Local Pension Board Operation of the Cambridgeshire Pension

Local Pension Board Operation of the Cambridgeshire Pension Fund July 2015

• History of the local pension board • Existing governance arrangements • Functions of the Pensions Committee • Functions of the Investment Sub-Committee • The Pensions Regulator • LGPS Scheme Advisory Board

How did we get here? • 2010 – Lord Hutton commissioned to chair the IPSPC review of public service pension provision. • 2011 - Final report issued – 27 recommendations • 2/27 recommendations affecting the governance arrangements of all public service pension schemes regardless of existing established arrangements • Recommendation 17 – More independent oversight (local pension board and national LGPS scheme advisory board) • Recommendation 19 – Much stronger governance of ALL public service pension schemes (the Pensions Regulator)

IPSPC – Recommendation 17 Every public service pension scheme should have a board that: • is properly constituted; • is represented by trained and competent individuals; • consisting of employee nominees; • is responsible for meeting good standards of governance including effective and efficient administration. There should be a pensions policy group for each scheme at national level for considering major changes to scheme rules. This led to the creation of Local Pension Boards and LGPS Scheme Advisory Board via the Public Service Pensions Act 2013.

Legal Duties of Local Pension Boards Public Services Pensions Act 2013 (section 5) Assist the scheme manager (the administering authority) in securing compliance with the scheme regulations and other legislation relating to the governance and administration of the scheme in the areas of: • managing risks and ensuring there adequate internal controls; • keeping records and ensuring the quality of member data; • ensuring the correct contributions are paid to the scheme; • managing conflicts of interest; • publishing information about the board; • communicating information to members; and • resolving disputes and reporting certain breaches of the law.

Structure of Local Pension Boards Requirements of local pension boards: • to be established in the County Council’s Constitution by 1. 4. 15; • to consist of equal numbers of employer and member representatives; • representatives committed to building their individual knowledge and understanding; • the board may contain independent experts; • board members must act in accordance with scheme regulations and other governing documents; • the board must meet a minimum of twice per year; • members of the Pension Committee and Investment Sub-Committee or any officer involved in the running of the scheme cannot sit on the local pension board.

Existing governance arrangements Where does the local pension board fit in? Cambridgeshire Pensions Committee Investment Sub-Committee

Cambridgeshire Pension Fund– Governance Structure Cambridgeshire County Council (Local) Pension Board (Administering Authority) Investment Sub. Committee Pensions Committee Director of Finance (Matt Bowmer, LGSS) Section 151 Officer (Chris Malyon /Chief Finance Officer)

Administering Authority (CCC) The Administering Authority has delegated its functions in relation to the maintenance of the Cambridgeshire Pension Fund to the Pensions Committee and Investment Sub-Committee.

The Pensions Committee To set the Pension Fund objectives and determine and maintain appropriate strategies, policies and procedures with ongoing monitoring. Terms of appointment As prescribed in the County Council’s Constitution Meeting frequency 4 per annum + 1 Annual General Meeting Voting rights All Committee members have equal rights Training All Committee members have access to relevant and regular training to ensure their knowledge facilitates effective decision making

Committee Representatives of: Number Position held by: of seats: Cambridgeshire County Council 6 Cllr Steve Count (Chairman) Cllr Roger Hickford (Vice-Chairman) Cllr Julie Wisson Cllr Peter Ashcroft Cllr Mike Shellens Cllr Maurice Leeke All other local authorities, police and fire 2 Cllr Andrew Fraser Cllr David Seaton All other employers 1 Tim Woods Active scheme members 1 Matthew Pink Deferred and pensioner scheme members 1 John Walker

Functions of the Pensions Committee /1 Funding strategy: • Monitor/manage of the Fund’s liabilities • Ensure appropriate funding plans are in place for employers • Oversee triennial/interim valuations • In partnership with the actuary, determine employer contribution rates Reference document: Funding Strategy Statement (last updated for the 2013 actuarial valuation of the Fund). Reference document: Actuarial Valuation Report 2013 Advisor to the Fund: Hymans Robertson (actuarial services).

Functions of the Pensions Committee /2 Investment strategy: • Determine the Fund’s investment objectives • Set and review the long term high level investment strategy • Ensure investment strategy is aligned with the Fund’s liability profile/risk appetite Reference document: Statement of Investment Principles 2015 Advisors to the Fund: Mercers

Functions of the Pensions Committee /3 Administration and communications strategy: • Administrative management of the Fund in areas of: – Collecting payments due – Calculating and paying benefits – Gathering from/providing information to scheme members and employers • Determine the methods of communication with stakeholders – Annual Benefit Statements – Newsletters Reference document: Administration Strategy 2015 (part of the Joint Administration and Communications Strategy)

Functions of the Pensions Committee /4 Administering Authority discretions: • Determine how the various discretions (as set out in the various sets of LGPS Regulations) are operated Reference document: Administering Authority Discretions 2014

Functions of the Pensions Committee /5 Governance: • Determine the key governance arrangements for the Fund, including representation. Reference document: Governance Policy and Compliance Statement 2015 Advisors to the Fund: Hymans Robertson (benefits and consultancy services) and Aon. Hewitt (governance consultancy).

