's the launch of our strategic plan for 2025, which is essentially the third year of our three-year transformation plan, where we sought to transcend and move the pension fund from transformation into continuous improvement. I draw attention to page 129 of the pack, 135 of the electronic version. This really brings out how our emphasis will be on customer focus, so a real emphasis on customer focus. That's what I like to call my rocket. The three pillars of how we enable that is through compliance, making sure we are effective for today and we are also ready for tomorrow. And the sort of boosters at the bottom continue to be our people, our systems and process, the communications and our culture and values. I'll just briefly hover over that particular diagram. In compliance, it's ensuring best practice, while meeting the stuff that we have to do, our statutory obligations. A few examples of that will be how we respond to the pension reform outcomes. There will be compliance issues with that. The continued ask from the pensions regulator in their new general code of practice and making sure that we are compliant with that across the piece is a huge piece of work, which continues to be ongoing. And then the regulatory changes, some of which we've already spoken about today, i.e. GMP and the cloud and then there's the pensions dashboard project. Improving our readiness for how we do things today is changing that emphasis. We have transformed, we do move to continuous improvement and we need to improve our effectiveness and our efficiency across the piece. Customer insights is going to drive that, so I really welcome the recommendation of this committee for us to work with the board on that. We will also be required to align our asset allocation and continue to review our key policies and strategies. We've already spoken about some of the issues in the account and governance team and around reconciliation. Our financial controls will need to be enhanced, that is a clear priority of the team, as well as data management and overall overarching continuous improvement. And then the third pillar is improvements for the future, making sure that we have future fit, that we have horizon scanned and that we're a confident organization with resilience and we have agility to meet change head on. Key amongst those areas are digital innovations. We've mentioned already today, but we need to be ready for whatever local government reorganization brings that there are key elements that will come to in a paper later, irrespective of the structure in which we are residing. Customer engagement is forefront all of this. We have improved our service standards to our customers beyond recognition over the last two to three years. What we need to now do is delve deeper and actually find out specifically what it is our customers want and are we delivering that. And we can be an absolute industry leader in that. Our relationship with Boulder to Coast will change, our partnership will change and we need to be able to pivot and ensure that we are providing oversight where it's appropriate, collaboration where it's appropriate with the 12 partners. That's the 11 partner funds and Boulder to Coast. And finally, it's ensuring our investment beliefs, I firmly believe, will drive our relationship, our investment relationship with Boulder to Coast in the future. It's clearly the direction of travel that the government intends and we need to clearly articulate our beliefs to enable Boulder to Coast to implement them within their strategic and product range. I'll pause there on the strategic plan. The slide that goes into more detail into how this is allocated through different service areas. I'll take any questions on this. Members, no? Carry on, Neil. Okay. So if we move to Annex C, which is the budget, there is a total operations budget of 7.2 million. And the main variables on last year's budget is inflation increases in pay and a small change in head count. We've also fully realized bringing the IT systems into direct cost and that acknowledges the new contract cost but also the cost which we recently brought into this budget which is of hosting. So we have our service providers host as well as provide the actual system. Previously, that was a recharge through the county council budget. And also, we have left some project cost in the budget assuming there will be the number of projects we've already mentioned, chiefly amongst them, local government reorganization. If you need any further questions on the budget, Collette is online. She stands ready to take them. Please. Just one general question. Thank you, Chairman. Do you benchmark your costs against other funds of similar sizes? Yes, we do. We also benchmark performance. There is some work you can see in the data room, the governance room on the CEM. There is also a statutory requirement to provide a SF3 report which provides a comparison across the LGPS universe. I would have to say that it's a bit difficult to ascertain specifically a good comparison because the data input points vary across how different funds allocate costs. I wouldn't like to say whether we're upper quartile or lower quartile. I think we offer extremely good value for money for our customers and a good service. And that would mean we were not the cheapest and I wouldn't want us to be. This was the benchmarking report I referred to earlier. There are lots of data points. I've seen previous schemes of comparisons and they've been frankly of no value whatsoever. But I think it's quite insightful. And while you might say, well, is that right? Apples and apples? I think collectively it's quite a valuable thing. So our request for the board to make use of that I think is quite appropriate. Ah, sorry, Duncan. Thanks ever so much. Yes, thanks very much indeed, Neil. That's very interesting. And I just noticed the IT costs. Obviously that line has increased quite significantly and that's because we're now hosting or you're now hosting a lot more of the systems than you used to. Is that right? I mean this is a significant increase, isn't it? Well, yes. So back in December 23, I think it was, we've moved to a hosted service to improve those