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Agenda, decisions and minutes

Venue: Cyfarfod Rhithiol / Virtual Meeting. View directions

Contact: Lowri Haf Evans  01286 679878

Items
No. Item

1.

ELECT CHAIR

To elect Chair for 2021 / 22

Decision:

To re-elect Councillor Peredur Jenkins as Chair for this Committee 2021/22

Minutes:

Resolved to re-elect Councillor Peredur Jenkins as Chair of the Committee for 2021/22.

 

2.

ELECT VICE CHAIR

To elect Vice chair for 2021 / 22

Decision:

To re-elect Councillor Stephen Churchman as Vice chair for this Committee for 2021/22

Minutes:

Resolved to re-elect Councillor Stephen Churchman as Vice-chair of the Committee for 2021/22.

 

3.

APOLOGIES

I dderbyn unrhyw ymddiheuriadau am absenoldeb

 

4.

DECLARATION OF PERSONAL INTEREST

To receive any declaration of personal interest

 

Minutes:

None to note

 

5.

URGENT MATTERS

Nodi unrhyw eitemau sy’n fater brys ym marn y cadeirydd fel y gellir eu hystyried.

 

6.

MINUTES pdf icon PDF 216 KB

The Chairman shall propose that the minutes of the meeting of this committee held on 25th March 2021, to be signed as a true record

 

Minutes:

The Chair accepted the minutes of the meeting held on 25 March 2021 as a true record

7.

THE PENSIONS COMMITTEE FUNCTION APPROVING THE FUND’S STATEMENT OF ACCOUNTS AND RECEIVE THE RELEVANT REPORT FROM AUDIT WALES pdf icon PDF 166 KB

To consider the report, comment on the contents and adopt the new arrangements

Decision:

To accept

·         The external auditor’s work plan on Gwynedd Pension Fund’s Accounts.

·         The Gwynedd Pension Fund’s Statement of Accounts, following certification by the Head of Finance, but subject to audit, and an opportunity to challenge its content.

·         The external auditor’s annual report on Gwynedd Pension Fund’s Statement of Accounts.

·         The final post-audit version of Gwynedd Pension Fund’s Statement of Accounts (before the end of November in 2021), and an opportunity to challenge the content of the external auditor’s relevant report, i.e. Audit Wales

Minutes:

It was explained, as a matter of course, that the Audit and Governance Committee was responsible for considering and adopting the Operational Arrangements to reflect the statutory requirements on local authorities, at its first meeting of the new council after an election. (The current version was adopted by the Audit and Governance Committee on 06/06/2017).

Following a period of reviewing the financial governance arrangements of the Pension Fund, modifications were introduced to the Arrangements which are necessary for dealing with the 2020/21 accounts of the Gwynedd Pension Fund. It was highlighted that the Audit and Governance Committee had been receiving and approving the accounts of Gwynedd Council and the Gwynedd Pension Fund, as part of its role as "those charged with governance". 

Having considered the latest guidance and regulations, and reviewing the governance arrangements, it appeared to be increasingly clear that the Pensions Committee, and not the Audit and Governance Committee, was the appropriate body to receive and approve the Gwynedd Pension Fund statements of accounts. Not only was the legal requirement for them to be included with the Council's accounts abolished, but also the national board which advised Local Government Pension Schemes also recommended that the Pensions Committee should consider the accounts.

Attention was drawn to the relevant regulations and the new draft operational arrangements which remain consistent with the requirements of the Local Government Measure and the Statutory Guidelines. It was reported that there was no inconsistency with Section 81 of the 2011 Measure, as the financial matters of the Pension Fund were not a part of Gwynedd Council's financial matters - the money of both entities were completely separate.

It was highlighted that an equivalent report had been submitted to the Audit and Governance Committee on 27 May 2021, where modifications to the operational arrangements were approved, in order to allow for the Pensions Committee to accept and approve the pension fund's statements of accounts, as well as the relevant report of the external auditor. It was reiterated at the Committee that arrangements and decisions relating to pensions were managed by the Pensions Committee, which in turn were scrutinised in detail by the Pension Board. As a result, it was considered that the modification was sensible.

