Joint Pensions Committee - Tuesday 10 March 2026, 7:15pm - Wandsworth Council Webcasting

Joint Pensions Committee
Tuesday, 10th March 2026 at 7:15pm 

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  1. Webcast Finished

Good evening, everybody.
My name is Councillor Marshall, and I'm the chair of the Joint Wandsworth and Richmond
Pensions Committee.
I would like to extend a warm welcome to everybody who has taken the trouble to log in online
and also to everybody who has taken the trouble to come out this evening and join us in person.
You are all welcome.
Members of the committee, I will call your names in alphabetical order.
Please switch on your microphone to confirm your attendance.
Councillor Cady.
Good evening.
Deputy Chair, Councillor Craigy.
Good evening.
Thank you.
Councillor Crook -Dake, I think, is trying to get here but may not quite make it.
Councillor Dickard.
Good evening.
Councillor Gasser.
Yes, good evening.
Ireland.
Good evening.
Councillor Pridham.
Good evening.
Councillor Saira.
Good evening.
We have a number of officers present who will introduce themselves when they are ready.
they address the committee.

1 Minutes - 11 December 2025

The first item is the minutes of the 11th of December, 2025.
Normally this is just a nod through, but the minutes are directly relevant to something
that we're going to be discussing later on.
So I'm asking everyone to confirm that they agree the previous minutes has a correct record,
including passing motions relating to responsible investment.
Thank you.
Item 2, disposable pecuniary interests.

2 Disclosable Pecuniary Interests

Are there any declarations of pecuniary, other registrable or non -registrable interests?
Councillor Dickerson.
Yeah, I'm a member of GMB union and Palestine solidarity campaign, but I don't get any funding
from it.
But it's worth, it's relevant to the papers that are coming up tonight.
Thank you.
I'll ask the clerk to know that.
So item 3 is the minutes of the local pension board, also somewhat relevant to our discussions

3 Minutes of Local Pensions Board - 9 February 2026

later this evening.
Can we accept those minutes as read?
Can we ask questions about the pension board on the following paper, though, based on the
minutes that are provided?
I think it probably, where do you think they're likely?
It was best come.
Do you think it will be best?
Well, just because the matters that were discussed at the last meeting and the one being discussed
next was discussed at the pension board.
So it would be useful to get a sense of what...
I think it's absolutely fine to bring up matters raised in either set of minutes in our discussion
later on.
We're just confirming that what's written down there is that we've read and noted.
But presumably we're just noting the minutes of the pensions board because we haven't...
I don't know if minutes are a fair record or not.
None of us were there, but we noted that we are noting them.
So we're just going to swap the order around, really, also for the convenience of people
who've come here so that we can move straight on to responsible investment policy.
You're obviously welcome to stay afterwards as we go on to a pension fund valuation and
other technical matters, but also equally may want to leave at that point.
I wanted to just set the scene a little bit for this topic, the responsible investment
topic.

5 Responsible Investment Policy (Paper No. 26-93)

I think it can – we can – I think we can – I'm sure we can take it as read that
everybody around this table is deeply concerned by the events that were – have really provoked
particularly the events in Gaza, and that we would very much like to do what can be
done and what is right to be done and what is possible to be done.
So there is a context, though.
So we are meeting at a moment of fundamental transition for local government pension scheme
funds across England and Wales.
The government's consolidation agenda, driving LGPS assets into pooled mega -funds, represents
the most significant structural change to local authority pensions in a generation.
For funds like ours, this means that direct control over individual investment decisions
will increasingly sit with the pool rather than with this committee.
That's the reality that we face.
It does not mean that the values and priorities of our scheme members become irrelevant.
Far from it.
What it means is that the work we do now in establishing a clear, robust, and well -articulated
responsible investment policy becomes more important, not less.
Because the leverage we will retain is the leverage of a well -informed, principled client.
Pool operators, like ELSIF, will be accountable to their constituent funds, like us.
How we instruct them, what mandates we set, what ESG, Environment, Social and Governments,
expectations we embed in our investment agreements, all of that flows from a policy framework
that is one, coherent, two, legally sound, and three, democratically endorsed.
A fund that arrives at the pool with a vague or absent RI policy on any of these points
is a fund that will be a passive recipient of whatever the pool decides.
A fund that arrives with clear, adopted positions on matters like climate risk, stewardship,
engagement and disinvestment thresholds is a fund that can hold the pool to account,
shape its direction and speak with authority when challenging
investment decisions.
That's why tonight's work matters beyond this room
and beyond this committee's lifetime.
The policy we are working towards tonight
does not close doors.
It opens them.
It gives our successor committee, our scheme members,
and the pool itself a clear signal of what this fund stands
for in a world where our direct levers are going to be fewer, the quality of our policy
foundations determines the extent of our influence.
We have been doing that work so far carefully and lawfully, and I'm proud that this committee
will leave that foundation in place, and I look forward to the discussion this evening.
I'm now going to hand over to Paul Gilotti to further introduce this matter.
Thank you, Chair.
So at the last committee, obviously there was the motions and the deputations that was
put before.
And at the end of it, really, you were trying to set out whether or not to bring back to
this Committee a report outlining proposals for a revised responsible investment policy
within our investment strategy statement that was in the legal framework of the guidance.
And that latter point is really, really key, is that any policies that we set need to be
within the legal framework.
And so therefore, in order to facilitate that, we needed to put together and seek advice
from specialists who were able to look at those proposals.
And this is what this report is being brought back in doing so.
So we asked for a report to come back to say how could you facilitate and how could you
bring and revise a more stringent response to investment policy that is legal, legitimate
and in line with your duties as a Pensions Committee.
The advice that we've received is detailed in synopsis in the report and the crux of
it is your duty as a committee is to act as a quasi -trustee of the fund.
That is your duty and your duty is to the fund and if we're going to set policies
we need to make sure that they are compliant with the regulations both as your role as
trustee and that within the LGPS regulations.
And that is what this report outlines.
So, it highlights your key principles and roles, and that's outlined in Section, and
so in paragraph 6, which sets out your, the primary role of yourself, which is to have
sufficient assets to pay the benefits as they seek to, as they fall, keeping employer contributions
rates stable, and funding volatility within reasonable bounds.
And again, you'll see that in a later paper when we're setting out the valuation, and
rates which impact on all stakeholders on local council taxpayers are set and bound
by decisions you make in relation to setting out policies.
It's ensuring that there is sufficient diversification within the investments that we have and actually
adopting a rational decision -making process for coming up with those outcomes.
The Minister of Authority is a public body and therefore we need to ensure that any decisions
that are made are done so for proper purposes and that there is relevant considerations
are made, not ignoring those that are irrelevant.
