The Pension Fund Committee of Barnet Council met on Thursday 10 November 2022 to discuss the triennial valuation of the fund, review investment performance and strategy, and address administrative and risk management updates. Key decisions included noting the provisional actuarial results of the triennial valuation, approving the admission of two new admitted bodies, and agreeing to add several items to the committee's work programme.

Triennial Valuation - Whole of Fund Results

The committee received an update on the triennial valuation of the Pension Fund, with provisional results for the whole of the fund as of 31 March 2022. The deficit has reduced significantly since the last valuation in 2019, from £190 million to £71 million, bringing the overall funding level to 96%. This improvement is attributed to strong investment returns and employer contributions, although an unexplained data item has increased the deficit by £47 million. The committee noted that while the overall funding position is encouraging, there are headwinds to consider, including higher inflation expectations and changes to longevity assumptions. The Head of Pensions and Treasury explained that consultation with employers on the proposed Funding Strategy Statement had begun and would conclude on 31 December 2022, with conclusions to be presented at the January meeting. The committee resolved to note the provisional actuarial results, differences in covenant and actions taken by officers, and the ongoing consultation with employer groups.

Valuation, Transactions and Performance

The committee received an update on the Pension Fund's investment activities and performance for the quarter ending 30 September 2022. Despite volatile market conditions, the fund's overall asset value had decreased by £35.492 million to £1,385.1 million. While this represents a negative return of -2.5% for the quarter, the Head of Pensions and Treasury noted that rising long-term interest rates are generally beneficial for pension schemes, as they reduce the value of liabilities. The committee discussed the potential risk posed by a lack of delegation to officers for rebalancing investment funds between committee cycles, with Councillor Anne Hutton requesting officers to present options for introducing delegation into the decision-making framework at the next meeting. The committee also noted that the fund was likely fully funded on a risk-free basis for a period but lacked the agility to capitalise on the opportunity. Furthermore, the Head of Pensions and Treasury highlighted that significant cash balances were being held in low-yield funds due to a lack of discretion for officers to invest them in less liquid, higher-yield options. The committee resolved to note the investment activities and performance and the exempt information.

Administration and Data Update Report

The committee received an update on the administration of the Barnet Pension Fund by West Yorkshire Pension Fund (WYPF). Performance levels for case processing remained above the 90% KPI target, although the number of cases processed was slightly lower due to staff training. Work in progress levels remained high, largely due to the issuance of annual benefit statements and the processing of historical leavers. The committee noted a significant improvement in the issuance of Annual Benefit Statements (ABSs), with 97.3% issued by the statutory deadline. The data improvement plan showed progress, with TPR data scores for common data remaining stable and conditional data scores showing a slight improvement. The committee also noted the ongoing work on historical leavers and the upcoming implementation of the Pensions Dashboard. The McCloud judgement, which requires recalculating benefits for certain members between 2012 and 2022, was also discussed, with WYPF updating systems to ensure correct benefit calculations. The committee resolved to note the current performance levels and updates on the data improvement plan and historical leaver exercise.

Admitted Body and Bond Status Update

The committee received an update on outstanding admitted body and bond agreements. Three admission agreements had been signed since the last meeting, and the committee was asked to approve the admission of two new admitted bodies: Enigma CCTV Limited and Nourish Contract Catering Ltd (at Osidge School). The report detailed progress on cessations, including the deficit for Absolute Catering (St James' Catholic School) and the surplus for Fremantle Trust. Updates on bond renewals were also provided, with several employers still needing to provide bonds or guarantees. The committee resolved to note the progress on outstanding admitted body and bond agreements and to approve the admission of Enigma CCTV Limited and Nourish Contract Catering Ltd.

Pensions Scheme Risk Register

The committee reviewed the Pension Fund's risk register, which details risks associated with the management of the scheme. Several administration risks had seen their scores reduced due to improved controls and processes, including those related to member data, admission agreements, and cyber security. A new risk, PB017, concerning the effect of new pensions legislation on members' benefits, was identified and assigned a risk score of 8. Officers recommended a more fundamental review of the non-administration risk register following the 31 March 2022 valuation, to reflect the economic environment, the outcome of the Responsible Investment day, and considerations around employer covenant and the maturation of obligations. The committee resolved to note the report and agreed to the recommendation for a more fundamental review of the non-administration risk register.

Pension Scheme Expenses

The committee received a report summarising the Pension Fund's costs and expenses for the six months ending 30 September 2022, with a comparison to the previous year. It was estimated that there would be a decrease in directly charged costs by £157,000, primarily due to a reduction in fund manager fees charged directly to the fund and the resolution of Pensions Savings Statements costs. However, increases in LCIV fees and actuarial fees due to the triennial valuation were also noted. The report also included a summary of contribution income and benefit expenditure. The committee resolved to note the scheme costs incurred.

Pensions Fund Committee Work Programme

The committee agreed to add several items to its work programme, including feedback on training, the status of the 2021-22 audit, and a policy report on how the committee can take investment decisions. The committee resolved to note the work programme.

Triennial Valuation - Middlesex

The committee received a report on the triennial valuation for Middlesex University. Following a break, the committee agreed that the suggested approach for funding Middlesex University's obligations was appropriate and thanked officers for their update. The committee resolved to note the exempt information and to consider the position as documented in appendix A of the report.

Attendees:

• Councillor Anne Hutton (Chair)
• Councillor Andreas Ioannidis (Vice-Chair)
• Councillor Zahra Beg (Cabinet Member for Equalities, Poverty Reduction and the Voluntary & Community Sector)
• Councillor Linda Lusingu
• Councillor Simon Radford (Cabinet Member for Financial Sustainability)
• Councillor Danny Rich (The Mayor of Barnet)
• Councillor Mark Shooter
• Councillor Elliot Simberg
• Councillor Michael Mire
• George Bruce

Documents:

• Agenda frontsheet 10th-Nov-2022 18.00 Pension Fund Committee
• Printed minutes 10th-Nov-2022 18.00 Pension Fund Committee
• Public reports pack 10th-Nov-2022 18.00 Pension Fund Committee