The Pensions Committee of Bexley Council met on Monday 24 June 2024 to discuss the Pension Fund's business plan, investment performance, and administration strategy. Key decisions included the approval of the 2024/25 Business Plan and Investment Work Plan, the CMA Investment Consultant Targets for 2024/25, and the draft Pensions Administration Strategy for consultation.

Business Plan and Investment Work Plan Approved

The Committee approved the Pension Fund's Business Plan and budget for 2024/25, which outlines the strategic medium-term objectives and financial forecast for the year. Alongside this, the Investment Work Plan for 2024/25 was also approved. This plan, developed in collaboration with Redington, details the investment topics and presentations scheduled for the year. Members raised queries about the possibility of reducing audit and pension administration costs. It was explained that local authority auditors are appointed by an external body, and while pension administration costs had increased, this was partly due to the previous contract being below market rates and inflationary pressures. The Chairman stated these costs would be closely monitored.

CMA Investment Consultant Targets for 2024/25 Approved

New targets for the investment consultants for 2024/25 were approved by the Committee. These targets follow a review conducted in November 2023. It was noted that each objective would be assessed and rated from unsatisfactory to excellent by the end of the financial year. A member queried the absence of information on investment costs within these objectives, and Jill Davys from Redington clarified that these were objectives rather than Key Performance Indicators, but that cost information for specific investments could be provided if requested.

Pension Fund Outturn and Cash Flow Forecast Noted

The Committee received an update on the Pension Fund's actual income and expenditure for 2023/24 and the forecast for 2024/25. The Fund reported a deficit of £1.516m at the end of the 2023/24 financial year, which was lower than the projected overspend of £4.475m. This improvement was attributed to higher-than-expected income receipts and a change in asset allocation. The cash flow forecast for 2024/25 was also presented, with assurances that it would be regularly reviewed to ensure sufficient liquidity to meet liabilities. Members noted that the Fund's current liquidity levels were considered good.

Pension Fund Investment Performance – Quarter Ended 31 March 2024 Reviewed

The Committee reviewed the investment performance of the Bexley Pension Fund and its investment managers for the quarter ending 31 March 2024. Charlie Sheridan from Redington provided an update on market conditions, noting a strong period for risk assets. He indicated that global equities had performed well, with continued outperformance from seven key stocks. The potential impact of the UK general election on markets was discussed, with the expectation that the direction of travel for pooling would likely continue, and potentially accelerate, regardless of the outcome. Concerns about potential exposure to French government debt in the event of a far-right government being elected were also addressed, with the assessment that any such exposure within the Fund was likely minimal.

Jill Davys from Redington provided an update on the performance of individual investment managers. The Fund had outperformed its benchmark during the quarter, with all equity managers, including RBC, exceeding their benchmarks. The LCIV Long Income Fund's performance remained disappointing, and the LaSalle Property Fund had also underperformed, though it was closer to its benchmark. The UBS infrastructure fund's performance was noted as being impacted by its holding in Southern Water, though this represented a small portion of the overall Fund.

Residential Property Review Noted and Decision Deferred

A report on the residential property market was considered as part of the ongoing strategy review. Charlie Sheridan outlined options for investment in social and affordable housing, and Jill Davys presented Redington's findings on the LCIV UK Housing Fund. Some Committee Members expressed concern regarding the performance of other LCIV funds in which the Bexley Fund is invested. However, it was noted that LCIV had conducted thorough due diligence on the UK Housing Fund's managers. The Committee resolved to note the review, defer any decision on allocating funds to residential property until September 2024, and invite LCIV to attend the September meeting to discuss their affordable housing mandate.

Investment and Administration Update Received

The Committee received an update on various investment and administration issues. The risk register was reviewed, with red items remaining unchanged since the previous meeting. Updates were provided on London CIV assets, the transition to the new impact equity manager, Ninety One, and the outcomes of meetings with LaSalle and Aviva (LCIV Long Income Fund) regarding performance concerns. LaSalle had agreed to reduce their fees, while ongoing close monitoring of the LCIV Long Income Fund was recommended due to persistent concerns. Information on Freedom of Information (FOI) requests received by the Pension Fund during the past year was also noted. A query was raised regarding the disinvestment from Russian assets and the potential for similar action concerning Israel/Palestine. Officers explained that fund managers had independently decided to write off Russian investments due to their worthlessness, and that tracking Israeli investments was complex due to their inclusion in various tracker funds and indices.

Michelle Doman from Mercer, the Fund's actuary, advised the Committee of termination requests from two admitted bodies, L&Q and Avante. Following discussions, it was determined that both were due exit credits based on the Funding Statement assumptions. The Committee also noted the latest update on the implementation of the McCloud remedy.

Draft Pensions Administration Strategy Approved for Consultation

The Committee considered the draft Pensions Administration Strategy, designed to ensure an efficient, high-quality, and value-for-money service for scheme employers and members. The strategy outlines the roles and responsibilities of the fund, its administrators (LPPA), and scheme employers, along with performance expectations, monitoring procedures, and actions for non-compliance. The Committee resolved to approve the draft strategy for consultation with stakeholders, scheme employers, and the third-party administrator.

Key Decisions Made:

• Approval of the 2024/25 Business Plan and budget.
• Approval of the 2024/25 Investment Work Plan.
• Approval of the CMA Investment Consultant Targets for 2024/25.
• Noting of the Pension Fund Outturn 2023/24 and Cash Flow Forecast 2024/25.
• Noting of the Pension Fund Investment Performance for the quarter ended 31 March 2024.
• Noting of the Residential Property Review, deferral of any decision on residential property allocation until September 2024, and agreement for LCIV to attend the September meeting.
• Noting of the Investment and Administration Update, including approval of termination amounts for L&Q and Avante.
• Approval of the draft Pensions Administration Strategy for consultation.