So in principle, what we're saying here is – and it's been reiterated – is that
our main aim is to get the optimum returns and stable contribution rates.
We can make non -financial decisions, and that is what the crux of it is doing.
So looking at trying to see how can we influence, how can we make those changes in addressing
in some of the issues that are going on is possible for you to be yourselves to make.
But in order to do that, it has to be done in accordance with those regulations.
And those regulations state that we need to look at the impact of what any such approach
would make first and foremost.
So we need to understand if we were to change our approach and actually set some exclusions,
what impact that will have on the fund.
So we can't set a policy first.
we need to look at what that impact of that action would be.
Then, if it's not, if that comes back and showing that actually it is within relevant thresholds
that is acceptable to the trustees of the fund, we then need to consult with all relevant stakeholders.
That includes active members, deferred members, pensioners and also employers.
employers will be the ones who will pick up the cost of any changes to those
investment strategies. So this is what this paper sets out, the rationale for
why we're taking the course of action here and it sets out a clear timetable
and pathway how we can get to what was being discussed at the last meeting in a
legal compliant manner.
We received a deputation from representatives of Unison and the GMB.
The clerk circulated a supplementary agenda that contained details of the request.
Does the committee agree to hear this deputation?
Great.
Thank you.
So I'm going to invite Richard Tuohy and the other members of the OAR deputation to move
to the committee table, please.
So according to our normal practise, one of you
has the opportunity to speak for up to five minutes.
And once then, after that, then the committee
will ask questions of your deputation.
And once all those have been asked,
I'll ask you to return to the gallery.
Yes.
Apologies, I was under the impression
that we'll both get five minutes to speak each.
No, that's not correct.
There's one person.
One from each?
One person will speak for five minutes.
Okay, that was different to what it was last time.
Exception was made last time,
but it's not the normal practise,
so we're just following the normal practise this evening.
The fact is that we've only had a few days to prepare for this and we prepared based
on two speakers because of based on what we did last time.
I would possibly ask if it would be extended for just due respect and courtesy, especially
after we came on the deputation in December.
Members of the committee?
If you could keep your speeches to exactly five minutes, I could let you know.
Hello, my name is Kathy Cattel and I'm speaking once again on behalf of the GMB Union. I want
to begin with a simple point of democratic accountability. In December, this committee
unanimously passed a motion calling for divestment from companies complicit in violations of
international law, including those identified by the United Nations.
That decision was clear.
It reflected the will of the elected councillors and the concerns of scheme members.
So the question tonight should not be whether we act, it should be whether this committee
will honour the decision it has already made.
This issue has already been under discussion for a long time.
In October 2024, members of the Richmond and Kingston PSC and ones with Friends of Palestine
addressed this committee and presented evidence about companies linked to the occupation and
violence in Gaza and the West Bank.
At that meeting, the committee resolved to carry out an evaluation of divestment options,
but that evaluation never materialised.
16 months later, we are still discussing process rather than action.
Instead of the divestment recommendations requested in December, the proposals before
you push meaningful decisions to September 2026 at the earliest.
That is a significant delay from what the committee agreed.
One explanation we have been given is that the national policy changes, particularly
the pooling of assets through the London SIV limit what the councils can do, but this isn't
the case. Yes, assets are pooled through the London SIV, but the London SIV works for the
councils, not the other way round. Wandsworth, alongside other boroughs, is not simply a
client of the L -SIV. It is a co -owner and shareholder. London Council has collectively
determined the SIV's investment direction. The L -SIV itself confirmed in 2025 that it
would respond to new direction from its member councils. So when reports suggest that policy
must be limited to what the LCIF can currently implement, they miss the key point. It is
councils that instruct the LCIF what to implement. So if the existing investment structures are
insufficient to meet the ethical standards this committee has endorsed, then the appropriate
response is to instruct the LCIF to improve them. The opportunity to influence those structures
exists now, further delay risks missing it. But this debate is not only about governance
structures, it's also about the context in which these investments exist. International
courts, UN bodies and human rights organisations have warned that the situation in Gaza and
the West Bank involves grave breaches of international law. The International Court of Justice, in
its July 2024 advisory opinion, stated that states have a duty to help bring the unlawful
situation in the occupied Palestine territories to an end, including through economic and
financial measures. UN experts have been explicit that this includes reviewing financial relationships,
including pension fund investments. Under international law, complicity does not only
occur on the battlefield, it can also occur through the economic relationships that sustain
unlawful activity. Public bodies risk complicity when they invest in companies that profit
from occupation, settlement expansion or military operations that violate international law.
That is why the OHCHR database of companies involved in settlement activity matters. The
December motion specifically called for the disclosure and phased divestment from companies
identified by the UN, yet the report before you proposes treating that list merely as
a trigger for further review. With respect, this falls short of what this committee agreed.
The OHCHR list should represent the minimum standards for exclusion, not the beginning
of another lengthy process. Responsible investment can meet fiduciary duties while reducing reputational
and long -term financial risks.
But ultimately, this is about something broader than financial governance.
It's about whether the money of public sector workers, teachers, care workers and council staff
should be invested in companies linked to serious violations of international law.
History shows that local governments can take principled stands.
British councils once acted against apartheid South Africa when national governments hesitated.
This committee has already taken its decision.
The motion for divestment was carried out in December. The mandate exists was unanimously carried in December
The mandate exists the authority exists
What remains is the will to implement it?
So we asked you tonight honour the decision you have already made instruct the L
Civ accordingly and ensure that the pensions fund reflects both our legal obligations and our shared humanity. Thank you
As the newly elected chair, vice chair of Wondrous Unison, I'd like to thank the pension
committee for allowing me to speak on behalf of the 1300 members of Unison and stakeholders.
I'm extremely disappointed to note that the report does not develop a plan for divestment
in pension funds within six months as we were led to believe in December 2025.
It is clearly a review and not a plan.
During the last deputation, Unison and GMB, representing their members and stakeholders in the pension scheme,
were led to believe that the pension committee would begin to develop a plan in pension funds within six months of that meeting.
Look at how unions would and could be engaged in the process and possibly look at consulting the pension scheme members and stakeholders
to get their views on how they would like their pensions to be invested.
We know that our recent survey found out that 80 % of our members wanted some type of ethical investment.
The report has stated that consultation with scheme members such as Unison's 1300 members will only take place between June 2026 and September 2026.
It seems as this is just another, this is simply another delaying tactic and it can't be something that our 1300 Unison members would be happy with.
This document fails to highlight that as scheme investors, the pension committee should be
directing the SIV on how the scheme's funds are invested as other local authorities are
currently doing, rather than leaving it down to the SIV to do that.
