To receive
the Pension Fund’s Annual Report for 2017-2018
Minutes:
The Head of Finance presented the Annual Report of the Pension Scheme for 2017/18.
Although 2017/18 had been
a challenging year, it was reported that the Fund had received positive returns and had built on
the funding level. There had been a 10.8% increase in members
contributing to the scheme,
and a 4.3% increase in the number of pensioners in the scheme. The employers who had submitted accurate and speedy
data were thanked, and it was explained that this was essential
for the Pensions Unit to update
employer records and produce timely
annual benefits to satisfy the Pensions Regulator.
It was noted that submitting accurate and timely data would be essential for 2019 as the three-year valuation date.
The Head of Finance Department
added that he had asked the Fund's Actuary about what the 2019 three-year valuation result would be in the context of the Government Actuary's decision to increase the Teacher Pension Scheme contribution rate from 16% to 24% in September 2019. It was explained that this substantial leap was taking place as teacher rate levels were
attempting to catch up with historic
levels that were too low,
and an adjustment
to the SCAPE discount rate that was only reviewed
every five years. It was expressed that these factors
would not affect the Local Government Pension Scheme.
Reference was made to the commitments of the Pension scheme, and it was reported that the Fund had been operating
prudentially, and the factor that would
influence the valuation the
most would be investment returns and the value of the assets. Since the stock market became challenging
in 2017/18, it was reported
that the Fund continued to build on the outstanding investment performance of
2016/17, and in 2017/18,
the Fund assets received £56m (3%) in investment returns. This reflected weaker markets compared to the 22% returned the previous year, but the further progress seen during
the first quarter of
2018/19 was enough to see
the value of the Fund growing to more than two million pounds.
It was explained that
an element of the significant growth in 2016/17 reflected the impact of the pound slump on worldwide
investment values. A graph prepared by the Fund's Investment Advisor was distributed, that separated the growth elements in equity
value from the local financial value and value
in sterling. It was added that the growth in asset values
was encouraging, with the
Gwynedd Fund being 91% funded in the 2016 triennial valuation (that was within the top 10 in England and
Wales) when using prudential actuarial assumptions. For the 2019 valuation, the Fund's strength should allow for taking
a flexible approach towards employer contribution rates effective from 2020.
It was noted that
the investment procedure in future would
change, and reference was made to the responsible investment principles and the development of the Wales Pension Partnership. With the Fund's investment strategy focusing on growth assets,
more attractive returns were expected than the returns that could
be gained from high risk investments.
Building on that, it was reported that the Gwynedd
Pensions Committee and the Fund's Pensions Committee had jointly developed responsible investment principles that considered environmental, social and governance
factors.
The Chair of the Pensions Board
added that transparent information was required in the context of money invested against the best returns for
the Fund. He referred to
the principles that the Committee and the Board had prepared, and he thanked
the officers and Hymans for organising
the workshop and coordinating the discussion. He added that it had been a busy year,
but that strong foundations had been set.
It was reported that
the Pensions Committee had a mandatory
fiduciary duty to ensure that financial
considerations carried more
weight than non-financial considerations, but also recognise that they had a duty to be a responsible investor to engage with companies and change corporate
behaviour to influence outputs. It was added that the Fund was vulnerable to risks such as climate change and the expectation of a transfer to a low carbon economy. The intention was to improve financial outcomes by managing how open
to such risks the Fund was.
The Chair of the meeting
reported that work was ongoing to pool investments with seven other
Local Government Pension Schemes in Wales, and the Partnership had been set up formally in
March 2017. It was added that
Link Asset Services had been
appointed as an investment platform operator in partnership
with Russell Investments as
the investment manager and pool advisor.
Despite the pooling, the eight funds would
continue to operate their individual investment strategies. In August 2018, the Wales Partnership ACP was authorised by
the Financial Conduct Authority
to offer two worldwide equity sub-funds to replace the separate mandates of individual funds with investment
managers. It was reported that Gwynedd would transfer assets to the sub-funds.
The Chair of the meeting
noted that changes to pension fund management was changing significantly, and many were
concerned about the role of the Committee within the new system. Following presentations by 10
Asset Managers, it was noted
that more opportunities were available by collaborating. Reference was made to the new Asset Managers, and a few of their various
expertise were highlighted. It was noted that the wide range
of expertise would be of advantage to Gwynedd. It was intended
to transfer £600m in worldwide equity assets equally between two sub-funds
of the Partnership. It would
be expected to realise further fee savings
by pooling, along with benefiting from advantages that were not possible
as an individual fund, still keeping
ownership and responsibility for the Fund's investments.
Councillor Stephen Churchman had been
elected as the first Chair of the Partner's joint committee. He expressed that it had been an exciting
time, and substantial progress had been made in
the work of the Partnership.
The officers were thanked for their
work, along with their fellow
members on the Committee and the Pension Board for
their support.
Everyone was thanked for their
support during 2017/18.
In response to a question regarding others who will use
the asset managers selected by Russell Investments,
it was noted that every fund (including
Gwynedd) of the eight funds
in Wales would use either of the two sub-funds. It was added that it would
only be Gwynedd and Neath investing in both sub-funds,
with Russell Investments taking a managerial overview of the second sub-fund. It was noted that the seven companies in the second sub-group were new to each
of the eight Welsh funds.
It was explained that there were restrictions
in the past in terms of the ability of LGPS funds to procure foreign asset managers,
but opportunities would arise soon.
RESOLVED TO ACCEPT THE ANNUAL REPORT OF THE PENSION
FUND FOR 2017/18.
Supporting documents: