The Committee noted the minutes of the Pension Board and Pension Investment Sub-Committee. The Committee noted the 2023 / 2024 Annual Report, commenting that they were pleased to see continued progress on responsible investment, with an extra £25 million committed to the UK Forestry industry, taking the total commitment to £175 million. The Committee noted the Business Plan, agreeing that officers could start the process of seeking a consultant to review the Fund's current AVC provision. The Committee noted the Governance Update and the Cyber Incident Response Plan and Data Retention Policy. The Committee noted the Risk Register. The Committee noted the Training Update, commenting that they were pleased to see 100% of the attendees at the “Introduction to Pensions” training session would recommend this session to a colleague. The Committee noted Government's open consultation Local Government Pension Scheme (England and Wales): Fit for the future, and agreed to delegate the preparation of the detailed response to the Chief Financial Officer. The Committee approved the Forward Plan.

Pension Fund Annual Report for the year ended 31 March 2024

The Committee received the Pension Fund Annual Report for the year ended 31 March 2024. The report details the Fund's audited financial statements, investments, administration, governance, valuations, accounts, and membership.

The report details several achievements in the last year, including:

• Increasing the Fund’s net assets by £362.7 million to £3,971.3 million.
• Increasing both employer numbers and scheme membership.
• Making significant progress to improve access to information for members through the development of the Fund’s Members’ Portal.

The report also includes details of what was agreed by the Pensions Committee during the year.

Business Plan

The Committee received the latest Business Plan, which is a one-stop-reference-shop for everything going on at Worcestershire Pension Fund and in the LGPS world.

AVC provision

The Committee agreed that officers could begin the process of finding a consultant to review the Fund's current AVC provision. The Head of Pensions Administration is liaising with Worcestershire County Council's Commercial/Procurement team to start the process of signing up to the national LGPS frameworks.

Triennial Valuation 2025

Work has started on the preparations for the 2025 Triennial Valuation. Meetings have taken place with Hymans Robertson LLP, the Fund Actuary¹, and work on contribution modelling is in progress.

An actuary is a business professional who deals with the measurement and management of risk and uncertainty.

The Actuary provided an update to scheme employers at the Employer Forum in October 2024. The next stage of the process will be to receive the results of contribution modelling that has been undertaken on a sample of employers. This will lead to discussions between officers and the Actuary, before being brought to the Board and the Committee in early 2025.

Governance Update

The Committee received the Governance Update, noting the following:

• A Cyber Incident Response Plan has been created, following the recommendations of The Pensions Regulator's General Code of Practice.
• A meeting has been arranged with Heywood's to discuss cyber security and incident response.

The Committee also noted:

• The Good Governance Position Statement October 2024
• The Data Retention Policy.

Risk Register

The Committee noted the Risk Register. The following updates to the Risk Register were discussed:

• Being an LGPSC² partner fund:
  • The Committee noted that LGPSC is currently undergoing a significant amount of change at a senior level. Officers are in contact with the Company, and with the other seven partner funds, and are monitoring the recruitment processes. The Fund has requested and received an organisational chart, in order to understand the qualifications of the leadership team.
• Employers cannot pay their contributions or take on an inappropriate level of risk or their contributions take them too close to limits of their available expenditure.
  • Risk profile analysis is undertaken to understand the strength of an employer's covenant. This process informs the setting of terms of admission agreements, which may include the use of bonds.
• Climate change.
  • LGPSC is tasked with producing an annual climate risk report, which the Fund uses to target managers with high carbon footprints to understand what measures they are taking to reduce their carbon output.
• WCC procurement policies hindering the Fund's ability to secure key investment services efficiently.
  • The Fund is trying to gain greater control over its procurement, by using the Norfolk Framework³ as much as possible.
• Having insufficient resources in pensions administration.
  • The Committee discussed improvements that have been made to resourcing, with only two vacancies remaining in the team. The Committee also noted that apprenticeships have been implemented to help build resilience in the service.

LGPS Central Limited is a pooled investment vehicle for eight local government pension funds: Cheshire, Derbyshire, Leicestershire, Nottinghamshire, Shropshire, Staffordshire, West Midlands and Worcestershire. The Norfolk Pension Fund offers a framework that allows other LGPS funds to procure asset management and related services.

Training Update

The Committee noted the Training Update.

The Committee noted that the following training had been delivered since the last meeting:

• “Introduction to Pensions” training sessions on 10th September and 28 October.
• Sessions on “Understanding your Annual Benefit Statement” on 19 September, 26 September and 3 October.

