Agenda and minutes

In attendance:

Mr S Greene, Head of Pension Fund, Lancashire County Council.

Mr M Wilson FIA, Senior Associate, Mercers.

Ms A Devitt, Independent Investment Adviser.

Ms M George Independent Investment Adviser.

Ms L Sales, Director of Corporate Services, Lancashire County Council.

Mr M Neville, Senior Democratic Services Officer, Lancashire County Council.

Mr C Rule, Chief Executive, Local Pensions Partnership.

Mr G Smith, Director of Strategy, Local Pensions Partnership.

Ms J Darbyshire, Director of Administration, Local Pensions Partnership.

Mr W Bourne, Chair of the Lancashire Local Pension Board.

The Chair welcomed everyone to the meeting and invited those present to join him in a Minute silence in memory of Her Majesty Queen Elizabeth the Second.

Apologies for absence were received from County Councillors A Gardiner and H Hartley together with Co-opted members Councillor E Whittingham and Ms S Roylance. It was also noted that Councillor D Borrow would be attending the meeting but had been slightly delayed.

Members are asked to consider whether they need to disclose any pecuniary and non-pecuniary interest in matters appearing on the agenda. If a member requires advice on declarations of interest he/she is advised to contact Josh Mynott, Democratic Services (telephone 01772 534580) in advance of the meeting.

No disclosures of Pecuniary/Non-Pecuniary interest in relation to items on the agenda were made at this point in the meeting.

The Committee is asked to agree that the attached Minutes are an accurate record and can be signed by the Chair.

Since the last meeting confirmation has been received regarding the appointment of the following Co-opted members - Councillor M Smith (representing Blackpool Council) and Councillors D Borrow and M Dad (representing City/Borough Councils).

A copy of the updated Terms of Reference agreed at the last meeting and subsequently approved by Full Council on 14^th July 2022 are also attached for information and a copy has been placed in the Minute Book for future reference.

Mr Neville, Senior Democratic Services Officer, reported that since the last meeting confirmation had been received that Co-opted members Councillor M Smith, Councillor D Borrow and Councillor M Dad had all been formally appointed to the Committee. He also reported that the updated Terms of Reference of the Committee had been approved by full Council on 14^th July 2022 and a copy placed in the Minute Book for future reference.

Resolved: That the Minutes of the meeting held on 17^th June 2022 are confirmed as an accurate record and signed by the Chair.

The Head of Fund presented a report which updated the Committee on two key regulatory developments relating to pensions – the Pensions Dashboard and implementation of the McCloud judgement.

The Committee noted that further information regarding the Dashboard would be presented to members of the Committee/Pension Board as part of a technical update by the Local Pensions Partnership at a workshop to be held at 10.00am on Monday 5th December 2022 in The Exchange at County Hall, Preston.

Resolved: That the updates on the Pensions Dashboard and implementation of the McCloud judgement, as set out in the report presented, and discussed at the meeting, are noted.

The Committee considered a report on the income and expenditure of the Fund for the 3-month period up to 30^th June 2022 which included a forecast for the financial year ending 31st March 2023. In response to a query on investment management fees the Head of Fund reported that such fees were directly linked to the value of the Fund's assets which during the year to date had decreased, resulting in lower-than-expected management fees. However, it was noted that this was not unusual for Q1 and the forecast for fees for the year end was not altered.

Resolved: That the financial performance of the Fund for the 3 months up to 30th June 2022, together with the budget and forecast variances, as set out in the report presented, are noted.

The Head of Fund presented a report to update the Committee on the issues of materiality and the Fund's approach to the handling of overpayments, in response to points raised at the last meeting. Regarding overpayments it was noted that the Fund would continue to work with Local Pensions Partnership Administration Ltd on communications aimed at minimising future overpayments following the death of scheme members. It was also reported that in future a monitoring report on the write offs of overpayments would be presented annually to the Committee for information.