controls. So it's been like that for the last two years now. But that's why you'll see some increase across. Also there's some additional functions we took on for compliance purposes, which included the GMP side of it, the cloud, and soon to be the dashboard as well. So that does lead to some of those increases, yeah. Duncan, there is the offset in the IT services line immediately above. So that offsets much. I'm just going to note the recent IT changes and local job organization may result in yet another set of IT changes and the impact of those. And so I'll just raise a word of caution that it's something that will need a lot of attention to make sure that the risk is managed because I think we're all a bit fed up with the risk from changing IT systems. Certainly I think the disaggregation elements of the County Council and then the integration of boroughs is going to be a significant challenge in the coming year. I think I would refer to disaggregation as aggravation. Any more comments on that? If not, committee to approve the strategic plan for 25-26 and to approve the team budget for 25-26. Is that agreed? Agreed. Thank you. Lloyd, you haven't said very much so far. Over to you, item 13, investment management performance and asset liability update. Thank you. Thank you, Chair. There's a few elements in this paper this time around. To start with, it's this time of year when we do the allocations to the border to coast private markets program. And this year there's a new series, series three, and these series last for about three years. Only one real main change and that is an increase in the target return for private credit which has increased from six to seven percent. What we try to do with our allocations is to make sure that they can stay stable over the three years so that we can avoid sort of vintage variation and get an average return. And so in arriving at these allocations, we've modeled out, well when I say we've modeled out, obviously I mean Mel has modeled out for the last eight to ten years. And we're trying to hit our target returns on about years four, our target allocations in years four, five and six. So the targets for each of these three flavors, infrastructure, credit and private equity, we're targeting six percent in infrastructure and private credit and five percent in private equity in line with the ISS. And that has resulted in a subscription of 40 million to infrastructure, 30 million to private equity and 85 million to private credit where historically we'd under subscribe to private credit. So there's a bit of catch up there. In terms of the standard paper, you know, we always produce the funding ratio 152 percent but we've already spoken enough about how that will change in future. In terms of the fund performance, the quarter was a strong quarter in absolute terms, nearly three percent, but you will see that it was behind benchmark. The two main drivers for that underperformance were the border to coast global alpha fund and the border to coast multi asset credit fund. We're going to be talking about both of those later, the global alpha in part two. And in the asset class review, we'll be talking about Mac so we can come back to those at a later stage today. There were some offsets and perhaps most interesting is signs of life in real estate, where at the end of last year, all of the different asset classes within real estate started to see some improvement in values. Whilst on real estate, the other element to raise this time is about the real estate benchmark that we're using, paragraph 65 to 68 in the paper. And what's happened is that historically we've had a MSCI provided benchmark. They've actually imposed quite a high price increase for that benchmark. And it's coincided at the same time with the benchmark potentially becoming less reliable given some of the dynamics that are happening in the real estate industry at the moment. And at the time when we're about to start transitioning to border to coast and so that benchmark will become less relevant to measure CBRE with. And so the proposal is to move to a straight absolute 6% return target to make sure that CBRE are focused on maximizing value on that transition into border to coast. And of course, depending on opportunities, the portfolio could become quite unbalanced over time. So the proposal is for a 6% absolute performance target for the next year. And then probably another review in a year's time to see if that should change further. I'm happy to take any questions. Members? Anthony. Thank you, Chair. This isn't a question really. It's an observation. In the training session earlier, Stephen was asked with us now, but asked a very reasonable question. Do you track the performance of what you say and what the fund was? And paragraph 34, which is the table on returns, now this data is not contiguous. It's not for the full three-year period. But if you look at the three-year rolling period of 30th of December, the fund's return was 3.9%. The benchmark return was in round number 6.4%. And the actuarial expectation or requirement for performance to deliver the promise in fullness of time was 4.4%. And whilst our strategic asset allocation should have comfortably delivered Stephen's objective three years ago, the actual fund return was some 50 basis points below that. So it does flag up the importance of the kinds of uncertainty which Stephen was mentioning in the training earlier and in the cash flow analysis. And I just wanted to flag that up as something which I found interesting, at least. Any further comments, questions? No? Okay. I'll take you to the recommendations. They're on page 139 to note the findings of the report in relation to the fund's valuation and funding level, performance reports, returns and asset allocation and to approve the delegation of authority to the executive director of resources, the LGPS senior officer and the chair of the pension fund committee to invest in series 3A of BCPP private market fund subject to necessary conditions being met. And three, to agree the change in the CBRE real estate benchmark to an absolute 6% per annum return. Are those recommendations agreed? Thank you. So let's move on to company