The local government pension scene guidance on preparing and maintaining an investment
also highlights that it is down to local authorities to decide and consult with the LCIV on how
they want their schemes to be invested.
Recently the LCIF told RBK, RBKC that the government had made it clear
directive that councils are responsible for choosing investment strategies. Many
other councils are currently consulting with the LCIF regarding the three pillars
approach to investments. It is essential that if a pension committee actively
engage with the LCIF regarding the framing of the three pillars,
something that the reporters not highlight. It is the power of the pension
committee to determine the investments and the L -CIV to implement them. At least 21 other
local authorities have already taken the lead on this by passing motions to divest or beginning
the process to divest as part of their responsible investment framework. The question which we
must ask is why is this pension committee not doing the same? It is over the last five
years that I have recently been made aware of the £12 .2 billion of local government
pension scheme funds that have been invested in companies which further facilitate the
ongoing violations by the Israeli government towards the people of Palestine and other
in the wider regions.
What I am going to ask the Pension Committee is why are we delaying on this issue and continuing
to invest our workers' money in companies which are supplying arms to Israel, enabling
the occupation and profiting from apartheid and genocide.
It is not a question of if anymore, but why does the Wandsworth Pension Committee continue
to knowingly invest funds into companies who are explicitly involved in genocide?
The weight of international legal opinion, UN findings and leading human rights organisations
leaves little room for doubt that genocide is taking place in Palestine.
This is not a fringe position, it is the conclusion reached by some and the most of the most authoritative
bodies in international law and human rights.
I ask the question again, why does Wanders pension committee continue to knowingly invest funds into companies who are explicitly involved in genocide?
Other councils are leading the way and have decided to make a change.
When will Wanders pension committee do the same? Think bigger and lead by example. They're just some of our values.
I would like to finish this storey about a girl, a six year old girl called Hind Rajab.
This storey recently be made into a film.
Hind was fleeing Gaza with nine family members in a car
when it was attacked by a Meerkara tank driven by the Israel Defence Force.
Hind survived the initial attack along with her cousin, Leila Hamad,
who was able to call the Red Crescent and the entire event was recorded live.
After Leila was also killed, Hind picks up the phone while hiding in the back seat
under the bodies of her relatives.
Hind may be heard describing the situation and you are able to hear the ongoing bombing of the car she is in.
In the live recording, Hind is heard speaking to the red crescent worker who stays on the phone to reassure the six year old girl waiting for the ambulance to arrive.
The IDF continued attacking her car for three hours.
Please note that the red crescent have to seek approval for the deployment of an ambulance from the IDF to avoid being attacked.
The IDF approved the deployment of the ambulance and supplied a secure route for the ambulance to follow.
When the ambulance finally arrives, the ambulance is attacked and both paramedics, Yousif Sinha and Ahmed Al Mahoun, were killed.
A war crime according to any official body and anyone who cares.
An investigation by, just one last paragraph, sorry.
I think, to be honest, how do you think we've got the trust in what you're trying to say?
Okay, so I'll finish off with my last sentence, just it's not the paragraph.
Delaying the process for ethical investment only sees more children like Hind being killed.
The UN stated that last year the biggest cause of childhood death in the world was the war in Gaza.
I'll turn this over to members who may have questions to ask of either member of the
deputation or others that have come along with you if somebody is more in a better position
to answer a particular question.
Councillor Dickard.
I'm going to raise this later on in the meeting as an addition to the paper, but it seems
very obvious that speed and the speed at which this committee has moved is one of the key
issues that brought you to the table.
So we'll address that later on.
But I think second to that is your engagement, and so the engagement of the unions in the
process of what it looks like to set the pension strategy, and particularly around ethical
investment.
Have you any ideas, are there any other examples that you can point to, or how would you like
to be engaged so that on the timeline that is in this paper, you feel that you get adequate
site involvement, engagement on materials that will go out to your members asking them
about their views on the fund?
I think in the simple thing of getting the report on what actions you're going to take,
five days before, it's just not adequate enough for us to respond.
We've tried to do our best and there's a lot to go on.
And I do appreciate the points that were made about the committee, sort of the rules and
stuff around the committee.
But getting some reports ahead of these meetings would be really helpful so we can get involved.
And also consult our members, because our members are ultimately the stakeholders.
They're the ones who are paying into this pension committee.
The pension fund, sorry.
I also just say that I think it's important that we are involved. I don't know exactly
how, but every kind of step of the way, just to say that we've had our input, our members
have had our input. And as Richard said, if we had more notice of the plans, we would
have been able to say, list a bit better about how we would then want to be involved.
Yeah, I would agree that speed is probably one of the key reasons that we're here today
because we're not satisfied with how quickly the roadmap looks like it's going to play
out.
But I mean, it doesn't feel like when we leave this meeting, we can have the confidence
that we're going to be proactively engaged.
So up until a few weeks ago when I sent first email asking you were copied in because you
brought the motion to the last committee and some of the workers from WANDA council responded.
I laid out eight points and questions about, you know, and each question kind of implied
a way that we suggested the union be involved.
And the response we got was basically that there wasn't going to be much union involvement,
which was quite worrying for our branches, and I think that's why we – that's one
of the reasons we've come today.
I mean, I did say in the email, if you can tell us sufficiently how we're going to
be involved so we know, then maybe we don't need to send a deputation.
but I mean one of the things I put forward is, is there a way to secure union representation
on the Pensions Board? And basically the answer was no. And yeah, I mean, there was no sort
of suggestion of like further meetings we'd be involved in. Even, you know, we don't necessarily
know whether we're going to be getting responses from councillors or whether we're going to
be getting, you know, from other people at the table. So yeah, it's all, we're quite
in the – we feel quite left out of the whole process so far, and we feel like if we are
going to be involved, we'll have to be proactive every step of the way.
And obviously, you know, we're all workers and we do most of our union duties as volunteers.
It's a very – it's a big effort for us to try and follow up on this sort of stuff
alongside our day jobs.
And yeah, that's the problem.
If we don't do it, though, we're just not going to be involved.
That's our feeling about it at the moment.
Any further questions from members?
Councillor Sohra.
I was just going to add to what Harry just said.
Sorry, my name is Charlotte Richardson.
I think just with regards to the point about the speed of how this is progressing, I think
Perhaps members of the committee drastically underestimate the effect that this is having a work and morale
And I say that as an employee of the council for the last six years
I've had so many conversations with my fellow workers about this topic many of whom
Dare not speak out openly as we are doing they are intimidated
They are afraid okay
And I really just feel that these conversations are going on behind the scenes in lunch hours and breakout rooms
and it is very much a live topic right now
and has been over two years now,
and it is demoralising for us to hear
the same sort of procedural nonsense.
I understand that there is procedures you need to go through
but it just smacks of like overblown bureaucracy.