Resolved: That the report is noted, and that in future the Committee receive a monitoring report annually regarding the management of write offs of historic overpayments.

The Committee considered a report on the draft Lancashire County Pension Fund Annual Report for the year ended 31^st March 2022 which included the statement of accounts (within the Lancashire County Council Statement of Accounts) as approved by the Audit, Risk and Governance Committee.

The Head of Fund reported that text in the Foreword to the Annual Report would be amended to read 'Since we began pooling in 2016, £40.3m worth of savings have been achieved within the Fund' to clarify the level of savings achieved. It was also suggested that some text in the Responsible Investment section relating to the depletion of natural resources be reviewed and amended. It was further reported that a summary document (highlighting key areas of activity and performance) would be produced for circulation to scheme members and employers once the Annual Report was published, possibly complimented by an animation on the Fund website explaining the key messages from the Annual Report and performance of the Fund.

On behalf of the Committee the Chair thanked the Head of Fund and his team for their work on producing the draft Annual Report.

Resolved: That, subject to any minor amendments, an updated audit opinion and small account updates to be agreed by the Head of Fund, the Annual Report set out at Appendix 'A' to the report presented, is approved for publication on or before 1^st December 2022.

The Committee considered a detailed update report from Local Pensions Partnership Investments Limited on responsible investment activity during Q2 of 2022 (April to June).

In response to a query Mr Rule, Chief Executive of the Local Pensions Partnership, confirmed that the Company was committed to achieving net zero emissions by 2050 and was already working towards an interim target for 2030

The Chair informed the meeting that the report author, Mr Master from the Pensions Team, would be leaving the County Council shortly and thanked him for his work in supporting the Fund.

Resolved: That the report is noted.

A report was presented on four internal training workshops which had taken place since the last meeting and County Councillor De Molfetta reported that he had found recent workshops informative and helpful. The Chair reminded the Committee that the Local Pensions Partnership Investment Conference would be held on the 1^st /2^nd March 2023 in London and asked that further details be circulated to Committee members outside of the meeting.

Resolved: That the report and feedback given at the meeting is noted and that further information regarding the Local Pensions Partnership Investment Conference on the 1^st /2^nd March 2023 be circulated to Committee members outside of the meeting.

An item of urgent business may only be considered under this heading where, by reason of special circumstances to be recorded in the Minutes, the Chair of the meeting is of the opinion that the item should be considered at the meeting as a matter of urgency.  Wherever possible, the Chief Executive should be given advance warning of any Member’s intention to raise a matter under this heading.

No items of urgent Business were raised at the meeting under this heading.

The next meeting will be held at 10.30am on 25th November 2022 in Committee Room 'A' the Tudor Room at County Hall, Preston.

The next scheduled meeting will be held on 26^th November 2022 in Committee Room 'A' – the Tudor Room at County Hall, Preston starting at 10.30am, preceded by a briefing at 10.00am on the work of the Local Pension Board.

The Committee is asked to consider whether, under Section 100A(4) of the Local Government Act, 1972, it considers that the press and public should be excluded from the meeting during consideration of the following items of business on the grounds that there would be a likely disclosure of exempt information as defined in the appropriate paragraph of Part 1 of Schedule 12A to the Local Government Act, 1972, as indicated against the heading to the item.

Resolved: That the press and public be excluded from the meeting during consideration of the following items of business on the grounds that there would be a likely disclosure of exempt information as defined in the appropriate paragraphs of Part 1 of Schedule 12A to the Local Government Act, 1972, as indicated against the heading of each item. It is considered that in all the circumstances the public interest in maintaining the exemption outweighs the public interest in disclosing the information.

Exempt information as defined in paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972. It was considered that in all the circumstances of the case the public interest in maintaining the exemption outweighed the public interest in disclosing the information.

