The Dyfed Pension Fund Committee met on Wednesday 27 March 2024, approving the budget for the upcoming financial year and updating key policy documents. The committee also received updates on the fund's financial performance, investment strategy, and the activities of the Wales Pension Partnership.

Dyfed Pension Fund Budget 2024-2025

The committee unanimously approved the Dyfed Pension Fund Budget for 2024-2025. The budget sets expenditure at £133.6 million and income at £133.6 million, resulting in a zero net budget. This approach provides the fund with flexibility to utilise investment income based on budgetary requirements. Expenditure includes an estimated £118 million for benefits payable, incorporating a 6.7% pensions increase based on the September 2023 Consumer Price Index (CPI) and a 1.5% increase in pensioner and deferred members. Management expenses are estimated at £11.9 million, with £9.4 million allocated for investment manager fees. Income is projected at £104.5 million from contributions, comprising £76.1 million from employers and £28.4 million from employees. Employer contribution rates have been amended to reflect the results of the 2022 triennial valuation, with an additional 4% factored in for pay awards. Investment income is estimated at £25.7 million to maintain the cash-neutral budget.

Governance Policy and Compliance Statement

The committee unanimously approved an updated Governance Policy and Compliance Statement for the Dyfed Pension Fund. This document, following a recent review, outlines the fund's adherence to best practice principles concerning its structure, representation, selection processes, voting, training, meetings, access to information, scope of operations, and publicity. It details arrangements for the fund's governance, the Pension Committee's terms of reference, delegations to the Director of Corporate Services and Head of Financial Services, committee meetings, the Annual Consultative Meeting, and the Pension Board.

Investment Strategy Statement

An updated Investment Strategy Statement for the Dyfed Pension Fund was unanimously approved. This statement reflects the Revised Strategic Asset Allocation Review, approved by the committee on 22 September 2023, which recommended a 5% allocation to Private Credit funded from the Equity Portfolio. The statement is considered a crucial governance document that details the fund's current investment strategy, enhances transparency in investment management, serves as a high-level risk register, and is designed to be informative for all stakeholders.

Dyfed Pension Fund Business Plan 2024-2025

The committee unanimously approved the Dyfed Pension Fund's Business Plan for 2024-2025. The plan aims to provide information about the fund and its operations, explain its background and governance structure, outline its principal responsibilities, introduce key documents, highlight the investment strategy including strategic asset allocation, present key statistics, detail the financial budget for the upcoming year, and outline the fund's priorities and business objectives. The plan also noted that preparatory work had commenced on the 2025 triennial review.

Training Plan

The committee unanimously approved the Training Plan for 2024-25 and noted the Training Plan for 2023/24. The plans detail the schedule of committee meetings and training events for members and officers of the Dyfed Pension Fund.

Wales Pension Partnership (WPP) Business Plan 2024-2027

The committee unanimously approved the Wales Pension Partnership (WPP) Business Plan for the period 2024-2027. This plan, drafted in accordance with Section 6 of the Inter Authority Agreement, outlines the fund's priorities and areas of focus over the next three years. Its purpose is to explain the WPP's background and governance structure, detail its priorities and objectives, introduce its policies and plans, outline the financial budget, and summarise its investments and performance objectives. The plan will be continuously monitored and formally reviewed and agreed annually.

Wales Pension Partnership (WPP) Joint Governance Committee (JGC) Update

The committee received an update on the Wales Pension Partnership's Joint Governance Committee (JGC) meeting held on 13 March 2024. The update covered governance matters, ongoing sub-fund development, operator services, investments and reporting, communication and training, resources, budget and fees, and the training plan. It also included a summary and commentary on the WPP's investment performance for Q4 2023 (October-December 2023) and a report from GCM Grosvenor detailing infrastructure investments, in which the Dyfed Pension Fund is invested.

Wales Pension Partnership Responsible Investment Update - 31 December 2023

The committee received the WPP's Responsible Investments update for December 2023. This report details recent Responsible Investments activity and provides information on the Global Growth, Sustainable Active Equity, and Global Credit Sub-Funds, in which the Dyfed Pension Fund is invested. It also includes a Stewardship Summary and relevant appendices.

