The Pension Board of Harrow Council met on Monday 5 February 2024 to discuss the performance of the Harrow Pension Fund, review audit reports, and consider government consultations on investment pooling. The Board noted updates on pension administration performance, the audit of the 2021-22 accounts, and progress on filling a vacancy for an active scheme member representative.

Pension Administration Update - Quarterly Performance Update

The Board received an update on the administration performance of the Harrow Pension Fund for the quarter ending 31 December 2023. The Administration Team completed 1,876 tasks, with 73% of these finished within the target time. Performance dipped during this quarter due to staffing changes and ongoing issues with the Council's payroll system. Two new complaints were received: one concerning the late payment of a first monthly pension, which was resolved to the complainant's satisfaction, and another regarding ineligibility for a death grant, which was not upheld under the Council's dispute resolution procedure. The Board was also informed that some active members' annual benefit statements were still outstanding due to payroll system issues, with approximately 970 statements yet to be issued. A further fix was being tested, with the aim of making these available via Member Self Service by the end of March 2024. The late issuance of these statements has been logged as a breach. The Board queried a £200,000 rise in administration costs attributed to the Council's payroll system, with the explanation requiring a private session due to confidential member information.

Audit of Pension Fund Accounts 2021-22

The Board reviewed the Audit Report of Pension Fund Accounts for 2021-2022. The audit was largely complete, with only minor presentational changes required. However, formal sign-off was delayed due to national issues affecting local authority audits. The auditors, Mazars, reported their findings to the Governance, Audit, Risk Management and Standards (GARMS) Committee on 29 November 2023. The Board expressed concern that governance could be compromised if account balances from fund managers were not received promptly. Officers explained that while monthly valuations are received, auditors require direct confirmation from managers. Procedures are in place to ensure timely responses from fund managers for future audits.

Review of Pension Fund Committee Items

The Board reviewed matters considered by the Pension Fund Committee on 20 December 2023. The funding level of the Pension Fund had improved significantly since the 2022 Triennial Valuation, primarily due to rising interest rates increasing the discount rate applied to future pension liabilities. The Board inquired about reducing equity investments, and was advised that the Pension Fund's investment consultants recommend continuous monitoring and rebalancing of holdings. The Committee had reviewed its strategic asset allocation, retaining a 50% allocation to equities. The Board also asked about de-risking strategies and whether Harrow's Pension Fund performed below benchmark. Officers noted that while some investment managers had underperformed, leading to the replacement of two equity managers in 2021 and 2022, the Committee continues to monitor performance. The performance of some London CIV equity funds was noted as a concern for other LGPS funds. The Chief Investment Officer of London CIV will be invited to the next Pension Fund Committee meeting.

Government Consultation on Investments and Pooling

The Board received an update on the Government's consultation regarding reforms to Local Government Pension Scheme (LGPS) investments and pooling. The consultation, which closed on 2 October 2023, focused on accelerating and expanding asset pooling, encouraging investments in UK levelling up projects (up to 5% of assets), increasing private equity allocations (aiming for 10%), and amending regulations concerning investment consultants. The Government published its response on 22 November 2023, indicating a move towards fewer, larger pools (aiming for £50 billion+ assets) and a requirement to pool listed assets by 31 March 2025 on a comply or explain basis. Passive assets may remain outside pools but require justification. The government will provide guidance on increased delegation to pools for manager selection and strategy implementation, and favours pools providing investment advice to funds. The Board commented that consolidating pools would be a significant task requiring independent review.

Recruitment to Board vacancy - Active Scheme Member

The Board received a report on the steps being taken to fill the vacant position for an active scheme member representative. This role has been vacant since April 2023. To address this, nominations will be sought from Corporate Leadership Group members, trade union representatives, community schools, and other participating employers. An update on progress was to be provided at the meeting.

Pension Board Work Programme 2023-24

The Board received the proposed work programme for the remainder of the 2023-24 Municipal Year. This included regular quarterly reports on pensions administration performance, the Pension Fund Dashboard, and a summary of Pension Fund Committee meeting items. Specific items for the remainder of the year include a review of the Pension Fund Risk Register, an update on the recruitment to the Board vacancy, regulatory updates, a review of fund policies, an update on the Investment Strategy Statement, and a report on London CIV and investment pooling. The Board was also to prepare its Annual Report for 2023-24.