engagement and voting. And I think Mel is going to take this item. Welcome. Thank you. So this quarter the LAPFF engagements were most prevalent in STG 10 which was the reducing inequalities and 16 peace, justice and strong institutions. Engagements included 24 meetings, 38 transition plan responses and 94 letters to constituents of the FTSE 100 regarding conflict affected in high risk areas. The transition to electric vehicles is one where conflict affected high risk areas is considered and some good progress has been made in that automotive industry. There are engagements with Mercedes, Ford, BMW, Volkswagen and General Motors. And some examples of success include better reporting on more raw materials, supply chain initiatives including education and audits and accountability with mineral resourcing, mineral sourcing. It was also reported that Volkswagen has now decided to exit its joint venture in Xinjiang. Sustainable airline fuel continues to increase in importance and engagements with Wizz Air and IAG have reported some long term supply agreements in place and specific targets for using this type of fuel. Airlines do account for 2% of the global carbon emissions. Moving on, Robeco has introduced a new theme for 2025 and that's ocean health. It focuses on the three sectors of seafood, shipping and cruise lines with sector specific goals and companies are expected to set out high level climate and biodiversity ambitions with quantifiable and time bound roadmaps. The fund is aware of increasing global commentary about the nature of ESG integration into the investment decision making and general pushback. Border to coast are involved in this debate and they continue to monitor the situation and someone is here today to comment on that and we will do that after I mentioned the voting. So during the quarter, the fund voted at six meetings on 79 resolutions and voted against management on 33% of those resolutions. It voted against management on all of the audit and reporting, remuneration and sustainability categories. And all of the resolutions in the sustainability category were proposed by shareholders which certainly voted in favor of all of those which requested more enhanced reporting and transparency. With that, I will open it up to questions before we turn it over to border to coast to talk about the ESG. More of an observation I feel that it is our fiduciary duty to speak up and where necessary take action as we discussed earlier to protect members' investments. I very much welcome the infections that we have made but I think the statement is that there are times when we are going to have to be robust rather than just saying we don't like you but we actually have to do things every now and again. Thank you. George? Thank you. I think just a comment I wanted to make on this is that the engagement in particular with the vehicle manufacturers I think does quite clearly illustrate the value of successful engagement of how actually engaging as shareholders can have a material impact in the actions of companies in ways that support and accomplish our responsible investment goals. So I think and the same actually for financial institutions mentioned as well which I think is really positive and it's really encouraging to see how engagement can pay off and does pay off in many cases. I won't repeat what I said earlier but I think it's just worth noting that again the contrast could not be more stark with some of the sectors where many years of engagement has not led to any change. Well, it's not even led to zero change, it's led to the opposite of the change we're hoping for. Which again, I'm not going to show you the point I made earlier but I think it is in just contrast of how engagement can work successfully which should be contrast with cases where it quite clearly is not working at all. Thank you. Lil, back to you. So that's all from me. I'd turn it over to Milo or Tim to discuss their involvement in the... Yeah, thank you. So I'll pass it over to Tim and I guess we'll specifically comment on I guess views around backlash that we are seeing in the US around ESG specifically. Tim. Okay, thanks Milo. This is mostly going to be an observation of what's happening at the moment and just a quick update on what we're doing. So I think the political landscape's clearly changed, a lot of that is coming from the US since President Trump's come into position. Then there's a number of high-level announcements that he's made including removing the US from the Paris Agreement, removing pro-electric vehicle policies, freezing offshore wind development and in general shifting the balance in terms of the energy policy in the US to be one more focused on fossil fuels. I think how that's translating into what we're seeing across the industry, probably most prominent would be large financial institutions, especially those with ties to the US. What we've seen is them exiting climate alliances, the Net Zero Banking Alliance, Net Zero Asset Management Alliance and Climate Action 100. Some of this activity has been, you know, there's been a lot of these exits, some of it has triggered a number of those initiatives to really sort of pause and rethink what they're doing. In particular, the Net Zero Asset Manager Initiative has suspended all of its activities to undertake a review of whether it is fit for purpose or how it can be fit for the future. Now, what we are doing is we are talking to industry partners, including some of the external managers that we work with who invest the money in some of your funds just to understand what this means for them. What we're hearing back from them to some extent is they are facing significant, sustained and concerted legal action, which is both creating a distraction for them as organisations, but also costing them a significant amount of money. And often it's the legal action, if you like, or the threat of legal action that is sitting beneath a lot of the actions that they're taking. There is pressure from both lawmakers at the federal level and at the state level. And, you know, a lot of the arguments that are being put forward are that these financial institutions, if they act through collective