The meeting received updates on a number of topics, including the government's recent budget announcement, progress on the Merseyside Pension Fund's (MPF) Catalyst Fund, cyber security, a review of the Fund’s investments in defence companies and the Pension Administration Strategy.

Government Budget 2024

The meeting received a report on the recently announced government budget. Of particular note was the Chancellor’s decision that unspent defined contribution pension pots, including death grants, would form part of a person's estate for inheritance tax purposes from 6 April 2027.

Previously, the recipient of the death grant was at the discretion of the administering authority, placing it outside of consideration for inheritance tax. A consultation has been launched on the technical aspects of how pension scheme administrators will report and pay any inheritance tax due on unused pension funds and death grants. The consultation will close on 22 January 2025.

The meeting also noted the introduction of the Investment Rule, targeting a reduction in net financial debt by changing the measure of public debt from Public Sector Net Debt (PSND) to Public Sector Net Financial Liabilities (PSNFL). This change brings assets and liabilities held by funded public sector pension schemes, such as the Local Government Pension Scheme (LGPS), into consideration.

Catalyst Fund

The Catalyst Fund, launched in 2016, supports development and refurbishment projects in the Merseyside area, promoting job creation and regeneration while generating a commercial return. It has committed over £170 million to nine assets across real estate and infrastructure debt, and private equity investments. The fund focuses on projects with strong BREEAM¹ credentials, incorporating sustainability measures and environmental improvements.

Active projects include the Mersey Heat Network, a district heating system serving 9,000 homes and commercial units in the Liverpool Waters area. The fund increased its commitment to the project to £20m in 2022. Additionally, £27 million was invested in the acquisition and refurbishment of the Royal Albert Dock in Liverpool, with plans to improve occupancy, energy efficiency, and social impact.

The meeting also received an update on the Fund’s £56.5 million investment in the construction of five residential blocks in Liverpool’s Baltic Triangle. Developed by Legacie, the project will deliver 633 high-quality residential units incorporating environmentally friendly features, such as air source heat pumps.

The Catalyst Fund has also participated in a £36 million club development loan with the Greater Manchester Pension Fund (GMPF) to support a 550,000 sq ft warehouse development at X-Docks Widnes. The development, located near major transport links, will create approximately 450 jobs and adhere to high environmental standards.

Cyber Security Policy

The Board considered a draft Cyber Security Policy. Designed in line with the Occupational Pension Schemes (Governance) (Amendment) regulations 2018 and the Pension Regulator’s General Code of Practice, the policy addresses the increasing threat of cyber-attacks and data breaches. The policy outlines aims and objectives to protect the Fund's data, assets, and reputation, including managing third-party cyber risks, training staff, and implementing incident response plans. It will be reviewed annually by the Fund and in line with Wirral Metropolitan Borough Council’s (WMBC) review program for Cyber Security and Governance.

Investments in Defence Companies

The meeting discussed the Fund's investments in defence companies, focusing on fiduciary duty, responsible investment, and guidance in relation to the LGPS. The discussion was informed by a paper prepared by Redington, the Fund’s investment consultant, which analyzed various approaches to responsible investment in defence companies, including exclusion policies and engagement strategies. The meeting considered the latest fiduciary guidance and draft legislation, levers for supporting objectives, and survey results on responsible investment beliefs.

Concerns were raised about the potential impact of divestment on local employment, requesting a report evaluating aerospace and defence employment in the Wirral and Merseyside areas.

The Board also noted the recent guidance issued by the LGPS Scheme Advisory Board (SAB) regarding fiduciary duty and lobbying pressure related to the conflict between Israel and Gaza. The guidance emphasized that investment decisions should not be driven by political views and highlighted the quasi-trustee role of Pensions Committees, emphasizing the importance of acting in the best interests of scheme members.

It was agreed that the MPF should ensure that it does not hold investments in companies that manufacture weapons proscribed by international treaty to which the UK government is a signatory.

Pension Administration Strategy

The Board received a report on the Pension Administration Strategy, which provides monitoring information on key performance indicators for the period 1 July 2024 to 30 September 2024. The report included data on membership movements, workflow statistics, performance standards, pensions in payment, employer base, contribution monitoring, complaints, the Internal Dispute Resolution Procedure (IDRP), communications, the Member Web Portal (MyPension), and cybersecurity.

The report noted the Local Government Association’s (LGA) release of two Pension Dashboard guides, and the commencement of work to connect to the dashboard system. Updates were also provided on cyber security and the development of a cyber security governance document in collaboration with Wirral IT.