We want to see action, we want to see change,
we want to see Wandsworth as a borough
on the cutting edge of being a trailblazer for human rights
and all things that are good. We're proud to be part of Wandsworth and we want to be
proud of our workplace and be headed in the right direction, which many other councils
across London and the rest of the country are already way ahead of us on this. We look
like dinosaurs, sorry.
Thank you, Chair. I completely understand what the deputation has said, and I think
we all get the sentiment behind what's being said. The way I understand it, this is going
to be an irreversible decision, because once we've made that decision to go down that route,
we're not going to go back on it.
So I'd be interested just to hear from Paul Gigliotti about this timeline and how realistic
is this timeline and how necessary is this timeline that's outlined in here.
And the necessity is, like what other boroughs are doing, they are going out to consult.
This is a legal framework which we all operate within.
So this isn't something about our own internal procedure and process.
This is what a KC has delivered.
It's in line with what Nigel Giffin has said before and that has been brought to this committee about what he said.
Another KC who is saying that we are bound by national scheme regulations.
And anything that systems you make here today,
We may well have our own views about how we want to do it, how Monsworth wants to lead, and I take that all on board fully,
but we are not setting our own internal rules and regulations. We are bound by the LGPS process, and that is which sets out.
And it's clearly defined here in this paper about what KC advice has said around what the members of this committee's legal duty is in order to do so.
In relation to consulting, we are bound to consult with all 44 ,000 members of the scheme
and with the scheme employers who are the ones who are impacted by changes in contribution
rates as a result of any decisions that we make.
We need to look and change and analyse what the impact of any decisions that we make.
That is the role of this committee as a trustee of the fund, not as an individual making decisions
on behalf of within the council, it is a trustee of this fund and that is your legal duty which
you need to make when coming up with these decisions. So I reiterate this is not our
own internal processes and procedures, it is a legal framework which we need to operate
within.
Can I just go back a step and ask the union something because I didn't think we'd close
that or is it too late?
I share all of your frustrations.
This is taking so long.
We first agreed this, didn't we, October 2024.
The timeline now is 2026.
It is really frustrating.
But actually what really upset me with the colleague here saying your members feel intimidated.
They can't speak out about their views.
That's not the sort of council that we're running here.
So what are they scared of?
That's not how we work.
We're not how it's supposed to be.
Yeah, I'm happy to elaborate.
Myself, my husband is of Arabic heritage.
And I've been told by my manager that I'm not
allowed to wear, for example, a kafia to work,
that that would be viewed inappropriately politically,
despite that being a marker of my family, ethnicity,
and heritage, which is quite confusing for me,
because I understand regulations around not wearing
say for example, a Palestine pin on my coat,
that's also been told that that was inappropriate.
I've been told not to wear Arabic calligraphy jewellery, for example.
I think it really does cross a line.
I can't imagine any other ethnic background
or religious person being spoken to in that way
and given those kind of restrictions.
And it just is very symptomatic of a wider issue in the council,
which is one of double standards.
When it comes to the war in Ukraine, for example,
we were proudly showing our support
with a flag over the town hall.
Where is the Palestine flag?
There isn't one.
And I did make inquiries with Anna Popovici about that.
And she did respond saying that they're following
national protocol.
But when it was Pride Month, there was a pride flag.
You know, it's just, it's one thing after another,
where we do feel that on this particular issue,
it's viewed differently.
For some reason, there's a different set of rules
and a different set of standards and a different timeline.
Why?
This is a question that we all need to reflect about.
That's all I'll say.
Thank you.
Thank you.
Thank you.
Councillor Dicodem.
Yeah, so I wanna go back to the timelines point
because so the first deputation came on the 18th of October 2024. And if we hadn't written
the motion that we wrote to submit at the last pensions committee, then we wouldn't
have had a plan that would have been responded to in the first place. And the deadline for
the SIV is April 1st. So in many ways, the thing that we've pushed into June, we should
have had teed up and ready for the April 1st decision, surely, because we're now behind
where we could have been if we had, you know, what we ended up having to submit at the previous
meeting was really what should have come out of the year -long process of the first deputation
which happened in October 2024.
So there's a feeling that the council is kicking the can down the road on this issue, and I
think that's where the frustration and where this deputation comes from.
Part of the challenge was, and again it's highlighted in this report, is actually having
something to invest in because when you're looking at actually setting out
your RA policy you have to set it on something that can be delivered and
that's that it is a chicken and an egg type scenario so if there was a lot of
engagement with the CIV not just from officers here but across the 32 London
boroughs in order to try to work together and have something that is
developed because from the 1st of April we cannot invest in anything that we
We don't invest now in anything that we choose.
We don't own singular sales.
We own, we're investing in units in pooled vehicles.
So it isn't about just saying, right, okay, I want to sell share A or share B.
We don't have that authority to do so.
But my point is that we were already in pooled funding arrangements.
And what's happening is the SIV is taking over those pooled funding arrangements.
But had we set a policy that already had an ethical investment on our own pooled funding
arrangements, when we passed it over to the SIV, we would have a very clear and coherent
background to articulate the reasons why they should continue the strategy that
we'd already set. We're kind of doing it now after and I think that is where some
of the frustration lies. I think some of this might be the communication about
how it's been done because a lot has been going on because we can't, whilst we can
have a policy as a singular fund, it won't be able to be delivered because
the CIF have to have policies that can be delivered as a compromise across the
32 London boroughs. A lot of work has taken place across those 32 boroughs to come up
with something that we can bring to here. It would be pointless for setting a policy
here that cannot be delivered. So that is what the crux of the work has been able to
be carried out first. Coming together with those three pillars, which is what the CIV
have come back and tweaked and changed, and it has been brought back to this committee
before, that is what a lot of the time has been spent upon in order to say what is going
to be manageable because yes we are responsible for our own policies and it
be easy for us to set whatever we like and then say well the sieve aren't
delivering it but if we unique and we're the only ones who've got it and it can't
be there we're never going to be able to get something what we want so that's
where the time has been spent between in the last sort of 12 12 months or so is
working with a sieve to get those pillars sieve is acutely aware that
we're not unique like this is happening all over the I mean they're being
lobbied left, right and centre.
So there's no, that doesn't,
I don't feel like that's a coherent argument.
What all the councils are being told on one hand
is that we can't do anything until,
because it's all going to the SIV.
But then we're not setting the frameworks
necessary to show the SIV that this is something
that we all want.
And that, it's a kind of, it seems like it's a divide
and rule strategy because when the SIV came,
when we spoke with the SIV, and it was a closed session,
so I'm not, I can't say what we said,
But I think I can say that we raised this issue
and we talked specifically about divestment.
We spoke specifically about Israel and about Gaza.
And their line was, oh, well, we don't know how much appetite
there will be for it.
And so everyone is just talking past each other.
And meanwhile, the deadline is rapidly
approaching on April 1.
And my fear is that the actual bit of control
we had in the run up to that can then be taken over by the sieve.
And then once it's all handed over,
we won't have that say.
And so we certainly need guarantees on that,
and the say post -April 1st heading into the June process.
And then I'll talk a bit about my ideas
around the June process.
So Kathy.
Thank you.
Isn't part of the issue that we obviously need to consult
before we make any recommendations?
Isn't that the point there that we are where we are,
and we need to consult, so this committee,
you know, doesn't really have an opinion.
This committee is merely a trustee, essentially,
as you said, of the assets and is here to look after the assets.
So we have to consult before we set out
that framework for the SIV.
That's my understanding.
I don't know if that's correct.
No, you're perfectly correct.
And in order to consult, you actually
have to have a product to release
and a process to work within.
And that's what I'm saying.
Getting those pillars right so we can go out and consult
and actually say, this is the approach that we've got,
That is what enables you to go down that pathway.
So coming with a quick process point, because I can see one of the deputation members wants
to join in.
What I'd just like to suggest now is if we've got some more questions for members
of the deputation, we ask those questions, and so that the members of the deputation
can then return to their seats, and then we can continue this discussion.
Has anybody got some questions for members
of the reputation at this point?
At some point you wanted to make,
so let me just allow you to make your point,
and then if I could ask you to return to your chairs.
Thank you.
No worries, it's not a point, it's a question.
I'm slightly confused, okay, and maybe I'm a bit simple.
But how can you send something to the SIV,
which you cannot affect after the 1st of April,
and then do a consultation with your members? That doesn't seem to make sense.
The response to investment policy remains with this committee. So nothing's changing
from the 1st of April in that context. The only thing that's changing is that 100 %
of your investments will be managed by the SIP. You set your investment response and
investment policy so we will determine whether or not we're in Pillar 1, 2 or 3 after the
after the 1st of April. There's no hard deadline date of setting an RRI policy by the 1st of April.
All it is is that they will implement our approach from the 1st of April.
Okay, thanks. So therefore you can tell the ELSIF what you want to do?
We can, but there's 32 other funds that also have their say as well, so it's a compromise.
Thank you.
Councillor Dickadam, if I could just ask you to hold your question for one second, if we could
Just offer thanks to the members of the deputation.
If we could ask you to retake your seats.
Please stay and listen to the continuing discussion,
which I'm sure is going to carry on for a little while.
I don't know whether you had a point.
I did want to sort of make a suggestion
that it might be helpful for everybody
if Mr. Joty could take us through the recommendations,
specifically the timeline, and give us a sense of
why they come in that sequence and why they're expected to take that long, whether there's
any way that they could be accelerated so that we can just understand exactly what's
been laid out here and where we're going to be by the end of 2026.
Yes, certainly.
So obviously we've got proper advice and we have to take what legal advice and work within
those legal frameworks.
What we're saying about between now and the committee is we've got the products,
we know what potentially might be available with the various different pillars, one, two
and three, going forward.
We're now in a position where we have to look and assess what the impact would be of transitioning
our assets out of our current investments and taking those particular stances and look
at what the consequences will be.
Because I reiterate what the legal requirement is, not a procedure, the legal requirement
is.
And that is that you can only make a non -financial decision, which this will be, is if you have
addressed, you've still got proper advice.
That advice says the impact of making those changes is not significant.
And then you've got the, you know, you've seen whether you've got the support of the
key stakeholders.
So the reason for doing that, and how it's mapped out, is during this first phase we
have to look at what would be, if we're transitioning into those different pillars,
the financial impact, what impact it will have on the diversification of our portfolio,
before you can go out and even consider taking that course of action.
You are a trustee of this fund.
That is what you must do.
Once you've got to that stage, it has to come back to this committee, therefore, for
to make a decision, an informed decision, which you do not have that information.
Other funds have not gone, we would not be surprised if they've actually been able
to make that call yet, because until they've gone through and made that informed decision
based on the impact, these changes will have to A, their potential returns, and B, their
diversification, and potentially the contributions that that might have for the relevant stakeholders
who have to make.
That is what was coming back for you and being able to present it with to then make, is that,
does that tick that first box before you then go out to consult, will you make that call?
So I'm just going to, it's kind of academic at this point, but what I was, what I'm going
say is obviously the impact that we can have on the pillar three conversation to make sure
that pillar three actually does what we want it to would have been much more strengthened
had we done this timeline a year ago because we'd be heading into pillar three with an
existing investment strategy. Now we're past that point so I want to be able to say things
that you know are useful going forward. The journey that we're taking on this is exactly
the same journey we took on the environmental ethical policy that we did.
And I say that because, you know, oil per barrel right now is going through the roof.
It doesn't mean that we then are going to rush as a pension fund based on finances to
invest in that because we made a series of financial decisions based on an ethical investment
strategy around the environment.
And it's been obvious from the deputation that we had at the previous meeting that there
There is nothing against the financial and fiduciary duty that is based in the ethical
divestment programme that is being pushed on this issue. It's to do with long -term security.
Why would you invest in a state that is committing genocide and that is going to have long -term
legal and financial implications on the member's scheme? So I think I don't see that as a strong
enough case as to – it's outlined in the paper all the risks, and I totally understand
those risks, but I don't see those risks as massively different to the fiduciary duty
we took when it came to the environment.
Thank you.
Can I, sorry, can I just sort of sharpen this slightly, because I think it was very helpful
that Mr. Gilotti was taking us through this time frame.
I'm not diving too much into the detail, and I think I've understood it.
whether or not you assess, where you assess the risks,
you have to do it.
The risk, even if you come back and say there is no risk,
or there's huge risk, or there's upside,
but you have to do some kind of assessment.
So, can we just, sorry, can we just let Mr. Gelosky
finish, because I think it's very important
for everybody to understand what this process involves,
why we're doing it this way, how long it's going to take,
whether it can go any faster,
and what we're going to get to.
So if we could just get to the end of that so we're clear,
without going down too many side ways,
and then we can come back to some of these points.
Is everybody happy with that?
I can see that lots of people want to come in.
But if you could just let Mr. Gelotti finish on the process
so we understand about that.
So far we've got to, we have to do an assessment
of what that change would mean financially.
Don't say it, no.
Can you hear me?
So on that assessment point, and this ties in with the point that you made, we did do
that for the basically the environmental aspect.
So this is the same process.
This isn't going slower or different.
That proved it was financially beneficial to make those changes.
That's the fundamental difference between the two here is it was a positive decision.
