The Pensions Committee of Tower Hamlets Council met on Monday 27 July 2020 to discuss a range of important issues concerning the council's pension fund. Key decisions included the approval of a draft admission employer exit credit policy and a COVID-19 contribution deferral policy, alongside noting updates on the fund's actuarial position and liquidity forecasts.

Pension Fund Administration and Updates

The committee received a comprehensive update on the administration of the Local Government Pension Scheme (LGPS) for the period ending 30 June 2020. Miriam Adams, Head of Pensions, reported an increase in active membership, with 323 new members joining from Veolia. The report also highlighted an increase in deferred members and pensioners. Efforts are underway to improve starter procedures and data collection from new employees to ensure all necessary information is captured from the outset. The committee noted the ongoing work to address frozen records, which are people who have left the fund but not provided updated information.

A significant point raised was the potential impact of the MacLeod judgment, a Supreme Court decision that could lead to substantial work over the next few years to ensure correct data for affected members. The committee also discussed the move towards employers submitting their own payroll data, a process that is being piloted with the council.

Actuarial Update and Funding Risks

An actuarial update provided a snapshot of the fund's funding levels as of 31 March 2020 and 17 June 2020. Despite a dip in March, the fund had recovered to its pre-valuation levels by June, showing a funding level of 102%. Douglas Green, Senior Investment Consultant from Hymans Robertson, presented this update, emphasizing that while the overall fund position was stable, the impact of COVID-19 on individual employers remained a concern. The report detailed various risk-mitigating measures, including monitoring employer covenants, scheme longevity, and market movements. The committee noted the impact of COVID-19 on funding risks and approved the proposed mitigating measures.

Knowledge Assessment and Training Plan

The committee reviewed the results of a national knowledge assessment for LGPS funds, presented by Andrew McKearns from Hymans Robertson. While overall results for Tower Hamlets were considered high, the committee's results were benchmarked lower than other participating pension committees, with engagement levels also noted as being fairly low. A training plan has been developed over the next 18 months, incorporating feedback from the assessment and participant requests, with a focus on bite-sized online videos to improve knowledge and understanding for informed decision-making. Councillor Rachel Blake and Councillor Andrew Wood raised points about the low number of committee members who completed the assessment and the relevance of some questions to their specific responsibilities.

Admission Employer Exit Credit Policy

A new admission employer exit credit policy was discussed and approved in principle. Douglas Green explained that this policy addresses recent legislative changes requiring pension funds to consider paying back surpluses to employers who leave the fund. The policy outlines the discretion the committee has in determining whether and how much surplus to pay back, particularly in cases where risk-sharing arrangements exist between employers and the council. Councillor Andrew Wood suggested using job titles rather than names in policies for longevity, while Councillor Rachel Blake inquired about the administrative challenge of understanding all employer accounts. Miriam Adams confirmed that the fund has sufficient information to identify deficits or surpluses and that efforts are being made to monitor employer risk-sharing arrangements.

COVID-19 Contribution Deferral Policy

The committee approved a COVID-19 contribution deferral policy, allowing for temporary deferrals of up to three months for employers facing financial difficulties due to the pandemic. Douglas Green highlighted that benefits must always be paid in full, meaning any deferrals would need to be covered by other employers, primarily the council. The policy requires employers to provide a clear business case and assurances that other financial obligations are also being addressed. Councillor Andrew Wood proposed extending the policy beyond the current financial year, and Miriam Adams confirmed that while the current policy is framed for the immediate period, it could be adapted if government policy permits. It was noted that no employer had yet requested a deferral due to COVID-19.

Liquidity and Cash Flow Forecast

A three-year cash flow forecast was presented, indicating a projected cash flow deficit for the upcoming years. To address this, the committee agreed to fund the deficit by drawing down £20 million from the equity protection cash received in March. Miriam Adams explained that this money would be placed in money market funds, similar to the council's approach to its day-to-day cash, to maintain liquidity. Councillor Andrew Wood questioned the amount and the expected interest earnings, and Kevin Bartle confirmed that investments would align with the council's treasury management strategy.

Work Plan

The committee reviewed its forward work plan, which outlines upcoming agenda items and tasks. Miriam Adams explained that the plan is fluid and will be updated to reflect new issues and actions arising from committee meetings. The committee noted the work plan, acknowledging its flexibility in responding to the evolving circumstances, particularly in light of the pandemic and regulatory requirements.