Gratitude was expressed for the report.

In response to a question regarding the decision of the Audit and Governance Committee, it was confirmed that a decision had already been made (27/5/21).

RESOLVED: To accept,

·         The external auditor's work plan on the Gwynedd Pension Fund Accounts.

·         The Gwynedd Pension Fund's Statement of Accounts, after they are certified by the Head of Finance, but subject to audit, and an opportunity to challenge their content

·         The annual report of the financial auditor on the Gwynedd Pension Fund's Statement of Accounts

·         The final post-audit version of the Gwynedd Pension Fund Statements of Accounts (by the end of November 2021), and an opportunity to challenge the contents of the relevant report of the external auditor, namely Audit Wales

 

8.

GWYNEDD PENSION FUND AUDIT PLAN 2021 pdf icon PDF 6 KB

To consider the report

Additional documents:

Decision:

To accept the plan

Minutes:

Yvonne Thomas and Garmon Williams were welcomed to the meeting. The Audit Wales plan for 2021 was submitted, noting the work intended to be completed during the year, in line with the statutory responsibility they held as external auditors. Reference was made to the need to audit the pension fund's accounts, with the aim of identifying relevant misstatements, as well as the risks associated with the financial audit, such as the impact of Covid-19.  Reference was made to the content of the performance auditing programme, offering an overview of the work to be done, the fees and the proposed timetable.

 

Gratitude was expressed for the report and a willingness to collaborate was expressed.  Appreciation was expressed that the Audit Wales Team were all fluent Welsh speakers and this was to be welcomed.

 

In response to a question regarding whether Audit Wales had considered cyber security protocols, suggesting that security issues could arise for staff who worked from home as the information was 'possibly available', it was noted that further enquiries needed to be made to identify a thorough response and Audit Wales would respond directly to Councillor Churchman.

 

RESOLVED:

 

To accept the plan

 

9.

GWYNEDD PENSION FUND'S DRAFT STATEMENT OF ACCOUNTS FOR THE YEAR ENDED 31 MARCH 2021 pdf icon PDF 196 KB

To consider the report, receive and note the draft Statement of Accounts

 

Additional documents:

Decision:

To accept and note the Pension Fund Statement of Accounts (subject to audit) for 2020/21.

 

Minutes:

Submitted, for information, the report of the Investment Manager to provide details of the financial activities of the Pension Fund during the year ending on 31 March 2021.  It was highlighted that the accounts (draft) were subject to audit and the audit would be undertaken by Audit Wales.

 

It was reported that the accounts were following the statutory CIPFA format, with the guidance interpreting what was submitted in the accounts.  Members were reminded that last year's accounts, had been signed with an emphasis of matter paragraph because of the uncertainty with property prices. It was highlighted that the 4 Property Managers had stated that there was no uncertainty this year. Attention was drawn to the Fund's Account, which noted a normal year for contributions and benefits, without any substantial change. Nevertheless, a substantial change was reported in management costs and reference was made to note 12a, which explained that an increase in Private Equity (Partners) performance fees was responsible for the change, with strong performance in three funds specifically. (A full explanation was received from the Managers when their fees were challenged).

 

Reference was made to the increase in the Investment Income (note 13) as a result of income from Equity investments as the Wales Pension Partnership started to pay income gained since establishing all of the Partnership's sub-funds that the fund had invested in them. Reference was also made to the figure of £565.5 million, namely the increase in the value of the assets on the market following a very prosperous year (note 14a).

 

In the context of the net asset statement, attention was drawn to the change in the investment assets (Note 14a), which had now reached £2.5 billion, with a substantial increase in the Wales Pension Partnership after a proportion of Fidelity and Insight transferred to fixed income funds during the year.

 

The Head of Finance Department took the opportunity to thank the Investment Team for their commitment to ensure that the Statement of Accounts (draft) was completed within the timetable. He noted that he had already certified the draft accounts and that it would be good practice to share the accounts with Members to give them an opportunity to question / make observations.

 

Gratitude was expressed for the report.

 

In response to a question as to whether financial outgoings will appear consistent within two years (i.e. fees reflecting the number of outgoings), it was noted that as there were a number of buying and selling combinations, it would be difficult to compare year v year, but consistency was expected in the long-term.