So we proved that by actually switching and changing
and having that 2015 net zero pathway
was making those changes was beneficial.
And that's what took a lot of those challenges
that are listed here away from you,
because acting as a trustee,
you could evidence that that is the case.
When we're doing mapping exercises
and looking what the impact is,
if it were to come back and say,
yes, this is actively positive
over the long duration of doing that,
then it negates potentially the need to go out to consult.
You'll have a document that says this is really, really positive in order to make it the call.
But you've seen in the paper about exactly what impact it's likely to be, how many firms are considered.
Are you likely then to be able to demonstrate of what issues will be?
Firms can come and go. The difference is within the climate change,
as we know, it's irrevocably on that sort of trajectory agenda within a global environment.
That is the crux and the difference of where we are.
So we are following the same process.
We're getting that analysis, then it needs to come back to here like it was last time,
so it needs to come back to the next committee for you to see the report and see the decision
as to what are the next stages.
If it's saying it's really positive, it's really good, and it's going to have a net
positive return, improve everything, you may not need to go out to consult because it will
be a risk -based decision that you're making.
What we're saying is that the likelihood of that happening is low because of the impact on where it is.
So at that stage, that's when it triggers into, right, it's not going to be a risk -based positive decision.
It's a non -financial decision then. So what is, in order to trigger that, what is it you need to do?
We need to consult. We need to advise the individuals who, during that consult process,
the outcome of that review so they can make an informed decision when they are doing so.
And that will take time.
We need the access to get the report back
to work out how we plan and how we go out and consult.
Consultation document needs to be legally compliant.
What we don't want to do is go out and consult
and then find out actually what we're doing
can be challenged and your decisions that you made here
can then be overturned because they're not compliant.
So we need to make sure that the framework is done,
the consultation is legal.
It needs to ensure that anyone who is involved
is a member of the scheme and they're the wishes that we need to take. We need to
liaise with the employers and again because they're the ones who will their
contribution rates will will change as a result of any positive or negative
decisions that are made in relation to that. So it's all of those sort of areas
and that is why when you know we're looking at having the committee cycle. So
if you look at it the timelines is they're based around when the next two
committees are. So this isn't elongating the process, the next committee is in June
and that's why it's coming back and it's for the committee then to make the
decision based on the report and then at that point do you want to consult and go
out and make those decisions and then we're talking about September which is
the committee afterwards. So that's the timeline, it is the shortest timeline
because that's when the committees are. We need to be sufficient time to have a
proper genuine engagement to liaise with the key stakeholders which will include
unions when we come to that consultation process and going out and where to go.
And that is why we've got the timeline here.
Like I say, it is the shortest timeline to meet to ensure that we are going down a legally
compliant way and that the committee as trustees of the fund make informed decisions.
Can you summarise first where we will be at that stage once we have established that this
is a coherent financial – or at least you've understood what the financial implications
are.
We've made sure that we're on legally sure footing and we've got a democratic
mandate by having consulted with members and employers.
What will we then be in a position to do?
So then you've got your strategy and that point – so at the moment, if you think about
the three pillars that are in the fund, you've got your pillar one, pillar two, pillar three.
So Pillar 1 is pretty much invest in line with what you're legally allowed to invest in,
without having any stringent exclusions.
There are some minor minimal levels, so particular types of weapons and particular types of sort of fossil fuel type investments.
Then gradually as you go across to Pillar 2 and Pillar 3, it elevates the list of exclusions.
and that clearly the bigger the exclusion ratio, the more funds, the more companies
that will be taken out, the reduced level of diversification of the fund, and the increased
risk.
But it still might be that the returns and the rewards are better.
So that's what we will be able to choose and elect to do in.
That doesn't mean that that's the end of it, because like with everything, this should
be iterative.
The fund is here for 80 years.
People who are joining the fund today will have beneficiaries and everything else.
So we need to make sure that the fund is long -standing for that duration.
And that means that we're not just going to shut off and not engage with the SIV, not
want to develop, not want to move things forward.
We can be, you know, just because pillar two and three is as it is now, doesn't mean
it will be in the same view in two, three, five, ten years' time.
That can shift.
That can change.
That is where we've got to go through the engagement.
And it is working collaboratively with the other 32 funds in there.
And that is the shift.
And that is why we talk about the 1st of April, because it isn't, you know, we're not going
to have products that we can invest in in our own right.
Just to recap and summarise, then just make sure I've understood this.
By the end of this year, we would be in a position to say to ELSIF, we want our money
invested in Pillar 3, for example.
this amount of our money in pillar three,
this amount in pillar two, this amount in pillar,
that we would be able to ask them to do that.
As well as continuing to put,
influence them to develop further products,
a pillar four, a pillar 3 .5.
Is that, yes?
Yes.
Thank you.
I hope that was a useful exercise.
It certainly cleared things up a little bit for me
in one or two respects.
I think there was Councillor Dicklum,
Councillor Caddy, and Councillor Serra.
I would like to hear from the committee.
Councillor Caddy.
Thank you.
Always a good outcome.
Councillor Saira.
Thank you, Chair.
I am going to try not to state the obvious, but Paul Giordotti has mentioned a few times
about this committee having its role as trustees and a legal responsibility.
I would just like to hear, for the benefit of our meeting this evening, what would happen
if we were to disregard our legal responsibility?
I'm not a lawyer and I'm not going to try to give an answer that I'm not 100 % confident
in.
However, like anything, decisions are made here that if they are deemed to be illegal
are subject to judicial review and will be overturned, compensation can be paid.
There's numerous outcomes if you make decisions that are not legal.
As to what they will be, as I said I'm not a lawyer so I don't want to do anything.
That is why my duty is to protect the committee and the fund so that the decisions that they
make should not be subject to challenge.
That is why I've got Casey's advice that sets out a clear pathway that means if you
then choose to go down and elect to go for Pillar 3, you should not be, those decisions
should not be overturned should someone not agree with that approach.
because you're not going to get 100 % of the people that will want to go down whatever you decide to choose.
No matter whether or not you go in pillar one, two or three, you're not going to please everybody.
What I'm trying to set out here is a framework that means sure that you've made an informed decision,
knowing all the facts and therefore mitigates the risk.
Get rid of the risk as you all know. I'm in charge of risk management and I know that you cannot totally get rid of it.
But what I want to do is make sure that it's minimal chance of anything that you make can be overturned
Because you've actually followed the proper advice proper guidance and in accordance with the legislation
So in terms so we obviously we you know, we've had a back and forth on this we we haven't seen the legal advice and
in order for us to
We've got a summation of it here, and when we requested legal advice, we were told that
it would have to go into closed session and we wanted this to be a public meeting.
But following this meeting, will we be able to see the legal advice in order to – the
reason I ask that, and if it's a no, then that's fine.
