The Pension Fund Committee of Barnet Council met on 18 April 2024 to discuss a range of financial and operational matters concerning the pension fund. Key decisions included the approval of an 8% reduction in the council's employer contribution rate for the next two financial years, the formal adoption of amendments to the Contribution Review Policy, and the approval of the 2022/23 Draft Annual Report for publication. The committee also approved the transfer of assets and liabilities related to the merger of Barnet and Southgate Colleges.

External Audit and Accounts Update

The committee received an update on the ongoing external audits for the pension fund. BDO, the auditors for the 2020/21 and 2021/22 financial years, have experienced delays, with the 2021/22 accounts now expected to be finalised in August 2024. The Department for Levelling Up, Housing and Communities (DLUHC) has set a backstop date of 30 September 2024 for all outstanding audits, and BDO has confirmed that a disclaimed opinion will be issued for the outstanding pension fund and council accounts. Grant Thornton, appointed as the external auditor for the 2023/24 financial year, presented their audit plan and confirmed they are adequately resourced to meet deadlines. The committee approved the 2022/23 Draft Annual Report for publication.

Direction Order for Barnet & Southgate College

The committee approved the transfer of assets and liabilities from the Enfield Pension Fund to the Barnet Pension Fund, stemming from the 2011 merger of Barnet and Southgate Colleges. This transfer, which is subject to the Actuary confirming no adverse funding outcome for Barnet & Southgate College, is expected to be completed by April 2025. To date, no transfer payment has been received from the Enfield Pension Fund, with the estimated transfer value being £9.2 million. Hymans Robertson will recalculate the funding position, which is expected to be beneficial to the fund.

Investment Strategy

The committee noted the investment transactions that occurred between December 2023 and February 2024, and reviewed planned transactions for 2024. Investments made during this period included £150 million in the LCIV Long Term Buy and Maintain Credit Fund and £1.308 million in the LCIV Renewable Infrastructure fund. Disinvestments totalled £167.886 million, primarily from Schroders Corporate Bonds. Cash balances increased by £20 million, and officers will explore potential investments in Trade Finance funds.

Risk Management Review

The committee reviewed the updated administration and non-administration risk registers, noting the revised format of the non-administration register. Several administration risks, including failure to pay contributions (ADM05), non-compliance with GDPR (ADM12), and cyber security breaches (ADM13), have had their lowest possible risk scores increased, indicating that no further mitigation actions can reduce these risks. Two new risks were identified: ADM19 (Employer unable to pay contributions) and ADM20 (Business Continuity for the LBB Pensions Team). The committee requested that the Pensions Fund Website be kept updated.

Administration Performance Report And Update On Other Administration And Legislative Matters

An update was provided on the administration performance by West Yorkshire Pension Fund (WYPF), which processed approximately 970 cases in February, with around 89% meeting Key Performance Indicator (KPI) targets. The committee was informed about the ongoing work related to the £45 million data investigation, with efforts focused on reconciling membership statistics and data files. The Pensions Regulator (TPR) has published a new general code of practice, and training will be arranged for the committee and the Local Pensions Board to ensure compliance. Pension surgeries have been positively received, and the team is exploring ways to increase member interaction.

Responsible Investment Update

The committee received an update on the progress of the fund's Responsible Investment approach, particularly concerning Paris Aligned Equity Funds and Nature Based Assets. Discussions highlighted the potential risk of divergence from a balanced market approach when investing in Paris Aligned funds and the need for thorough analysis of associated risks and benefits. The committee noted that Local Government Pension Schemes (LGPS) investing in Paris Aligned Funds typically expect returns to be broadly in line with the market, rather than improved returns, and that the energy transition market is still in its early stages. The committee's fiduciary duty to review expected potential returns was emphasised.

Admissions, Cessations And Bond Status Update

The committee noted the progress on outstanding admissions, cessations, and bond agreements/renewals. There have been no new admissions since the last update, although potential new admissions are anticipated in the summer. Several cessation payments have been made, and the team is awaiting a submission from Caterlink regarding a £127,000 exit credit payment. Updated bond values have been calculated for seven employers, and new admissions are awaiting the provision of bonds or guarantees. A new policy for admitting new bodies on a 'pass through' basis will be effective from 1 April 2024 for schools.

Knowledge and Understanding

The committee noted the training options available and the recommendation that members complete the LGPS Online Learning Academy (LOLA) training by 30 June 2024. Training will also be arranged on The Pensions Regulator's new Code of Practice. A report outlining the training strategy, objectives, and budgets for the committee and the Local Pensions Board will be presented at a future meeting.

Pension Fund Investment Performance Report

The committee noted the investment activities and performance of the pension fund up to 29 February 2024. The fund's valuation increased by an estimated £76.2 million (5.0%) during the quarter, with LCIV Sustainable Equities, LGIM Future Worlds, and LGIM RAFI being the main performers. The fund achieved a return of 5.3% in Q4 2023, outperforming its benchmark by 0.3%. Underperformance against the benchmark was noted in the Abrdn Long Lease Property and IFM Global Infrastructure funds. The committee was advised of a forthcoming vote on a direct investment with a private manager, valued at £11 million, and the potential use of the 'urgency situation' clause in the Investment Strategy Statement if necessary to prevent financial loss.

Advisor Costs

The committee noted the provisional 2024/25 budgeted costs for service providers and advisors and the actions taken by officers to manage these budgets.