The agenda for the Berkshire Pension Fund Committee meeting on 16 December 2024 contains reports on several important and varied topics, including; the ongoing implementation of the McCloud Remedy, an update on the Fund's administration, its approach to Risk Management, and a discussion on the Department for Levelling Up, Housing & Communities (DLUHC) consultation on the future of the Local Government Pension Scheme (LGPS). The Committee will also receive reports on the Fund's Responsible Investment activities, the implementation of the Pensions Dashboards Programme, and an update on progress toward the 2025 actuarial valuation.

McCloud Remedy

The Committee will receive a report on the McCloud Remedy project. The McCloud Remedy is a legal requirement arising from a judicial review which found that transitional protections put in place when the LGPS scheme rules changed in 2014 and 2015 were discriminatory. Those protections, known as 'underpinning' mean that members receive the better of two calculations, one based on the pre-2014 scheme rules and one based on the current scheme rules. The remedy extends this protection to all eligible members regardless of age. The report pack explains that the remedy requires the Fund to retrospectively recalculate benefits for all members whose benefits include a post-2014 element. The report includes a project plan that states that initial training has been delivered to the Pension Team by the actuarial firm Hymans Robertson. The report pack contains a project risk register that says:

There is a possibility that qualifying scheme members cannot be identified with 100% accuracy. This may result in some scheme members being excluded from in-scope and other scheme members included who should not be. Incorrect calculations could result from this.

The Committee will also receive a report on the Fund's administration. It contains Key Performance Indicators for a range of areas such as processing new starters, deaths, retirements and refunds. This report explains that the Pension Fund has had to apply to its Administering Authority - Royal Borough of Windsor and Maidenhead Council - for additional funding for staff because:

The work required to deal with McCloud remedy is not only retrospective it is ongoing as members benefits will need to be assessed continually for many years to come against the McCloud remedy requirements.

Risk Management

The Committee will consider an updated Risk Management Policy for the Royal County of Berkshire Pension Fund. The report pack explains that the updates come following a workshop on the Fund’s Risk Management processes that was attended by members of the Committee, the Pensions Advisory Panel, the Local Pension Board, and officers from RBWM. They include a change to the way that the impact of risks are assessed and reported. Previously, each risk was scored by its potential impact on the Fund, Employers, or the Fund’s reputation. The new policy states that:

As noted above, the “impact on life” criterion has been removed from the scoring assessment for “Fund” and “Employer” impacts, as it is not considered directly relevant in this section. Further consideration is required as to whether the “impact on life” assessment could be combined with other Environmental, Social and Governance (ESG) impacts in broadening the current “Reputation” impact assessment criteria.

The updated policy also changes the risk scoring criteria for cost/budgetary impacts by splitting them into ‘operational/employer’ and ‘investment’ values, so that the potential impact of a risk on employers can be assessed independently from its impact on investments.

The Committee will also receive an updated risk register¹. The highest scoring risk, relating to the successful implementation of the McCloud Remedy, remains unchanged since the previous meeting. The report pack notes that the risk score for PEN23, concerning the knowledge and skills of Committee and Board Members to fulfil their role, remains high but that:

With the exception of the Chairman, all members of the Local Pension Board have completed the toolkit.

The report pack states that whilst the consultation document “LGPS (England and Wales): Fit for the future” contains proposals that would formalise the knowledge and understanding requirements for committee members, no change to the risk score is proposed at this stage.

Administration Report

The Committee will receive the regular administration report that contains details of the Fund's performance in areas such as processing new starters, deaths, retirements and refunds. The report highlights that, for the second quarter in a row, West Berkshire Council and RBWM failed to submit data to the Fund via i-Connect - the online portal through which employers submit data to the Pension Fund. The report pack explains that West Berkshire Council’s failure was due to system errors, but that:

RBWM delays stemming from automation of pension updates unrelated to the payroll system. The problem arose from the data format during transmission, despite having conducted testing that indicated it would work.

It goes on to say that both Councils reverted to manual submissions.

The report also explains that the onboarding of new employers to the i-Connect system continues, with three new employers; Excalibur Academies Trust, Newbury College and Seetec joining the system, bringing the total number of participating employers to 126.

Good Governance

The committee will receive a report on good governance that contains discussion of the Pensions Regulator's new general code of practice. The report pack says that the code came into effect in March 2024 and that:

She conducted a desktop review using a compliance checklist purchased from Barnett Waddingham. The review found that the Fund was fully compliant in 29 of 53 applicable modules, partially compliant in 14, and non-compliant in two areas, specifically around knowledge and understanding for Board and Committee Members.

The report pack also contains discussion of the Fund's external audits and says that:

Recent legislation required all outstanding local authority audits, including those for the year ending March 2023, to be completed by 13 December 2024, addressing a significant backlog in audits.

Responsible Investment

The Committee will receive a report on the Fund's responsible investment activities, which will include a dashboard of information on its performance in areas such as climate change, pollution and biodiversity. The report pack states that:

Investments in Brown sectors (extraction, transportation, storage, supply, and generation of energy from fossil fuels) are 1.24% of the portfolio.

The report will also include details of the Fund's engagement activities, including a case study on its engagement with the asset management firm Robeco on climate change. The report pack explains that Robeco currently engages with 49 companies in the LPPI Global Equities Fund (GEF) and 19 companies in the LPPI Fixed Income Fund (FIF), and that:

As a result of our own data analysis and these manager discussions, we determined that setting separate targets for our investment grade and high yield corporate bond exposures made the most sense and that a WACI-based benchmark-relative decarbonisation pathway was the most pragmatic solution.

Local Government Pension Scheme (England and Wales): Fit for the Future

The committee will discuss the MHCLG Consultation “Local Government Pension Scheme (England and Wales) : Fit for the Future” behind closed doors.

The agenda indicates that the meeting is expected to cover several other topics, including updates from LPPI on the Fund's investment performance, a review of the fund's annual report for 2023-24, and a discussion of proposed learning and development activities for committee, panel, board and officers. A draft of the Committee's work plan for 2025-26 will also be considered, as will the proposed schedule of meetings for the Local Pension Board for the municipal year 2025-26.