frameworks to put forward expectations around climate, then they may be acting in breach of antitrust laws. So it's a very difficult environment for some financial institutions to operate at the moment, in particular, those with strong ties to the US. It's still, I'd still say it's early days. To some extent, what we're seeing on the ground is obviously the headlines that are most prominent are some of the presidential orders that are made. But what we're seeing on the ground is how some of that is beginning to get implemented. So an example would be that for large investors, the SEC issued some guidance recently on an updated interpretation that created a very onerous disclosure requirements if large investors engage actively on ESG issues. So to some extent, the asset managers that we're working with and ourselves are still judging the best way to address some of these challenges. I think there's still some road to go on this as we see other presidential orders be put into practice. But what we are doing is making sure we're close to the market, making sure that for all those external partners that we do work with, the external fund managers, that we're really emphasizing with them the importance to us and to you of long term climate commitments. And what we don't expect is that or what we do expect is that even if they are withdrawing from these initiatives, that we still expect them to deliver on some of the climate objectives that we have agreed within the bandaid that they invest for us and you. And more than anything, making sure that in this environment, which is making it more difficult to be a responsible investor, you know, we're making sure that the voice of long term investors is heard among all the voices that are out there. Thank you. George. I want to comment on this because I think what's just been outlined is probably the biggest challenge that we are likely to face over the next few years in terms of 2025 is going to be a year like 1989, where geopolitically the world shifts significantly in a very short period of time. What is touched upon, what's happening in the U.S., setting aside any particular political opinion on that, is a president who has been issuing presidential orders, which in most cases don't just simply lack constitutional authority, but actually contravene the Constitution. We've seen in the past week, literally this week, we have seen a presidential order issued trying to target a legal, a prominent legal firm for having acted in a legal case against the government, the result of which has been the management of that legal firm backtracking, withdrawing themselves from the legal case and offering 40 million dollars' worth of free legal services to the U.S. government as effectively strong legal frameworks, robust regulation, etc. and the exact opposite in every possible regard. Those two things are not reconcilable, which means, I suspect, as reference, we are going to see effectively major institutions, financial institutions, companies, effectively having to choose which camp they want to be in and having to make drastic changes to operations to align with that. I think it's very difficult to judge what on earth we should be doing to react to that as a pension fund. But what I am somewhat, I think, from my biggest concern about it is that in what is proving to be a very, very, very fast moving situation, when we were only meeting once a quarter, which I think is normally sensible, is do we actually, will we actually have the ability to act quickly should we need to? I don't think we're yet at a point where there's anything to react to beyond what's being done so far, continuing to engage, continuing to lobby, continuing to assert our position as investors. But it is certainly within the realm of possibility that we could see some quite major impacts on the robustness of our investments and in terms of direction we need to be taking over the course of the next year. I'm just curious in terms of what our ability would be and what boards coast's ability would be to respond to that rapidly should there be a major shift in the situation. Let's ask that question. Tim, should I pass it to you or not? Yeah, so I think there's two things you said there that do resonate. One is this is definitely a real time situation. Yeah, I think we've already seen a lot of change, but we should probably expect more change to come. I think what you and we have the benefit of being a longer term investor is what happens over the longer term that matters. Now, what I would say is the implications of everything that is happening in the US is that there is an investment market implication. So tariffs, trade barriers will have an impact on different sectors and different companies in different ways. And what you do have is investment managers who are thinking about that on a daily basis. And it's really their job to think about how they can best make the most of the opportunities that come of that and protect against the risks. That is not your job as a committee. That's the job you delegate to those investment managers. So from an investment point of view, that's some comfort I think you can take. There is this wider, more sort of thematic shift around the attitudes towards climate risk in particular, but other sort of ESG related topics as well. I think, again, what has come back to is we are long term investors. It is a real time situation. What we are doing is staying close to industry partners and other contacts to understand what is the best way that we could respond in that moment. But I think what we would try and avoid to do is be constantly responding to the flavour of the moment. So be aware of the issues and what our potential path could be and perhaps sort of no regret actions we could take. But I think given that the situation is quite volatile and sort of ever changing, there's as much of a danger of doing too much as there is of doing nothing in that moment. But we are doing what we can to be best appraised of what's going on to judge what might be the best course of action to take. Thank you. Vice-chairman. I'm going to weigh in on the volatility as well because I think we could be at risk of a very