The Committee was pleased to hear that 100% of attendees said they would recommend the Introduction to Pensions session to a colleague. The average satisfaction score was 4.50/5.00. The Understanding your Annual Benefit Statement sessions were similarly popular, with attendees giving an average score of 4.75/5.00, and 95.83% of attendees saying they would recommend the sessions.

Worcestershire Pension Fund Employer forum 2024 took place week commencing 30 September 2024. Feedback from the forum was positive, with an average satisfaction score of 4.00/5.00.

The Committee received an update on registrations to the member portal, noting the following registration percentages:

• Active members: 38.73%
• Deferred members: 12.44%
• Pensioner Members: 5.31%

The following updates to training processes were also discussed:

• Insufficient knowledge amongst members of Pensions Committee / Pension Board / Pension Investment Sub Committee members.
  • A training needs analysis questionnaire has been sent to Board and Committee members. This will help officers to understand where they can offer additional support to members, and to create a personalised training plan for each member.
• Failure of officers to maintain a sufficient level of knowledge / competence or to act in accordance with our roles and responsibilities matrix.
  • Officers have been taking LOLA⁴ courses to support their continued learning.
• Incorrect calculation of benefits through human error or delayed notification of a death.
  • Improvements have been made to the death processing workflow.

The Local Government Pension Scheme's Online Learning Academy

Open Consultation - LGPS (England and Wales): Fit For The Future

The Committee received a report on the government's open consultation Local Government Pension Scheme (England and Wales): Fit for the future. The Committee agreed to delegate the preparation of the Fund's response to the consultation to the Chief Financial Officer, in consultation with the Chairman of the Pensions Committee.

The consultation covers several topics:

LGPS Pooling

The government is proposing to introduce several changes to how assets are pooled in the LGPS.

The key themes of these proposals are:

• Full delegation: Administering Authorities (AAs) will be required to fully delegate the implementation of their investment strategy to their pool. This would mean that AAs will be able to set high-level investment objectives, but that LGPSC will be responsible for deciding exactly how to implement them.
• Investment advice from pool: AAs will have to take their principal investment advice from their pool, rather than from their independent investment advisor.
• Legacy assets: AAs will be required to transfer their legacy assets⁵ to the pool, by 31 March 2026.

A legacy asset is an asset that predates the introduction of asset pooling in 2015.

These proposals may introduce a number of challenges:

• Fiduciary duty: AAs will be handing over control of their assets, making it more difficult for them to fulfil their fiduciary duty.
• Conflict of interest: There will be a significant conflict of interest for LGPSC, as it will be responsible for both creating and implementing the investment strategy.
• Capacity: It will be difficult for LGPSC to take on a large increase in assets, including illiquid holdings, in the 16 month timeframe provided.

Local Investment

The Government intends for the LGPS to make an increased contribution to UK and local economic growth. The Government is proposing:

• That AAs consider local economic priorities when setting their investment strategy.
• That AAs set targets for local investment.
• That pools develop the capability to assess local investment opportunities.

The Committee had previously recognised several challenges to local investment:

• Diversification: Local investment may restrict the Fund's ability to properly diversify its portfolio.
• Availability of opportunities: It may be difficult to find suitable investment opportunities locally.
• Political risks: There is a potential for local investment to expose the Fund to political interference.

Governance of funds and pools

The Government is proposing to introduce some recommendations from the Scheme Advisory Board (SAB) Good Governance Review. The government's proposals include:

• Biennial independent governance reviews: AAs will have to take part in a review of their governance practices every two years.
• Independent person: Pension committees will be required to include an independent pensions professional.
• AA representation on pool boards: Pool boards will be required to include one or two representatives from the shareholder AAs.
• Performance reporting: Pools will be required to publish their asset performance and transaction costs.
• Senior LGPS officer: Funds will be required to appoint a senior LGPS officer. This is something the Fund has already done.

Collaboration and Consolidation

The Government want pools to increase their collaboration with each other. They want pools to share specialisms, to help them to achieve critical mass in niche areas. Increased collaboration may also help to achieve greater alignment on net zero strategies.

The Government is encouraging existing pools to take on greater responsibility for investment decisions, at a faster rate. There is a strong possibility that this approach will lead to the merger of some pools, to help them to achieve FCA authorization and to meet the March 2026 deadline for pooling all assets.

Forward Plan

The Committee approved the Forward Plan. The Forward Plan states that, among other things, there will be a report to the next Pensions Committee meeting on LGPSC's budget and business plan, and on the outcome of the consultation on Local Government Pension Scheme (England and Wales): Fit for the future.