The Head of Fund and Mr M Wilson FIA, Senior Associate from Mercers updated the Committee on progress to date in relation to the actuarial valuation, including a timetable for presenting updated documents/policies to the Committee for approval

An updated version of the Employer Risk Policy was presented at the meeting for consideration, and it was reported that the Funding Strategy Statement would be presented to the next meeting.

Resolved: That the report is noted and the Employer Risk Policy, as set out at Appendix 'A' to the report presented, is approved.

Exempt information as defined in paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972. It was considered that in all the circumstances of the case the public interest in maintaining the exemption outweighed the public interest in disclosing the information.

Ms J Darbyshire, Director of Administration from the Local Pensions Partnership Administration Ltd updated the Committee on progress regarding the implementation of a new pensions administration system (Project PACE). She reported that whilst there had been some issues, Phase 1 of the Project had gone well, and those Funds included in Phase 2 (including Lancashire) would benefit from the experience gained.

An update was also provided on other pension system changes due to take place in the forthcoming months that would interact with the new pensions admin system, and it was noted that whilst LPPA staff and the Pension Fund Team had collaborated on the project, substantial work still needed to take place ahead of the 28^thOctober 2022 'go live' date for Lancashire.

Resolved: That the updates regarding the implementation of Project PACE and other pension system changes are noted.

Exempt information as defined in paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972. It was considered that in all the circumstances of the case the public interest in maintaining the exemption outweighed the public interest in disclosing the information.

Mr G Smith, Director of Strategy from the Local Pensions Partnership presented a report on activity by the Group which included updates on governance, strategy, and finance. The Committee discussed performance by the pension administration service and recognised the initial impact resulting from implementation of Phase 1 of Project PACE.

Resolved: That the updates on the activity and financial position of the Local Pensions Partnership Group, as set out in the report presented, are noted.

Exempt information as defined in paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972. It was considered that in all the circumstances of the case the public interest in maintaining the exemption outweighed the public interest in disclosing the information.

Ms Devitt, Independent Investment Adviser, presented her report on the macro-economic factors which influenced the investment market in which the Fund operated. When considering the report members of the Committee discussed factors such as inflation, increasing energy costs and the potential impact of a recession.

Resolved: That the update on the macro-economic factors which influence the investment market in which the Lancashire County Pension Fund operates is noted.

Exempt information as defined in Paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972. It was considered that in all the circumstances of the case the public interest in maintaining the exemption outweighed the public interest in disclosing the information.

Ms George, Independent Investment Adviser to the Fund, presented a report on the performance of the Fund in Q2 (April to June) which included details of the performance of individual asset allocations against benchmarks, cashflows, and the current funding level. Regarding the total portfolio return over different periods Ms George reported that whilst the Fund had been impacted in the short term by current volitivity in the market the expected return over 12 months and 3 to 5 years remained strong and above benchmarks.

Resolved: That the summary of the Fund's performance in Q2 of 2022, as set out in Appendix 'A' to the report presented is noted.

Exempt information as defined in Paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972. It was considered that in all the circumstances of the case the public interest in maintaining the exemption outweighed the public interest in disclosing the information.

The Head of Fund presented a report on the various matters which were discussed at the Investment Panel on 16^th June 2022, as set out in the Minutes of that meeting.

Resolved: That the Minutes of the Investment Panel held on 16^th June 2022 are noted.

Representatives from the Local Pensions Partnership left the meeting at this point.

Exempt information as defined in Paragraph 3 of Part 1 of Schedule 12A of the Local Government Act 1972. It was considered that in all the circumstances of the case the public interest in maintaining the exemption outweighed the public interest in disclosing the information.

The Head of Fund presented a report on the key findings of an independent review of the governance of Local Pensions Partnership, highlighting various options available to shareholders and an initial implementation timeline/project plan.  It was noted that a further report on the matter would be brought to the next meeting.

Resolved: That the report be noted, and arrangements made for a briefing  to be held with Committee members before the next meeting on 25^th November 2022 to enable the options outlined in the report to be discussed in more detail.