serious, very fast moving event very easily. Particularly with the US adopting similar behaviours and a similar approach to actually the BRIC countries. And, of course, the US and the BRIC countries, if you look at the global emissions, for instance, they are the countries that are all sat at the top of the list. Totally outweighing everybody else. And you have countries such as China still building coal-fired power stations. So we got to see them as a serious risk to any ESG performance. So, yeah, I think the worry about it is the need to actually be able to react to it and be able to deal with the impact. And I think it really underlines as well that diversifying our investments as fully as we can is a very key part of that. And avoiding similar investments as well as we possibly can because they could all be hit in the same way at the same time. Thank you. Neil, perhaps you can deal with the question about flexibility that we might need as a committee and the officer team. Yeah, I mean, I'm going to agree with Tim. We're long-term investors and tactical decisions. Frankly, this committee will need to take advice on and hasn't got the opportunity to make in that sense. We are reliant on our investment managers. What we can do, and we have done, is what the committee agreed earlier is we have added additional prudence in our actuarial assumptions. But we have anticipated that there could be additional volatility in the markets there. Thank you. If there are no further comments, I'll draw this to a conclusion. And perhaps we can look at the recommendations to acknowledge the outcomes achieved for the quarter-end of 31st December 2024 by LAPFF and RABICCO through their engagements. And to note the direct voting by the fund in the quarter to December 31st 2024. Is that agreed? Agreed. Thank you. Let's move on then to the responsible investment updates. Lloyd, you're taking this, and I think the focus of this is on the UK Stewardship Code. Thank you. Thank you. Yes, thank you, Chair. Again, this time of year when we're updating the Stewardship Code, just as a reminder, that does need an annual application. So you'll recall last year, I think we put in about 150 pages, and so we're working our way through that. As you might expect, as it's a particular reporting period, there's the usual charts and data to be updated. But also being revised this time around will be the elements that we've discussed today, like the strategic plan, the training policy, conflicts policy. So those will be incorporated as well. Despite passing last year, we did also get some feedback from the FRC about how we could improve the policy, improve the submission. So that will be included as well, and part of that one element is to sort of emphasize the long-term nature of the thinking and the investment mindset for the portfolio and the fund. At the moment, the Stewardship Code, there is a review going on about the level of burden this is putting on signatories to put this material together every year. So there is a review, so I'm hopeful that in future years there will be much more focus on what's really important and what's driving and what we're actually doing, rather than some of the more admin side of it. But the bottom line for this report is that we're underway and we're confident that we'll get the submission in at the end of May. Happy to take it. Any comments from Border to Coast on this? Nothing specifically, other than that we're clearly on hand to support in providing data for the Stewardship Code submission. Thank you. Members, any comments? No. So we're asked to note a UK Stewardship Code renewal submission is being prepared to remain the signatory to the UK Stewardship Code and to agree delegation to the chair on the final approval of that application. Is that agreed? Agreed. Thank you. Let's move on to asset class focus, credit markets. Lloyd, you're going to introduce this and we've got a report from Anthony on this. So please proceed. Thank you. Yes, it's the turn of credit markets for this quarter's asset class review. And as you know, predominantly, that is the circa 900 million invested in the Border to Coast multi-asset credit fund. So with that, I'll hand over to Anthony. Thank you, Chair. Thank you, Lloyd. If I could draw everyone's attention to page 215 of the electric or 16 of, sorry, mine's item 16, isn't it? So 215 of the electronic pack. This sets out a table of returns to the 31st of March for various fixed income markets. And whilst ostensibly this paper is to talk about multi-asset credit, we do have some investments in government bonds, which are managed for us by LGIM. And the report on LGIM is set out on page 221. But that fund does what it says on the can. So there's nothing really to say other than it's done what we expected it to do. Now, you can see from this table, though, that fixed interest gilts deliver negative returns over the 12 months to the 31st of December. And if you look down further in the table, you will see that it was an excellent year for non-government bonds and credit markets. Investment grade markets delivered a reasonable return. And the more credit risk you took, the higher the level of return that you achieved. At the bottom, I've set out the return of the boards to coast multi-asset credit fund to a couple of other fund managers who also deliver similar products for other clients. And you can see those numbers on that page. But basically, in the 12 months that we're looking at, the more credit risk that you took, the better the returns that you got. The more interest rate risk you took or duration you might hear me say you took, the worse the outcome was. So focusing on the boarders to coast fund, moving forward to page 216. All these charts and tables and all the information which I presented here is based on the information that was provided to us at a special meeting we had earlier this year. And in various quarterly reports which boarders to coast have provided me with over the year. If we look at 2024 in the table, you can see that the funds delivered over a year of total return of 7.2%, which was nearly 2% behind the cash benchmark, but almost 1% better than the market return. That's not a bad outcome. 