Agenda and draft minutes

The Chair expressed his thanks to attendees for responding promptly to the request to hold a meeting at short notice. This was to meet the deadline of the Local Government Pension Scheme Fit for the Future consultation.

Apologies for absence were received from Councillor Yousef Dahmash.

There was none.

The Chair thanked Chris Norton (Head of Investments, Audit, and Insurance) and Dapo Shonola (Pension and Investment Manager) for their work over the Christmas period to produce a proposed response to the Local Government Pension Scheme (LGPS) Fit for the Future consultation for consideration by the Sub-Committee.

Chris Norton introduced the report which included draft responses to consultation questions. The consultation had a deadline for responses of 16 January 2025. He stated that the consultation gave a clear idea of the Government’s proposed course of action. Therefore, it was considered that a pragmatic approach was appropriate to improve the likelihood of influencing outcomes. The proposed response included a focus on the boundary between investment strategy and investment implementation, setting out the belief that LGPS funds should retain control over strategic asset allocation.

Chris Norton highlighted that the consultation included a proposal that pools act as primary advisors to LGPS funds on investment strategy. This presented a potential conflict of interest which had been outlined within the draft response to consultation questions. The consultation response also highlighted concerns about the proposed timescale for implementation of changes to pooling arrangements. The need for clarification of what was meant by ‘local investing’ was also covered in the draft response, including how funds could have access to the widest possible investment opportunity set. The draft response also covered governance proposals including resourcing requirements for the proposed changes.

Councillor Gifford highlighted that the consultation included an emphasis on geographically focused pools. Border to Coast Pensions Partnership (BCPP) was not a collective of neighbouring pension funds in same way as some other pension pools. Its membership encompassed funds across England.

Councillor Hammersley stated that the details of the consultation raised several key concerns, including the proposed timescale for implementation as well as the prospect of pools providing principal investment advice to pension funds. It was possible that pools would not be able to replicate the same quality of advice as funds received from independent advisors. The provision of impartial, unbiased advice was of fundamental importance.

The Chair suggested that the Sub-Committee examine each of the proposed responses to consultation questions in turn. This was agreed.

The draft response to question one was agreed with no proposed changes.

Consideration was given to question two, “do you agree that the investment strategy set by the administering authority should include high-level investment objectives, and optionally, a high-level strategic asset allocation, with all implementation activity delegated to the pool?”

Councillor Gifford stated that the prospect of pools determining strategic asset allocations on behalf of pension funds constituted a potential conflict of interest. This point had been covered well in the draft response.

Councillor Millar agreed that the proposed approach presented a potential conflict of interest. She highlighted that there was increased interest by members of the public in pension fund investment decision making. Existing arrangements provided clear democratic accountability. This would be lost if control over decision making was delegated to pools.

The Chair highlighted that there were  ...  view the full minutes text for item 2.