 

In response to a substantial net increase of 0.6 billion, it was asked whether the strategy could be reviewed to consider attractive packages / benefits for staff, e.g. early retirement. The Head of Finance noted that the Fund or Employer were not entitled to amend the benefits as they were set in line with salaries and the number of working years. It was reiterated, in April 2022, that work would commence on  ...  view the full minutes text for item 9.

10.

TREASURY MANAGEMENT 2020/21 pdf icon PDF 258 KB

To consider the report

Decision:

To receive the report for information

 

Minutes:

Submitted - a report by the Investment Manager noting that an annual decision had been made to permit the surplus funds of the Pension Fund to be pooled and co-invested with the Council's overall cash-flow. It was highlighted that the report compared actual performance against the strategy for the 2020/21 financial year, and fulfilled the Council's legal obligation under the Local Government Act 2003 to have regard to both the CIPFA Code and the Welsh Government's Investment Guidance.

           

It was reported that during the 2020/21 financial year, the Council's borrowing activity had remained within the limits originally set, and it had received £442,000 of interest on investments, which was above the budgeted level of £400,000. It was reiterated that no organisation that the Council had invested money with them had defaulted.

 

In the context of the compliance report and indicators, it was reported that full compliance had taken place separately to the interest rate disclosure. It was highlighted that this disclosure showed a one-year revenue impact of a 1% increase in interest rates, highlighting the serious impact the pandemic has had on investment returns compared to what had been projected at the beginning of March 2020 when the restricted level was set - pre-Covid-19.  It was reiterated that returns on pooled funds had recovered the interest decline.

 

Gratitude was expressed for the report.

 

RESOLVED to accept the report for information.

 

11.

RESPONSIBLE INVESTING pdf icon PDF 199 KB

To consider the report

Additional documents:

Decision:

To approve the statement and for the Chair to sign the declaration.

 

Minutes:

The Head of Finance Department highlighted that electors in Anglesey, Conwy and Gwynedd had submitted questions to the Committee relating to responsible investment. Appreciation was expressed for receiving the questions beforehand, and the presence of the electors at the meeting was appreciated. Resolved to respond to the questions before discussing the report.

 

1.    What evidence does the Gwynedd Pension Fund have that its engagement policy has genuinely changed the behaviour of the companies in which they are shareholders?

 

It was explained that, as a Fund, regular meetings were held with fund managers and progress reports were received on their engagement activities. It was noted that the fund's managers were very active and that the recent progress had been very satisfactory, with open discussions being held regarding the climate strategy of some funds. It was highlighted that the Wales Pension Partnership (WPP) had a Voting and Engagement Provider who assisted with the engagement process.

 

Reference was made to the following examples of considerate adaptations by companies within the Partnership's portfolios.

 

a)    Archer Daniels Midland (ADM). Shortcomings had been seen in ADM's policies, which contributed to continuous deforestation and a failure to protect native vegetation. It was noted that Robeco (Voting and Engagement Provider) had held discussions with ADM since 2020 and had introduced a proposal on behalf of the shareholders regarding their contribution towards deforestation and the clearing of native vegetation in South America. In March 2021, the proposal was withdrawn as the company had committed to:

 

·         set obligations and a deadline for the abolishment of deforestation by 2030

·         trace the soy supply chain in full by 2022

·         include native vegetation in their No Deforestation Policy

·         publish a protocol for engaging with suppliers

 

b)    Enel Spa. It was reported that Enel Spa (an international energy company from Italy), was active in the electricity production and distribution sectors. By leading on cooperative engagement under the Climate Action 100+ initiative, it was noted that Robeco had engaged on a number of occasions with the company's executive and non-executive managers, who had led on developing an ambitious strategy to develop renewable energy and digitalise distribution networks. As part of the efforts to strengthen the governance of companies on climate matters, Robeco succeeded to nominate the former Chief Executive Officer of Wind Power at DONG Energy to the Enel Board, along with a group of institutional investors. The next steps in their engagement discussions will seek to address the company's intention to achieve the target of net-zero by 2050, and set a long-term target for the Emissions of Scope 3

 

c)    It was reported that ING Bank (financial services provider in the Netherlands), placed a strong focus on digital services for standard banking services. It was noted, in 2018, that ING had announced a fine settlement of 775 million Euros due to their failure to discover money laundering matters between 2012 and 2016, and earlier in the year, the oversight board abolished its proposal to increase their executive pay levels following social pressures. It  ...  view the full minutes text for item 11.