Budget Monitoring 1 April 2023 - 31 December 2023

The committee received the Dyfed Pension Fund Budget Monitoring report for the period 1 April 2023 to 31 December 2023. The report indicated an underspend against the budget of £1.8 million. Expenditure was projected to be overspent by £2.8 million, primarily due to higher-than-budgeted lump sum retirement benefits (£3.9 million), transfers out (£715,000), and management expenses (£310,000). These overspends were offset by underspends in pensions payable (£1.1 million) and lump sum death benefits (£1 million). Income was forecast to exceed the budget by £4.6 million, largely due to higher employee pensionable pay and augmentation income from employers. Overall, total expenditure was estimated at £125.6 million and total income at £127.4 million, resulting in a positive variance of £1.8 million.

Cash Reconciliation as at 31 December 2023

The committee received the Dyfed Pension Fund Cash Reconciliation report as at 31 December 2023. The report noted that £15.4 million in cash was held by Carmarthenshire County Council on behalf of the fund to meet immediate cash flow requirements for pensions, lump sums, and investment management costs.

Pensions Administration Report

The committee noted the Pensions Administration Report, which provided an update on activities within the Pensions Administration service. This included updates on regulatory matters, the breaches register, i-Connect implementation, GMP reconciliation, the Business Continuity Plan, and workflows. The report confirmed that the Pensions team was liaising with Coleg Ceredigion, Coleg Sir Gar, Pembrokeshire College, and Dyfed Powys Police on transitioning to i-connect. It also confirmed the operational status of two data centres for the Business Continuity Plan.

Breaches Report

The committee noted the Breaches Report concerning the Dyfed Pension Fund. The report detailed instances where employee/employer contributions were not received on time. It specifically referred to a previously reported breach involving Burry Port Marina Ltd, which had regularly failed to pay contributions. The report confirmed that The Pensions Regulator had been advised, and the employer had entered administration. Contributions owed at that time were estimated at £7,230.56, and these were subsequently paid to the fund on 29 February 2024 following an agreement with the company's administrators.

Risk Register

The committee received and noted the Risk Register, which details the identified risks related to the Dyfed Pension Fund's functions. Significant work had been undertaken in reviewing and updating the register, with a new risk, G8 – Environmental, Social and Governance (ESG), being added. Risks have been categorised into three sub-headings: Governance and Regulatory (8 risks), Funding and Investments (13 risks), and Operational (16 risks). These categories will be reviewed at subsequent committee meetings in June, September, and November.

WPP Operator Procurement Recommendation Report

In a private session, the committee unanimously resolved to approve the appointment of bidder 3 as the preferred bidder for the New Wales Pension Partnership Operator Contract. This decision followed a tender exercise for a new operator contract for the Wales Pension Partnership.

Robeco Engagement Reports and Global Securities Lending Review

In private sessions, the committee noted the Robeco engagement reports for the periods 1 July to 30 September 2023 and 1 October to 31 December 2023. These reports provided statistics on engagement activities within the WPP portfolio, including case studies related to Net Zero Carbon Emissions and Responsible Executive Remuneration. The committee also noted the Global Securities Lending Review as at 31 December 2023, which provided information on securities lending activities that commenced in March 2020.

Independent Advisor Performance & Risk Report and Northern Trust Performance Report

In private sessions, the committee noted the Independent Investment Adviser Report as at 31 December 2023, which detailed investment managers' performance for quarterly, 12-month, and rolling 3-year periods ending 31 December 2023, alongside global market background. The committee also noted the Northern Trust Performance report for the Dyfed Pension Fund as at 31 December 2023, which provided performance analysis at a total fund level and by investment manager.

Investment Manager Reports

In a private session, the committee noted the investment managers' reports as at 31 December 2023, which set out the performance of each manager, including reports from BlackRock, Schroders, Partners Group, and the WPP Global Growth, Global Credit, and Sustainable Active Equity Funds.