Minutes of Proceedings

80^th Meeting of the Pension Trustees held on
Tuesday 26 November 2019 at 2:10pm, Room 106

Dialling in: Mr A Maclaren (GAD)

The Chairperson thanked everyone for attending the meeting and welcomed Mr Spooner and Mr Finding from M&G, Mr Burns from Deloitte, and Mr Maclaren from GAD.  The Chairperson also welcomed Miss Foster, the Assembly’s new Pensions Manager, to her first meeting. It was noted that the order of the agenda would be amended slightly to enable Mr Spooner and Mr Finding to leave the meeting early.

1. APOLOGIES

Mr John O’Dowd MLA

Mr P Catney MLA

2. MINUTES OF PREVIOUS TRUSTEES MEETING

The draft minutes of the meeting held on 24 September 2019 were agreed.

Action required:

• Agreed minutes of the 24 September 2019 meeting to be uploaded to the Assembly website (Pensions Team)

STANDING ITEMS

3. CONFLICT OF INTEREST

No conflicts of interest were declared.

4. M&G UPDATE

The Chairperson handed over to Mr Spooner and Mr Finding for their presentation on recent investment performance for the Scheme, and in particular the performance of the Episode Allocation Fund.

Mr Spooner explained that M&G has demerged from the Prudential Group and is now listed as a separate company managing £341bn of assets across equities, fixed interest and property.

Mr Spooner advised that the return on the Scheme’s investment portfolio has been very strong over 2019, to 30 September, with a return of 17.8% which is in line with the benchmark.  Mr Spooner explained that over the complete year preceding to 30 September, the return was 8.8%, mainly due to a very weak Q4 in 2018 when equities declined markedly because of US/China trade tensions.

Mr Spooner explained that, within the portfolio, the Long Dated Corporate Bond fund was a strong performer with a return of 19.7%. It was noted that the declining Gilt Yields had supported bond prices over the year.

Mr Spooner made reference to the revised benchmark authority which had been issued by the Trustees and confirmed that the 3% shift from UK Equities to Emerging Markets and 8% shift from Long Term Gilts to Index Linked Passive was implemented at the end of October.

Mr Spooner moved on to discuss the Episode Allocation Fund, explaining that this is a fund of £552m in size, of which, £100m is invested by pooled pension funds.  Mr Spooner highlighted that Mr Finding has managed the Fund since 2011, with his team of 12, who have a combined investment experience of over 200 years.  It was noted that the focus of the Fund is on delivering a positive total return of LIBOR plus 5% over any 5-year period. 

Mr Spooner handed the next part of the presentation over to Mr Finding.

Mr Finding explained that over the last three years, five years, and since his tenure as fund manager in 2011, the Episode Allocation fund has met its LIBOR plus 5% objective.  This has been achieved with a volatility of around two thirds of that experienced with equities.

The Chairperson asked for confirmation on how much of the Scheme’s total portfolio is invested in the Episode Allocation Fund.  Mr Spooner calculated that approximately 14% of the Scheme’s total assets are invested in the Fund.

The Trustees continued to have a brief discussion with Mr Spooner and Mr Finding on the performance of the Scheme’s investments.

5. GAD REVIEW OF INVESTMENT PERFORMANCE

The Chairperson handed over to Mr Maclaren.

Mr Maclaren commended Mr Spooner and Mr Finding for their comprehensive review of the Scheme’s investment performance.

Mr Maclaren raised a query in relation to the performance of the Passive Index Fund. Mr Spooner explained that the returns shown are net of fees and make no allowance for withholding tax.

The Trustees discussed the investment performance summary with Mr Maclaren, Mr Spooner and Mr Finding.  The Chairperson asked if the YTD performance figure of the overall investment portfolio could be included in the quarterly review from GAD going forward.  Mr Maclaren agreed to combine the figures from the main mandate and the Episode Allocation Fund to give a total investment return figure.

Action required:

• Quarterly Review reports to be updated with total investment portfolio return figure (GAD).

The Chairperson thanked Mr Spooner, Mr Finding and Mr Maclaren for their participation in the meeting.

Mr Spooner, Mr Finding, and Mr Maclaren left the meeting at 3:17pm.

6. TRUSTEE TRAINING

The Chairperson asked Mr Burns to proceed with his Trustee Training session.

Mr Burns presented the Trustees with a summary of the guidance from The Pensions Regulator (TPR) on good practice for record-keeping and ran through the updated investment guidance from the TPR for Trustees of defined benefit schemes.

The Trustees asked Mr Burns to carry out a review of the Scheme’s common and conditional data.  Mr Burns agreed to liaise with the Pensions Team to ensure the data is as complete as possible before running a report on the data scores.

Noting the potential fines that could be imposed by TPR for poor record-keeping, Miss Foster agreed to review schedule 1 of the scheme rules, which covers payment of fines, and confirm if the Trustees would be indemnified out of the Fund.