Functions of the Pensions Committee /6 Risk management strategy: • Regular monitoring of the Fund’s key risks and agreeing how they are managed/mitigated. Reference document: Risk Register (under development to be presented at Pensions Committee in October/December 2015). Advisors to the Fund: Hymans Robertson (benefits and consultancy services) and Aon. Hewitt (governance consultancy).

Functions of the Pensions Committee /7 Admission bodies, scheme employers and bulk transfers: • Approve/apply policy on/take decisions relating to employers joining/leaving the Fund. • Agree terms and payment of bulk transfers into/out of the Fund (in consultation with s 151). Reference document: Admission Bodies, Scheme Employers and Bulk Transfers Policy 2012 Advisors to the Fund: Hymans Robertson (actuarial services).

Functions of the Pensions Committee /8 Knowledge and understanding: • Develop and maintain a training policy for all Pensions Committee, Investment Sub-Committee and Pension Fund Board members and Officers of the Fund – Determine the Fund’s knowledge and skills framework – Identify training requirements – Develop training plans – Monitor attendance at training events Reference document: Knowledge Management Policy 2013 Advisors to the Fund: Hymans Robertson (benefits and consultancy services).

Functions of the Pensions Committee /9 Business planning: • Consider and agree business plans at least annually • Monitor progress against the business plan Reference document: Annual Business Plan and Medium Term Strategy 2015 -16 – 2017 -18 Reference documents: Quarterly Business Plan Updates (presented to the Pensions Committee)

Investment Sub-Committee (ISC) To provide operational governance of investments. Terms of appointment As prescribed in the County Council’s Constitution Frequency of meeting 4 per annum Voting rights All ISC members have equal rights Training All ISC members have access to relevant and regular training to ensure their knowledge facilitates effective decision making

ISC Representatives of: Number Position held by: of seats: Cambridgeshire County Council 4 Cllr Steve Count (Chairman) Cllr Roger Hickford (Vice-Chairman) Cllr Peter Ashcroft Cllr Maurice Leeke All other local authorities police and fire and; All other employers 1 Cllr D Seaton All scheme members 1 John Walker

Functions of the ISC /1 • Implement the investment strategy • Review/maintain the detailed asset allocation within the parameters agreed by the Committee • Appoint/terminate/monitor performance of investment managers • Appoint/terminate/monitor external advisors/service providers (custodian/investment consultants/investment managers) • Set benchmarks/targets for investment managers • Monitor risks inherent in the investment strategy in relation to the funding level • Determine operational matters (rebalancing/methodology for asset transitions)

Functions of the ISC /2 • Monitor/review – Legislative, financial and economical changes relating to the Fund’s investments – Investment management fees – Transaction costs incurred across the investment mandates and raise issues/concerns with investment managers – Investment managers’ adoption of socially responsible investments – Compliance with the UK Stewardship Code • Receive reports on interim investment manager meetings

The Pensions Regulator • The powers of the Pensions Regulator extended into the public sector wef 1. 4. 15 • Will look to raise standards in administration and governance • Provides guidance to those charged with the running/oversight of public service pension schemes as to their legal responsibilities – – – – Reporting duties Internal controls and managing risks Record keeping Communicating to members / publishing scheme information Maintaining contributions Pension board conflicts of interest and representation Resolving internal disputes Reporting breaches of the law • Key documents: Code of Practice – Governance and administration of public sector pension schemes • Key documents: Guide for public service pension board members • Key documents: Guide for public service pension boards

LGPS Scheme Advisory Board • Seeks to encourage best practice, increase transparency and co-ordinate technical and standards issues. • Considers items passed from DCLG, its sub-committees , other stakeholders and self generated items. • Formulate guidance and standards for administering authorities and pension boards. • Key documents: Guidance on the creation and operation of local pension boards • Key documents: Scheme Advisory Board – 2015/16 work programme

National/Local LGPS Statistics Category 2013/14 National (91 Funds) 2013/14 CPF Active membership 1. 8 m 24, 854 Deferred membership 1. 7 m 25, 793 Pensioner membership 1. 45 m 15, 091 5 m 65, 738 10, 671 197 (active) £ 192. 1 bn £ 2. 033 bn +5. 9% +7. 2% (estimated) Total contributions paid £ 8. 7 bn £ 99, 575, 000 Total benefits paid £ 8. 6 bn £ 87, 599, 000 Average annual administration cost per member £ 20. 75 £ 22. 62 Source: Scheme Advisory Board Total membership No of scheme employers Total assets Net investment return on assets after fees

Additional Information Pensions Committee Agendas and Reports http: //www 2. cambridgeshire. gov. uk/Committee. Minutes/Committee. aspx? committee. ID=60 Investment Sub-Committee Agendas and Reports http: //www 2. cambridgeshire. gov. uk/Committee. Minutes/Committee. aspx? committee. ID=85 Pension Fund Strategies/Policies/Reports http: //pensions. cambridgeshire. gov. uk/index. php/governance 2/ [Interim] Scheme Advisory Board http: //www. lgpsboard. org/ The Pensions Regulator – Public Service Pension Schemes http: //www. thepensionsregulator. gov. uk/public-service-schemes. aspx

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