But what I want to understand is there is obviously a contradiction between what was
said by yourself, which is we can make non -financial decisions regarding impact on certain areas,
which we've said and has been minuted before at this meeting,
we make non -financial decisions on mines and there are other types,
gambling and things that might have a high...
At the moment we don't, but we can.
There's precedent for us to make that.
I'm not saying us as an authority, but there is space legally.
Then there is the legal challenge from the outside,
which you've highlighted is likely to come from a fiduciary angle.
So people who want to stop divestment
will likely lean on that fiduciary impact assessment.
This is a moving piece of legal ground.
So Greenwich recently has just had
to go back on the legal advice that it was given
regarding the authority.
The pension committee was told that divestment from boycotts
and divestments was an unlawful thing that they were to do.
And the Public Law Centre took them to court.
and they'd have to concede that they are allowed to do these things.
So what I mean is that the legal advice seems to be moving all over the place.
At some point, how can we find out exactly what legal advice we are getting so that we
don't fall foul of judicial review, either from people who want to divest or from those
who don't?
Because it's clear that there isn't a simple line through this.
And I feel like as a committee, we can't make an informed decision unless we've actually
seen it ourselves.
I want to be careful because obviously again this has been open.
You've had a response from the Director of Law.
I'm going to allow the Director of Law to comment.
It's his giving you the view.
We've already had Freedom of Information requests asking for it.
It's legally privileged, that advice.
It is not in the Council's interest to disclose that and do anything else.
Like any advice that anybody gets.
So we cannot prejudice that advice and the way it's for in order to do that.
If we can't, so we've got a synopsis here.
Can we get details, for instance, that the legal advice was taken prior or after the Greenwich ruling,
or what happens when the letters are handed in to the SIV next week?
I mean, can we get any updates on how regular and how up to date, and also the,
if you're allowed to give a synopsis of the legal advice that we, in the process throughout this,
know that we're being guided by someone that is taking on board all of the perspectives,
because obviously the anxiety is that local authorities don't want to do this, it's complicated,
it's difficult and the legal advice will give them reasons not to do it.
It's iterative, but again if we are going to take that approach it delays the process even further.
If I'm waiting for different, you know, what we're going to need to do, and we don't want to do that,
we've got advice here that sets out a pathway which we're told is legally compliant.
If I take that stance it will be December, it will be May, it will be two years away.
We've got advice which we can now rely upon until there's something that goes in the
courts and that could potentially say that advice is wrong.
Nothing today in Greenwich or anything else is saying that advice that we've got here
is wrong.
So, let's use this to get that journey, to get us to where we are, so that come September,
subject to the two points I'm making, which is that we've done that mapping exercise
that shows that the impact is not significant, and B, that we've got support from all stakeholders
then you're compliant.
Councillor Pridham.
Thank you, Chair. Sorry to continue the discussion about legal advice,
but just this paragraph 21 here on page 119 refers to the legal advice pertaining to the ongoing adjudication of the ICJ
under the UN Genocide Convention that says that any position we were to take with regards to that
would leave us open to legal challenge because it could be characterised as a foreign policy position.
Now, would I be correct in assuming that any sort of position that we do take shouldn't
– should be fair to all countries and be judged on sort of objective metrics can be
applied globally and rather than singling out one country or another, because surely
that would also be taking a foreign policy position?
Absolutely.
And that's why it's something that's been discussed here.
I'm saying we need to make sure that it is proper.
However, we are bound by, and it actually says here, again it's not anything to do with
the council, it's a legal duty.
You've got the public sector equality duty where, you know, it's stipulated in this report,
you are bound by that as an authority.
Just if I may, on top of that, and I noticed that it referred to the ICGN, the UN genocide
convention, I think it's worth noting, and I'm not so sure if this was contained within
the legal advice that, as I understand it, the ICJ doesn't have sort of fair jurisdiction
across all countries, because there are some countries that have a reservation from it,
including, of course, China, where I think there is quite a lot of evidence to suggest
that the government has committed genocide.
So surely it would be then unfair to refer to any judgement by the ICJ if that can't
be applied fairly to any country globally.
So I just think we need to be very careful of stretching into foreign policy, which isn't
really the position of this committee.
I reiterate the point that we will ensure that we meet legal requirements in the approach
that we are taking with regards to the next steps will be in conjunction with the relevant
legislation and taking relevant advice.
So again, that anything that will be put forward will be done with proper legal support.
Can I just ask that there should be no comments from the Gallery at this stage.
However strong your feeling is about what you're listening to, please listen in silence.
Thank you.
Councillor Caddy.
So just to sort of almost clarify that process point.
So we won't be putting anything to consultation that would essentially be considered illegal
or a breach of our duties.
The first test is whether it's legal and a breach of our duties.
And then once that's been cleared, that hurdle's been cleared, then we can consider what we
would like to take to consultation.
Is that correct?
That's my intention.
My role here is to protect yourselves, to make sure the decisions that you're making
are in line with the regulations and also can be delivered.
So there is a two stage to this.
Obviously, there is the SIV and there is that sort of process.
But like I said before, 1st of April is not the be all and end all, you know, it's carrying
on.
We are, we retain those sort of rights.
Your duty here, like with any, your quasi trustee, it's not quite the same, but it
still does the same effect, you know, is to ensure that you're, you know, you are protecting
the interests of all scheme members, you know.
Irrespective of your own personal views, it is making sure that you follow all of those.
Like I said, there's 44 ,000 members, there are a number of employers.
It's ensuring that we have sufficient funds to meet the payments to all of those sort
of beneficiaries.
Anything that we do where we are making decisions that will, shall we say, reduce the types
of investments that we can do needs to be done with caution.
That doesn't mean that we shouldn't be doing it, doesn't mean it's not right that we take
those course of actions.
and you may feel as though that actually the stakeholders want us to take those
with us and they are willing and accept that there are risks with doing that.
There's nothing wrong in doing any of that we can do we can do all of those
things but in order to do so there is a process and I reiterate this is not the
council's process this is what you are required to do as a public body and as a
pension fund.
A small point and question really, just to go back to the analogy I think.
As a long -standing committee member, I think this is a tricky decision because we're not
making a decision today, but it's a tricky position to make with no information.
So just going back to Mr Geology's point, when we looked at the climate change stuff,
we were confident when we made that decision that it would not impair the viability of the fund,
would not risk the members. Today, we do not have that information
to make that decision on the divestment based on other non -carbon focused stuff.
And I just want to run a scenario through for the future that one of the
challenges we might have, particularly for the people in the gallery, is we're
going to get information back so we could do the consultation. The investment
analysis might show that in the pillar three that there's increased risk to the
fund in terms of volatility because it's more narrow because we've excluded a
large number of companies, and it might show that we expect lower long -term returns.
