Agenda and minutes

To receive any apologies for absence.

An apology for absence was received from Cllr Peter Wharf.

To confirm the minutes of the meeting held on 14^th June 2022 and 9^th November 2022.

The minutes of the meetings held on 14 June and 9 November were confirmed and signed.

To disclose any pecuniary, other registrable or personal interest 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.

Representatives of town or parish councils and members of the public who live, work, or represent an organisation within the Dorset Council area are welcome to submit up to two questions or two statements for each meeting. 

Alternatively, you could submit one question and one statement for each meeting. All submissions must be emailed in full to Joshua.kennedy@dorsetcouncil.gov.uk by 08:30 am Thursday 24^th November 2022.

When submitting your question(s) and/or statement(s) please note that:

· no more than three minutes will be allowed for any one question or statement to be asked/read

· a question may include a short pre-amble to set the context and this will be included within the three-minute period

· please note that sub divided questions count towards your total of two

· when submitting a question please indicate who the question is for (e.g. the name of the committee or Portfolio Holder)

· Include your name, address and contact details.  Only your name will be published but we may need your other details to contact you about your question or statement in advance of the meeting.

· questions and statements received in line with the council’s rules for public participation will be published as a supplement to the agenda

· all questions, statements and responses will be published in full within the minutes of the meeting.

Dorset Council Constitution Procedure Rule 9

No questions or statements from members of the public were made at the meeting.

To receive questions submitted by councillors.

Councillors can submit up to two valid questions at each meeting and sub divided questions count towards this total. Questions and statements received will be published as a supplement to the agenda and all questions, statements and responses will be published in full within the minutes of the meeting.

The submissions must be emailed in full to Joshua.kennedy@dorsetcouncil.gov.uk by 08:30 am Thursday 24^th November 2022.

Dorset Council Constitution – Procedure Rule 13

No questions from Councillors were made at the meeting.

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.

No urgent items were raised at the meeting.

To receive a verbal update from the pension fund’s external auditor on the progress of the external audits of the pension fund accounts and annual reports.

Ian Howse, Deloitte, gave an update on progress completing the independent external review of the pension fund accounts for 2020/21 and 2021/22.

The audit for 2020/21 was substantially complete with no reason not to expect an unqualified opinion.  The opinion on the pension fund accounts formed part of the wider opinion on Dorset Council’s accounts which had been held up due to a national issue regarding the valuation of infrastructure assets. A Statutory Instrument on this matter was expected to be brought before Parliament before Christmas which would clarify this issue and allow the audit to be completed in early 2023.  Work on the audit of the 2021/22 accounts was underway with no matters of concern identified to date.

It was expected to take most of 2023 for audit work to get back to normal pre-Covid timescales.  Deloitte were temporarily withdrawing from local government audit work which meant Dorset Council would be appointing a new auditor for 2023/24.

It was also noted that delays in completing the audit of the pension fund accounts had caused a material impact on the work of auditors for other scheme employers.

To consider the quarterly performance report of Brunel Pension Partnership, the pension fund’s Local Government Pension Scheme (LGPS) investment pooling manager.

The Committee considered the quarterly report of Brunel Pension Partnership (Brunel), the pension fund’s Local Government Pension Scheme (LGPS) investment pooling manager.

Many of Brunel’s portfolios had underperformed over the quarter and 12 months to date but Brunel believed the fundamentals of businesses owned, such as earnings and the ability to generate cash, remained sound. Brunel did not believe that there was a long-term trade-off between their responsible investment approach and performance returns.  The independent investment adviser felt that the responsible investment approach needed to be smarter to avoid overpaying for assets.

The revised format of the report was felt to be a big improvement and it would continue to evolve, with any feedback welcomed.

To receive a verbal update from Cllr John Beesley in his capacity as the Committee’s representative on the Brunel Oversight Board and as a member of the Scheme Advisory Board (SAB) for the Local Government Pension Scheme (LGPS).

Cllr John Beesley, the pension fund’s representative on the Brunel Oversight Board (BOB), and also a member of the LGPS Scheme Advisory Board (SAB), updated the Committee on governance matters relating to investment pooling.

More work was needed to understand the Committee’s options if investment under performance by Brunel persisted (“Plan B”).

Brunel had been working with some of their other clients to identify opportunities for local impact investing which was something that the Committee could consider in future.

There was an opportunity through SAB to influence the government’s position on pooling related matters such as ‘levelling up’, pace of transition and commitment to pooling by LGPS funds.

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. 

Performance against Key Performance Indicators (KPIs) was generally good with some exceptions. A summary of complaints could be reported to Committee annually in future.  Officers were already required to report complaints annually to the Pension Regulator.  The average number of days to achieve certain activities could be useful in addition to the KPI percentage achieved.

The McCloud remedy was expected to generate a significant amount of additional work. Officers were reasonably confident sufficient resources would be available to deal with this due to an ongoing recruitment campaign and also because the quality of the pension fund’s data was good.

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 Steve Tyson, MJ Hudson, the pension fund’s Independent Investment Adviser, that gave his views on the economic and market background to the pension fund’s investments, the outlook for different asset classes and key market risks.

Equites and bonds markets were down, inflation and interest rates were up and economies were heading towards recession.  There were signs inflation may have peaked in the US but inflation was not expected to peak in the UK until spring 2023, although it was more important what levels inflation would settle at.  Markets bottom out before economies do and, although markets may not have reached the bottom, value had begun to emerge in bonds and equities markets.

It had been a difficult time for the performance of the pension fund’s investments in both absolute terms (compared to the actuary’s discount rate) and relative terms (compared to market benchmarks).  Relative performance was a function of asset allocation and manager selection, with the pension fund’s under-performance attributable partly to the allocation to sustainable equites but mainly to manager selection decisions.

To consider the quarterly report on the funding position, the value and performance of investments and other related 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 September 2022.

The value of the pension fund’s assets at 30 September 2022 was £3.4billion compared to £3.7bn at the start of the financial year, with nearly two-thirds of assets now under the management of Brunel.

The pension fund’s actuary, Barnett Waddingham, was finalising the latest full assessment of the funding position as at 31 March 2022.  Compared to the last valuation as at 31 March 2019, it was expected that the funding level would be up from 92% to 96%, the discount rate would be down from 5.0% to 4.9% and overall employer contribution rates would be broadly unchanged (with increases in primary rate offset by decreases in deficit contributions) although this would vary between employers.

The investment return for the quarter was -1.3% compared to the combined benchmark return of +0.2%.  The total return for the 12 months to September 2022 was -7.2% compared to the benchmark return of -2.4%.  The main detractors to performance in the quarter were many of the Brunel active portfolios as had been discussed earlier in the meeting.

To approve for publication the draft (unaudited) Pension Fund Annual Report 2021/22.

LGPS regulations require all administering authorities to publish an annual report on the activities of its pension fund.  The report of the independent auditor regarding the financial statements had not been received but it would be circulated to members of the Committee when received. 

Decision

That the annual report is published on the pension fund’s website in draft unaudited format.

To confirm the date for the meeting of the Committee in 2022/23:

          10am Tuesday 14 March 2023 – County Hall, Dorchester

10am Tuesday 14 March 2023 – County Hall, Dorchester.

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.

Decision

That the press and the public be excluded for the following item(s) 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).

To receive an update on any changes to investment management arrangements.

The Service Manager (Treasury and Investment) gave an update on the implementation of changes to investment management arrangements agreed by the Committee at previous meetings.