12.

WALES PENSION PARTNERSHIP UPDATE pdf icon PDF 150 KB

To consider the report

Decision:

To receive the report for information

 

Minutes:

The Investment Manager submitted a report updating Members on the Partnership's work, the performance of the Fund, and ongoing developments since its establishment in 2017. By 31 March 2021, it was reported that 81% of the Gwynedd fund had been pooled with the Wales Pension Partnership - 54% through the main funds and 27% through passive investments.

 

It was reported that regular meetings via Teams allowed matters to be discussed in a timely manner, and this appeared to be effective, with matters progressing more quickly. It was reported that the easy transfers had been implemented, and work was now being undertaken on matters that seemed more challenging, such as Private Markets. It was emphasised that Hymans supported the work of combining assets in this category, with continuous business discussions arranged to discuss the appropriate structure and mechanisms for investment.

 

Attention was drawn to the discussion around the Member representative appointment process for the Joint Governance Committee. It was highlighted that the recommendation put forward in a report to the Joint Committee (24 March 2021) was that each local Pension Board should nominate one scheme member representative who would meet the requirements of the job description. The appointment process would be undertaken by a sub-group who would recommend a nomination for approval by the Joint Governance Committee. The Head of Finance expressed that he would support Osian Richards (Chair of Gwynedd Pensions Board) to become a member of the Joint Committee.

 

It was noted that the appointment process would take up to six to twelve months, as Full Council approval was needed from each constituent authority.

 

Gratitude was expressed for the report. The Chair noted that establishing the Wales Pension Partnership had been very successful, with the returns element and good collaboration gaining benefits for the Fund. He expressed pride in being a part of the Fund.

  

RESOLVED to accept the report for information.

 

13.

AMENDMENTS TO THE FUNDING STRATEGY STATEMENT pdf icon PDF 121 KB

To consider the report,  approve amendments to the Funding Strategy Statement following changes to the 2013 LGPS Regulations and update from the Goodwin Court Case

 

Additional documents:

Decision:

  • To approve amendments to the Funding Strategy Statement following changes to the 2013 LGPS Regulations and update from the Goodwin Court Case
  • To adopt the revised Funding Strategy Statement

 

Minutes:

Submitted - the report of the Investment Manager highlighting the need for the Committee to approve modifications to the Funding Strategy Statement following changes to the LGPS Regulations 2013 and an update on the Goodwin court case. The recommendation came from the Fund's actuary, namely Hymans Robertson, which had suggested the changes. It was highlighted that changes had been made in three parts of the statement

 

-       Reviewing the contribution - the modification allowed the Fund to re-calculate contributions outside the formal valuation under the following circumstances: if changes had been made to the employers' liabilities, if changes had been made to the employers' guarantee; or at the request of the employer

-       Exit arrangements - the modifications allowed for more flexibility when an employer wanted to leave the fund. If an employer is in arrears, the options have been formalised, e.g. spread the payment over a number of years or commit to a Deferred Debt Agreement.

-       Goodwin Court Case - where members or survivors were subject to discrimination because of their sexual orientation. It is expected for the impact of the Goodwin Case to be very small on the Fund's liabilities and an administrative matter to a great degree. Nevertheless, note the modification in the strategy for clarity.

 

Gratitude was expressed for the report and for Hymans Robertson's guidance in a very technical field. It was accepted that the response was also technical and possibly beyond the comprehension of some of the Members, but with an expectation that the officers acted correctly.

 

It was also noted that the use of colours in the report was a very effective way of highlighting the changes.

 

RESOLVED

 

     To approve the modifications to the Funding Strategy Statement following changes to the LGPS Regulations 2013 and for them to be updated following the Goodwin Court Case

     To adopt the Modified Funding Strategy Statement