Agenda and minutes

To receive any apologies for absence.

No apologies for absence were received at the meeting.

The Chairman welcomed Committee members and others, and made the following statement:

“In the light of the increasing Covid-19 case rates and projected increases through August and September, in consultation with group leaders, Dorset Council’s Chief Executive has exercised his emergency powers to revert to informal virtual meetings.

Where a decision is required, committee members will express a ‘minded to’ decision in respect of recommendations set out in officer reports, with decisions being made under officer delegated authority in the light of ‘minded to decisions’ expressed by members in the virtual meetings

Accordingly, this meeting has those arrangements in place.”

To receive and note the minutes of the meeting held on 15 June 2021.

The minutes of the meeting held on 15 June 2021 were received and noted by the Chairman.

To disclose any pecuniary, other registrable or non-registrable interests as set out in the adopted Code of Conduct. In making their decision councillors are asked to state the agenda item, the nature of the interest and any action they propose to take as part of their declaration.

If required, further advice should be sought from the Monitoring Officer in advance of the meeting.

No declarations of disclosable pecuniary interests were made at the meeting.

To receive questions or statements on the business of the committee from town and parish councils and members of the public.

The public questions, together with the responses from the Chairman of the Committee, are set out in the Appendix to the minutes.

To receive questions or statements on the business of the committee from Dorset Council elected members. 

There were no questions from members.

To consider any items of business which the Chairman has had prior notification and considers to be urgent pursuant to section 100B (4) b) of the Local Government Act 1972. The reason for the urgency shall be recorded in the minutes.

There were no urgent items.

To consider the quarterly report on pension fund administration.

The Committee considered a report from officers on operational and administration matters relating to the pension fund.

The change of administration system since the last meeting meant that Key Performance Indicators (KPI) reporting was not available but would resume before the next meeting in November. The new system was working well but development and testing had taken longer than anticipated.  Historic records had moved across from the old system. 

The chairman greatly appreciated the efforts of the administration team to implement the changes particularly given the disruption caused by Covid on working practices.

Officers would investigate whether Her Majesty’s Revenue & Customs (HMRC) Connect was an appropriate fraud detection tool in addition to existing measures employed such as the National Fraud Initiative.

The final results of the 2016 and 2020 cost cap reviews could result in changes to benefits going back to 2016.  In addition, the changes to benefits resulting from the remedy for the McCloud case were still unknown.

Noted

To consider the quarterly report of the pension fund’s independent investment adviser on the outlook for the pension fund’s investments.

The Committee considered a report from Alan Saunders, the pension fund’s Independent Investment Adviser, that gave his views on the economic background to the pension fund’s investments, the outlook for different asset classes and key market risks.

Inflation continued to be a concern.  Central banks seemed ‘relaxed’ that increases were transitory as economies recovered from the impacts of the pandemic and had given no indication of immediate action.  Tapering of quantitative easing was anticipated but increases to interest rates were not.  However, some commentators were concerned that there were more structural reasons for inflation rises and feared a ‘wage-price’ spiral could emerge that would ‘lock-in’ higher inflation for longer.

The implied long-term annual UK inflation rate in the market was 3.6% compared to the Bank of England target of 2%.  This meant that the cost of inflation hedging was prohibitive to increasing the hedging ratio at this time.

Noted

To consider the quarterly report of the Fund Administrator including an update on the funding position, the value and performance of investments and other topical issues.

The Committee considered a report from officers on the pension fund’s funding position, asset valuation, investment performance and asset allocation as at 30 June 2021.

The value of the pension fund’s assets ended the quarter at £3.5 billion compared to £3.3 billion at the start of the financial year. The funding position estimated by the actuary was that the value of the pension fund’s assets covered 86% of the present value of liabilities. The investment return for the quarter was nearly 6%, above the combined benchmark by about 1.3%.  Just under 30% of the pension fund’s liabilities were hedged against inflation sensitivity using 11.2% of assets to do so.  Nearly two thirds of the pension fund’s assets were now under the management of Brunel.

Target allocations to public markets had been achieved or exceeded but achieving target allocations for private market assets remained a challenge.  Following the previous day’s training, officers would prepare proposals for commitments to Brunel’s cycle three private markets’ funds for consideration by the Committee at the next meeting 30 November 2021.

