Agenda and minutes

There were no apologies.

Councillors Paul Lynch, Julian Grainger, Russell Mellor, Neil Reddin and Richard Scoates each declared an interest as members of the Bromley Local Government Pension Scheme.

The minutes were agreed.

Pension Fund Annual Report 2011-12

(Minute 50 – 19th September 2012)

The Chairman suggested a training evening for Members which could focus on issues such as global equities and fixed income. It was minuted that the Finance Director would prepare a framework for the evening and seek the views of the Sub-Committee.

A training evening, covering a wide range of issues related to the Pension scheme, has since been arranged for 7.30pm on Tuesday 5^th February 2013 in Committee Room 1 at the Civic Centre. The event is being led mainly by Baillie Gifford & Co and all Members have been invited to attend.

Members were updated on the matters below.

(a) Member Training

A training evening for Members, previously suggested at a Sub-Committee meeting, was held on 5^th February 2013 covering a wide range of issues related to the Pension scheme.

The event was led mainly by Baillie Gifford and Co and the Chairman felt that it was an excellent training evening. Copies of the training presentation pack were provided at the meeting for the benefit of Sub Committee Members unable to be at the event. Councillor Mellor offered his apologies for not being able to attend in view of business commitments. The Finance Director indicated that the training was provided at no cost to the Council with the speakers meeting their own costs.

(b) Auto-enrolment

Concerning Auto-enrolment to the Pension Scheme, approval was being sought to a transitional period for deferring automatic enrolment to eligible jobholders. As at 1st March 2013, the Council has the option to defer until September 2017 the automatic enrolment of eligible jobholders who had opted out of the LGPS prior to 1st March 2013. A report on this would be considered by the General Purposes and Licensing Committee at their meeting on 14^th February 2013. Approval would mean that Auto-enrolment would effectively only apply to new starters between 1st March 2013 and September 2017.

(c) London Mutual Pension Fund

Work continued on this and there was no proposal to seek a commitment from London Boroughs at this stage.

In accordance with the Council’s Constitution, questions to this Sub-Committee must be received in writing four working days before the date of the meeting. Therefore please ensure that questions are received by the Democratic Services Team by 5pm on Wednesday 6^th February 2013.

There were no questions.

Report RES13030

Summary details were provided of the investment performance of Bromley’s Pension Fund for the first three quarters of 2012/13 along with information on general financial and membership trends of the Fund and summarised information on early retirements. The Fund’s external advisers, AllenbridgeEpic, provided further detail on investment performance and Fidelity and Baillie Gifford each provided an update on performance and economic outlook/prospects.

The market value of the Fund rose during the December quarter to £526.0m compared to a value of £462.1m at 31^st December 2011. By 1^st February 2013 the Fund value had increased to £558.8m.

Until 2006, the target for Fund managers was to outperform the local authority universe average by 0.5% over rolling three year periods. Following a review of management arrangements in 2006, both managers were set performance targets relative to their strategic benchmarks; Baillie Gifford’s target to outperform benchmark by 1.0% -1.5% over three-year periods and Fidelity’s to outperform by 1.9% over three-year periods. Although the 2012 strategy review saw maintenance of an 80%/20% split between growth seeking assets and protection assets, the growth element would comprise a 10% investment in Diversified Growth Funds (DGF) and 70% in global equities, the latter removing arbitrary regional weightings in favour of flexibility in world stock markets and potentially improved long-term returns.

Baillie Gifford and Standard Life each received £25m on 6^th December 2012 from Fidelity’s equity holdings to establish the 10% DGF allocation (Phase 1 of the new strategy) and market values of the allocations had since increased.

Performance from Baillie Gifford and Fidelity for the first three quarters of 2012/13 was outlined. Baillie Gifford returned 3.0% in the December quarter (0.4% below benchmark) and Fidelity returned 3.7% (0.7% above benchmark). The Pension Fund’s medium and long-term returns remained strong with Bromley’s performance in the last few years particularly good. Baillie Gifford’s returns for three years and ten years ended 31st December 2012 (9.1% and 9.9% respectively) compared favourably with those of Fidelity (7.6% and 9.4% respectively), while Fidelity (at 5.8%) outperformed Baillie Gifford (at 5.7%) over five years.

Concerning Affinity Sutton Pension arrangements, officers were continuing to explore alternative options. Discussions were continuing and the LPFA and Affinity Sutton were due to meet again on 27^th February 2013.

Details were also provided of the 2012/13 Pension Fund Revenue Account and membership figures to 31^st December 2012. A net surplus of £5.6m was achieved in the first three quarters of the year (mainly due to investment income) and total membership numbers rose by 319. However, the overall proportion of active members continued to decline and fell from 36.4% at 31^st March 2012 to 35.7% at 31^st December 2012.

In discussion the Sub Committee’s Independent Adviser, Mr Alick Stevenson, provided views on the Fund’s performance. He briefly outlined a global context referring to the U.S., Eurozone and UK. Markets were consolidating around higher levels with investors currently moving in and out of fixed income. Mr Stevenson  ...  view the full minutes text for item 70.

Report RES13042

Members noted the 2012/13 Audit Plan of the L B Bromley Pension Fund.

This was prepared by auditor PricewaterhouseCoopers LLP (PWC) to inform Members and officers of the responsibilities of the external auditors and how they plan to discharge those responsibilities in accordance with the Audit Commission’s Code of Practice. The Plan was prepared in consultation with officers and includes an analysis of key risks, PWC’s audit strategy, reporting and audit timetable and other matters.

The Council’s accounts were being prepared in accordance with the requirements of both the LGPS Regulations and the CIPFA Statement of Recommended Practice and would be audited as part of the overall audit of the Council’s Accounts by PWC. 

RESOLVED that the Pension Fund Audit Plan for 2012/13 be noted.

The Chairman to move that the Press and public be excluded during consideration of the items of business referred to below as it is likely in view of the nature of the business to be transacted or the nature of the proceedings that if members of the Press and public were present there would be disclosure to them of exempt information.

Under Part 2 proceedings, Mr Stevenson outlined his views on investing in Options (Derivatives) and selling them on i.e. insuring the Fund or hedging risk against future fluctuations in the FTSE value.

The Part 2 Minutes were agreed.

Printed copies of reports from the Council’s Fund Managers are circulated to Sub-Committee Members with this agenda. Representatives of Fidelity will be attending the meeting for this item.

Quarterly reports (to 31st December 2012) from Baillie Gifford and Fidelity had been circulated prior to the meeting along with quarterly reports (to 31st December 2012) from Standard Life Investments and Baillie Gifford in respect of the Diversified Growth Fund investments.

Representatives from Fidelity attended the meeting to present their investment review and answer questions.