7.2 is a very reasonable level of return from markets over history. But if we look at what the actual managers did, effectively the largest negative contributions to return came from, negative contributions to returns came from emerging market debt, both local and hard currency. There was a slight underperformance from the high yield portfolio, loans were pretty much in line, securitized outperformed and PIMCO, which is the core manager, overall outperformed. So why did the fund underperform its cash benchmark? Well, it goes back to that point I made about duration or interest rate exposure. It had too much duration exposure and it had too much exposure to emerging markets. Rates didn't fall as fast as was expected last year, inflation fell as expected, but growth was slightly better than expected. That's why we didn't get the benefit of being in duration and equally the emerging market debt underperformed because of the strength of the dollar relative to those currencies over that period. So anyway, that's what the fund did. Now, I also need to flag up a couple of things. In my comments about the fund on page 218, the third bullet there, I'm just scrolling down to it myself, says that as a result of positioning, the fund was underweight, its exposure to securitize was less overweight than it should have been. So that was my mistake. Also, on table three, on page 219, which is the next page, I looked through the asset allocation of the various asset managers and the positions that Borders to Coast took in its dynamic asset allocation approach, which DAA stands for. And if you go down to the line which says Wellington, there I suggested that whilst Borders to Coast had high yield debt, they were actually overweight. That's actually incorrect. Borders to Coast were able to see once it had been written, but before it was presented to the committee and pointed out that I had made this error, which is reasonable. But it does make me wonder a little bit if I couldn't understand the data they were presenting, then how might other people understand that data? So I just leave that there. So the other thing to say also is that in my look through, the positions do look rather more emphasized than was actually the case according to new data which has been provided to me and the officers subsequent to me writing this report. So whilst it looks as though I'm suggesting that they may not have had the position that they intended to have, the new data suggests that actually the positions they had were in line with their intentions. So forgive me for making that mistake. But it still leaves me with the same conclusion though, but unfortunately in the discussions that we had, there did seem to be a difference in the way in which the officers and I felt the fund was being managed and how the fund is actually being managed relative to its cash plus benchmark. And I can't get away from the fact that plus 7.2 percent is not a bad outcome. It is a very good outcome for credit markets and a very good outcome for bond markets. But that's only when you compare it to the performance of government bonds. That's only when you compare it to the performance of investment grade credit. And in the case that you could see from the table, other managers did better in the same period. And fundamentally, the fund is supposed to outperform cash plus 3 to 4 and it hasn't done that. So another year where the performance has been quite difficult. Now that difficult performance combined with the presentations which have been made available ahead of time and then subsequently does raise questions about how well is the understanding of the management and performance of fund on part borders to coast. So, and I'll just flag up the point again that this fund from the perspective of what I believed and what the officers believed was about making credit security selection decisions, not about making duration decisions. But duration does seem to have dominated the performance as a theme apart from the performance of the individual managers. So the other thing that I'm a little bit worried about is that going forward from here, last year, we don't get many perfect years for credit and last year was a perfect year for credit. So going forward from here, with credit spreads as narrow as they now are, it does mean it's actually going to be quite difficult for borders to coast with this strategy of the fund since inception, which is now quite considerable. So my suggestion is that the committee ask the officers to engage with the CIO and with the external management team of borders to coast to see if we can get greater confidence in their ability to be able to deliver the expected returns. Notwithstanding some of the comments which I've made here about the overlay not being quite different. Thank you. Do you want to add anything, Neil, to what's been said or Lloyd? Perhaps come on with a development or what's actually happening is that all of the different partner funds meet to discuss the different funds every quarter in an operating officer's group. And we reviewed multi-asset credit this time around as well. And the funds are being graded sort of one, two, three, one being everything's swimming, three being let's have a major drains up. And my take on that discussion and Milo can come after. My take after that discussion was that there was a mix of views between the partner funds of whether the fund was a two or a three. The result to Anthony's point about engaging with borders to coast is that it's been left that there will be some engagement between borders to coast and all the other partner funds to discuss about their views of the fund and that we are going to have a review. So I think that's in train and that MAC will indeed be reviewed having gone through that scoring mechanism with the other partner funds. Milo, do you have anything? Yeah, thank you very much. If I can just add a few comments. Firstly, thank you, Anthony, for clarifying some of the points in the paper and we take the point around reporting and we'll certainly work with you to make sure that we're clear in that going forwards. I think over the longer term, this is performance versus the