Hermes, one of the pension fund’s infrastructure managers, and Aberdeen Standard, one of the pension fund’s private equity managers would both be invited to a future meeting of the Committee to discuss performance concerns.

Cllr John Beesley, the pension fund’s representative on the Brunel Oversight Board, updated the Committee on governance matters relating to the investment pooling partnership.

Noted

To consider the report of the external auditor for 2019/20

The Committee considered the draft report of Deloitte, the pension fund’s

independent external auditor, on the financial statements for2019/20.  No

substantive matters and been identified but it was noted that this was still not

the final report.  The final report would be circulated to Committee members

when it was received.

Noted

To confirm the dates for the meetings of the Committee in 2021:

        10am Tuesday 30 November 2021 – County Hall (tbc)

Resolved

That meetings be held on the following dates:

        10am Tuesday 30 November 2021 – County Hall, Dorchester (tbc)

To move the exclusion of the press and the public for the following item in view of the likely disclosure of exempt information within the meaning of paragraph 3 of schedule 12 A to the Local Government Act 1972 (as amended).

The public and the press will be asked to leave the meeting whilst the item of business is considered.

Resolved

That under Section 100A(4) of the Local Government Act 1972, the public be excluded from the meeting for the business specified in minute 14 because it was likely that if members of the public were present there would be disclosure to them of exempt information as defined in Paragraph 3 of Part 1 of Schedule 12A to the Act and the public interest in withholding the information outweighs the public interest in disclosing that information.

To consider a report from CBRE, the pension fund’s property investment manager.

The Committee considered a report from CBRE Global Investors, the pension fund’s property investments manager.  CBRE gave an update on market conditions and outlook for the sector, recent transactions, lease expiries and vacancies.

Noted

Question 1:  Vicki Elcoate

Councillor Canning told me earlier this year that the data in the UK Divest Report for Friends of the Earth of February 2021 was out of date for Dorset Council (https://www.divest.org.uk/wp-content/uploads/2021/03/UKDivest_Report.pdf).

He said that since those figures, which related to the 2019/2020 financial year, Dorset Council had undertaken a major strategic review of its pension fund investments. He promised an update after March 2021.  The question is: what is the current amount of investment in fossil fuels (I understand these are indirect investments)? The figures provided by the Friends of the Earth report are for the amount in £s of investments and the % that is of the overall investments. It would be useful to have it in the same format to compare. So this is not a question about the carbon footprint or the carbon intensity of the investments. The figure in the Friends of the Earth report was £128 million in indirect investment in fossil fuels. This put Dorset in the top 10 of local authority pension funds for fossil fuel investments. What is the current figure?

Answer 1

As part of the government’s requirement for Local Government Pension Scheme (LGPS) funds to pool investments the Dorset County Pension Fund no longer holds direct investments in companies.  Instead, the vast majority of its equity investments are now in pooled investment vehicles managed by the Brunel Pension Partnership, the LGPS investment pooling manager set up and fully owned by the administering authorities of ten LGPS funds including Dorset.

Brunel regularly publish details on their website of the underlying holdings in all their pooled investment vehicles.  Using this information officers have estimated that the value of the pension fund’s investments as at 31 March 2021 in companies primarily involved in the exploration, production, mining and/or refining of fossil fuels was approximately £41M (1.2% of total investment assets).

Question 2:  Tracee Cossey 

It is clear that pension funds exposed to the fossil fuel system in the coming decade will face a rollercoaster ride of disruption, write-downs, financial instability and share price deratings as markets adjust (Hobcraft, 2020)’ in UK Divest.

https://www.divest.org.uk/wp-content/uploads/2021/03/UKDivest_Report.pdf

Does Dorset Council see itself as ultimately responsible for any losses incurred to themselves and their Pension Fund Members by refusing to insist on 100% divestment from fossil fuels now or are Brunel Investments responsible?

Answer 2

The Dorset County Pension Fund is part of the Local Government Pension Scheme (LGPS) which is a national pension scheme administered locally.  It is a ‘defined benefit’ scheme which means that benefits for scheme members are calculated based on factors such as age, length of membership and salary not investment performance as they would be in a ‘defined contribution’ scheme. 

Dorset Council (DC) is the administering authority for the LGPS in Dorset which provides pensions and other benefits for employees of DC, other councils and a number of other organisations within the county.  DC has delegated its responsibilities as an administering authority to the Pension  ...  view the full minutes text for item 124.