Action required:

• Data scores to be provided to the Trustees (Deloitte).
• Scheme rules to be reviewed in relation to the payment of fines (Pensions Team)

STANDING ITEM

7. RISK REGISTER

The Chairperson handed over to Miss Foster.

Miss Foster made reference to the Scheme’s recently updated Risk Register, which had been based on the Assembly Commission’s Risk Register template, following an internal audit recommendation.  

Miss Foster also referenced the paper which outlined the Assembly Commission’s approach to Risk Management and provided guidance on how to score the risk register. Miss Foster asked if the Trustees had any questions or comments on the paper. None were raised.

Miss Foster asked if the Trustees were content to proceed with the Assembly Commission’s approach to Risk Management and arrange a date for the Risk Scoring Workshop. After a brief discussion, the Trustees agreed to proceed with the Assembly Commission’s approach and suggested that the workshop is scheduled to take place after the next Trustees’ meeting.

Action required:

• Risk Scoring Workshop to be arranged after the next Trustees’ meeting (Pensions Team).

STANDING ITEM

8. REVIEW OF ACTION POINTS ARISING FROM MEETINGS

The Chairperson handed over to Miss Foster.

Miss Foster highlighted the action points that had been completed since the last update.

It was noted that the contract with Eversheds was last reviewed in November 2016. Miss Foster agreed to prepare a review paper for the Trustees to consider at the next meeting.

Miss Foster also noted that Trustee Self-Assessment is to be revisited when Members are in a position to appoint new Trustees.  In the meantime, Miss Foster encouraged the Trustees to continue working their way through The Pension Regulator’s Trustee Toolkit and raise any training requirements as and when required.

Miss Foster confirmed that there had been no material update on the McCloud / Sargeant Judgement since the last meeting. Further to a request from Mr Wells, Miss Foster agreed for the item to be added to the agenda for the next meeting.

Action required:

• Eversheds’ contract to be reviewed and a paper to be provided for next Trustees’ meeting (Pensions Team).
• McCloud / Sargeant Judgement to be added to the agenda for the next Trustees’ meeting (Pensions Team).

9. AMPS STATEMENT OF INVESTMENT PRINCIPLES

A copy of the SIP, recently signed in October 2019, was noted.

10. ANY OTHER BUSINESS

Clerical Medical Data Processing Agreement

Mr Wells declared an interest in this item, as the only remaining Member of the Scheme’s AVC arrangement.

The Chairperson explained that Clerical Medical have provided an updated Data Processing Agreement for the Trustees to review and accept, in respect of their services as AVC provider for the Scheme.

Miss Foster noted that Eversheds had carried out a high-level review of the document, which was circulated to the Trustees by email.  Miss Foster summarised that Eversheds’ overall view on this agreement is that, particularly as Clerical Medical are not a major service provider to the Scheme, it would be reasonable for the Trustees to accept the updated agreement, subject to noting and being aware of the low risk and commercial points raised in their review.

The Trustees discussed the updated Data Processing Agreement.  Mr Beggs requested further guidance from Eversheds regarding the wording of point 4.2 (c) in the agreement.

Action required:

• Further guidance to be sought from Eversheds (Pensions Team).

Investment Manager Tender Exercise

The Chairperson reminded the Trustees that the contract with M&G expires in November 2020 and asked Miss Foster to outline the proposed strategy for the procurement exercise.

Miss Foster explained that the previous exercise was carried out in 2013, where a two-stage process was adopted, with the opportunity being advertised through a public sector procurement site, and the top 6 responses to the Pre-Qualification Questionnaire (PQQ) being invited to the second Invitation to Tender (ITT) stage.

Miss Foster advised that Deloitte are drafting a proposal to replicate the same process used before (two-stage public procurement), as well as a Negotiated Process proposal, where Deloitte will select a shortlist of managers to invite to tender, which is likely to be less than 10, based on their current knowledge and research of the market and investment managers. Both proposals will include a project timeline as well as costs associated with each stage of the tender process.

It was agreed that Mr Humpherson from Deloitte’s investment team would be invited to attend the next Trustee meeting.

Action required:

• Proposals for Investment Manager tender exercise to be sought from Deloitte and added to the papers for the next Trustees’ meeting (Pensions Team).

2018 – 2019 Scheme Return

The Chairperson advised that the Scheme Return for 2018 – 2019 was submitted to the Pensions Regulator in advance of the 22 November deadline. It was noted that the Scheme Return is currently completed on a triennial basis, with the next due date expected to be in November 2022.

11. DATE OF NEXT MEETING

To be confirmed.

Action required:

• Potential dates for early January to be circulated to the Trustees and Observers (Pensions Team).

The Chairperson thanked everyone for attending the meeting.

The meeting finished at 3:52pm.