cash benchmark was very much impacted by the fall off of a cliff in bond prices that we saw in 2022 shortly after launch. And could this have been avoided in terms of performance of the fund that would have been challenging within the parameters of the proposition? Could it be avoided in the future? I think as part of this review, we certainly would like to discuss with partner funds whether there is a role for greater flexibility within the proposition. Should we sweat the portfolio more to make back lost ground so we could take more credit risk. We could make stronger calls on interest rates. We could be more dynamic. We need to do that in a risk control manner. We don't want to push risk too hard and simply to make back previous losses. What are we doing? We shifted the portfolio towards what's called the core of the portfolio, which is dominated by managed by PIMCO. They can be more dynamic than we can. They've had good recent performance. They can take advantage of the uncertainties that we see. We've also reduced exposure to managers with interest rate sensitivity so that if interest rates do fall, we will be able to make back some ground and we have reduced the exposure to emerging markets. Is that going to get us back to cash plus three to four percent in one or two years to manage expectations? Probably not. We would need to see a significant fall in interest rates or wider. I guess wider swings in portfolio positioning. We do think that the fund is well positioned to provide diversification. We'll be working with offices in the coming months through that review. I think diversification is particularly important in the current environment. And while I would certainly not draw attention to shorter term movements necessarily, I think the first couple of two to three months of this year has been evident of how volatile and uncertain markets can be. In the first half of it, by the first quarter of this year, the fund so far has delivered positive two percent where the U.S. market, equity market is down almost eight percent. So it is providing diversification year to date and we very much look forward to working through that review with offices. So members, unless there are further comments, we're asked to note this report and the review by the independent advisors. I would suggest we add to that to endorse the review that Lloyd has mentioned with Bordered Coast and to look for a report back on that at a future meeting. So is that agreed? Agreed. I note we've been going for… Chairman, could I just suggest that you add on to that, not at a future meeting, but at the next meeting? I think we need to look at this quite quickly. Yes, happy to agree with that. I think time is not on our side, if I could put it like that. I'd be happy with the recommendation to say next meeting rather than at a future meeting. Let's have an update. Okay, with that change, is that agreed? Agreed. Thank you. Agreed. We've been going almost two and a half hours, so can we take a 10-minute break, resuming at 13.40? Thank you. …five again. So the next item is Item 17, page 217 on recent developments in the LGPS. Yes, thank you, Chair. I'll take this item initially. There's a few areas I'll draw the Committee's attention to. Paragraph 4, the future consultation, there is a link there to the Surrey response and in Part 2 of the meeting, there is the border to coast pooling response, which I will go into when we get to that point. Paragraph 8, it references the new fair deal, which fair deal is a guidance, government guidance for transfers of employees. It applies to academies, has applied to academies in particular in reference to this, but the regime will now include further education colleges. And also on Paragraph 11, it was mentioned earlier, the government's plans to bring death benefits in pension schemes under the inheritance tax regime. The Fund has responded to that consultation and I have shared it with members, I believe. And we have our technical guru, Sandy, online if members have any further questions on that particular, any of those items. Thank you. I thought the response on the IHT was very well crafted. Of course, the government will decide to do what the government decides to do. Could you just make a further comment about this guidance on colleges? Does that help members? What has happened in the past with colleges? Does it help their funding regime? Or perhaps you can give a little more information on that. I suppose it just brings the regime closer to the admission body status. So there is statutory guidance that now underpins that so that they will have to provide an LGPS pension to their transferring staff who have previously had LGPS pensions or a broadly equivalent scheme. There are very few broadly equivalent schemes out there. So it would tend to be a statutory underpin for the LGPS regime for employees of colleges and if there are any subcontracts from those organizations. Does this help us in our consideration of the credit worthiness of these institutions or is that...? That's a separate item. These colleges are now brought under the Department for Education regime under guarantee. So we have already changed our assessment of the covenant strength of those colleges to reflect that. Thank you for the clarification. Yes, please. Thanks ever so much. On the inheritance tax, I just wanted to say I sort of support the view on the inheritance tax because those changes, this has been raised with some of my members, those changes could potentially affect my members, you know, quite severely if they... Death in benefits will result in, you know, if it's not equally treated between private schemes and the local government scheme, then that will clearly be a loss to my members. I do support... I mean, I think Unison feels the same way about that. So I welcome the response on that one and simply highlight that as something that's potentially damaging to my members. Sandy, I think, is somewhere out there for some advice that she provides, so I'm grateful for that. So thanks very much. I think the treatment of private schemes is the same, isn't it? I don't think there's any distinction or maybe I've missed something here. I think it's treatment of an inheritance tax across pensioners' regime, yeah. I don't think members of LGPS are any worse. We're all as bad as off as each other. Anthony, you had your hand up. Thank you, Chair. I was just going to confirm that it's everybody, whether you're in D.C., whether you're in D.B., whether you've done any planning for this or not, and all of the management community which is involved in auditing and pensions and everything like this is pushing back on this because the government is saying, you've got to take... you've got to withhold the tax and it's almost impossible to figure out what that is. So the industry as a group is pushing back and saying, you need to think about this again. We'll see if they do. So could I ask we note this report and if that's agreed, members, we'll move on to item 18, local government reorganization. That's over to you, Neil, and I think Andy might be speaking online. I won't hover over the background. I think you're all very well aware of it. So there will need to be a reconstitution of the administrative authority, the host of the pension fund as a result of the outcome of devolution of government reorganization. There is... these will be one of a newly created unitary, a mayoral strategic authority or a single pensions... single purpose pensions authority. As Andy mentioned, there is... the pensions team are engaging in the process and will be with all key stakeholders in ascertaining this. But I suppose our guiding message will be we need to ensure that any solution is consistent with Surrey's strategic sustainability objectives, has the optimal government structure to allow the execution of fiduciary duty and provides the best outcomes for our members and Surrey residents. Irrespective of where we land, and as I said, we are speaking to Andy and the transformation team on all of this, there are a number of impacts. I've noted a few in paragraph 11. Obviously, there will be the transfer of all legislative and administrative functions to the new administrative authority, transfer of all assets and liabilities and reapportion them in the new councils as well. There will need to be a reassignment of contracts. Our team will need to transfer into the new administration and there will need to be a revaluation of pension fund assets and liabilities and a redrafting of all of our policies. So, in paragraph 12, I've laid out the timeline and as I've said in our next steps and in the recommendations is that we will seek to engage with the committee, the board and the key stakeholders of the pension fund in the future. Thank you. Comments from Colvin? Thank you, Jem. I suppose the other thing to mention is that in the run-up to whatever solution comes out of the MIST, there will be quite a lot of work for the team to do in terms of people wanting to know what their benefits are, redundancy, all those sorts of things as well. Yes, that is correct and we will get conversations internally with colleagues across the business. Could I ask if there are likely to be stamp duty consequences in moving assets, particularly real estate? My understanding is not from the conversations I've had with colleagues who've been through this, but that's something we will need to take advice on. I probably don't get a chance to say this later, but I do have concerns about the administration being the new mayor. If there is one, then that's an if because of the mayor's mandate to drive growth and I see that potentially in conflict with promotion of local investments. I see a conflict there. It would have to be managed, but that would be a comment I would like to be minuted out of this meeting, to be honest. Andy, do you want to comment? Yes, thanks, Chair. That's helpful. I know you've already spoken to me about that and it's a helpful comment to be minuted. And I just want to be clear is that is an important perception. And the obviously anything around the strategic mayor authority will be a year beyond the vesting day of the new unitaries that come into being. And so there's potentially double change there if that was going to be an option that we were to consider. But the independence of the Surrey pension fund is first and foremost, in my mind, firmly with the treasurer's hat on from the Surrey pension fund. Is it making sure that that in any model going forward is best supported the protection and the fiduciary duty that you hold, the protection of members in interest and including employees as well as employers within that as well. My learning has been is that this normally in a normal LGR, this gets wrapped up because there's a continuing authority, which is normally the county council that moves forward. We're not in that situation here. It's right that we start considering it now. It's my intention to put something in the final business case. Yes, that without doubt, the focus will be on other things. But pensions is a consideration in disaggregation that needs to be drawn out. And I think it's right that therefore the committee has begins to have a viewpoint on that. And hopefully we can we can frame suggestions at this point to get that in, get knowing that we are up against it with the government timescales in terms of the final submissions. But when it comes to implementation, this will be a key, key aspect. And just to reassure the committee, it is on my radar with both the LGR aspect, but also from the pension funds perspective as well. Thank you. Thank you. Just to note that the next submission is 9th of May and that's after our next scheduled meeting. So Neil, you will need to schedule something on an interim basis to consult with the committee and the other parties. So thank you for those comments, Andy. So we're asked to note that report. If that's agreed, we'll move on to the private section of the meeting. So I will read the words that under section 100A of the Local Government Act 1972, the public be excluded from the meeting for the following items of business on the grounds that they involve the likely disclosure of exempt information under the relevant paragraphs of part one of schedule 12A of the Act. And if that's agreed, members, I'll wait for confirmation. The webcast is finished.