And even quite subtle lower long -term returns, one, we need to consider how big they are.
Absolutely, that's our responsibility.
And two, we need to quantify, based on how big they are, whether that is a price effectively
worth paying.
And just to put this in real numbers, if the analysis says that pillar three, which gives
the exclusions that a lot of people in the room want, and I appreciate that, reduces
the long -term growth of the fund by 0 .2%.
I was just doing some back of the envelope.
That's about six million pounds a year.
So over five years, 30 million pounds.
Gone.
That would have to be made up from somewhere else.
And I say that just to quantify, we're
managing nearly three billion pounds.
Quite small shifts on what we invest in and don't invest in
cost millions of pounds if we get it wrong.
And just to back up in real numbers,
I don't think anybody on this committee, and I appreciate the urgency, but we need to know
there's a number there.
We need to know there's no impact, in which case it becomes a relatively easy decision
based on, because it becomes not a financial impairment.
Or if there's a cost to it, then it needs to be a much stronger case, supported by consultation,
supported by legal advice, and particularly employers that will have to foot the bill
for any shortfall, that they're willing to pay that.
So I appreciate the sentiments but we need to see how much it's going to cost if anything.
We just don't know that yet.
Because if it's going to cost loads of money, I mean like 10 million pounds a year, that
would be quite hard to justify for these people on the committee.
I'm sure people in the room would say any price is worth paying.
But we have to assess that.
I was just going to say, I think you're absolutely right, and I think that's why the central
point is going to the members, because scheme members have to be able to make that decision.
And that leads me on to what I want to propose on this motion, is that the unions are involved,
and we make it very clear and direct that the unions are involved.
And I know that on our pension board we don't have union representation, but I know that
in other places that does exist.
West Yorkshire has a specific member space on the pension board for union representation.
And I feel like there's an element here whereby we're in some ways democratising what the
fund does.
So it's not just councillors that make decisions in committee rooms, but that we go out and
consult with our members.
And that decision has to be put to them.
I absolutely agree with it.
At the same time, there are decisions that we see in our own papers that occasionally
we lose 6 million quid because of a speculative decision that's gone wrong or an asset manager
that isn't managing the fund in the same way.
Now, you're talking about something structural, baked in, that needs to go to members.
But I do think that member democracy part is what legitimises the decisions that we
make today and at those future committees.
So to come back on both those points, obviously the council, not this committee, sets the
terms of reference for boards and etc.
There are scheme member reps, you know, when people have written in they have been advised
that they can apply to be members on the scheme.
In fact we had the interviews today for the ones, because every single scheme member would
have been made aware because we publicise that there are these vacancies available for
them.
So that is, so there is already a route for people to do that.
We don't need to make those changes for people to have those.
There are member representatives on the, that board.
The board is not a decision making body.
It's scrutinising on the membership and we just seek to go to those views.
Anything that I'm going to, you also as you as a committee, you are not here as you, from
the Council, you're here as a trustee of the Fund, you should not be setting up something
for a consultation that might be in breach of the regulations.
There are 44 ,000 scheme members, we need to make sure that all parties are fairly treated
equitably, you've got your public sector equality duty that you must follow, we cannot
be hindered in the approach that will say that that, any consultation that we do, is
not valid.
We need to make sure that the consultation process is valid.
The unions will be consulted.
They will be consulted as part of the process and the new draught guidance and how we set
ISS going forward.
They will be consulted.
Consulted does not mean that they can make the decisions, but clearly we want to take
the view of scheme members.
But as we've been highlighted, the view of scheme members has to be mindful that the
impact on the employer stakeholders and what they have.
And again, that's any advice.
In this report you've seen I made sure that was in the synopsis is in there about where your role as trustees are and
In relation to those ski in those stakeholders not just one
element of that stakeholder process
And I just make coming here with a sort of process suggestion
I'll need to come back to councillor caddy and councillor Ireland, but on this question of union representation
We're clearly not in a position to make a decision about that tonight
So this will be a saviour, so I'm I would encourage
people to apply for the members' positions.
But my point is that we can't be in a situation where regular
deputations have to come to this committee in order for
them to be able to engage with the process that we're going
through.
I'm hoping that we can.
I entirely agree with Councillor Dick and I.
Can I just finish my proposal, which is I don't think we're in
a position to make a fairly fundamental decision like that
tonight on the hoof, as it were.
But if we can ask officers to come back with a proposal for
union representation on these committees to be debated and voted out at a subsequent committee.
If passed, then that will give union representatives a seat at the table in the second half of
this year as we go into the consultation phase.
I appreciate that's a little bit of time to wait, but that will be a democratic process
giving the opportunity to have all aspects of that considered.
Chair, I don't think it's for this committee to make that decision.
I think it's the Council's vote that it's not for this.
I'm not asking for us to make the decision.
I'm asking if officers can take that away as a piece of work and bring that back to
a future meeting so that it can be debated and decided.
But it can't be this committee.
It's not this committee's duty.
You can't – Whether it comes back to this committee or
another committee, that that should be discussed and debated and decided in due course.
Is that not possible?
I defer to my other colleagues because it's not – it's in terms of reference, it's
not for this committee to make those decisions.
Can we make a request and a representation that we would like that to be considered and
a vote taken at some point?
The point is that it is not for us to decide what the pension board member, who makes up
the board to the pension board, but there are independent member positions that are
open that I am suggesting the Trejans.
And it is already available.
The process for union representatives to get on there is through that route.
That is available to them now.
But what I'm saying is that when the trade unions have contacted,
they've been told that there isn't a space for trade unions.
And actually, the advice is not that.
It's to take up the member route, and that's a way that other pension boards
across the country regularly have trade union representation.
So I'm just trying to clarify it so that that process is open, transparent,
and available for the nice people who have come along tonight.
The second point I wanted to make was just on this paper, which is,
I was saying a friendly amendment on, it's the third bullet point on point A
between now and the next committee, which is if we're developing a consultation
material to just make sure that we have cast iron guarantees that there will be the involvement
of the trade unions at some point.
I mean, I just don't see that as controversial.
Before we – if it's all about setting out what the questions are and how they are,
they need to be legally compliant.
They need to ensure that it doesn't give a particular skewed view when you're putting
out on a –
You're talking to employers, you'll talk to members who aren't in trade unions.
It's just to say that the trade unions will also,
because what's clearly happened is there's a breakdown
in their ability to engage with this committee.
That's not clear.
Councillor Kelly's been trying to come in for a little while now,
so if I could ask her to.
Well, this kind of goes back to a question
which has now sprung up for me based on this conversation.
This paper sort of sets out that a consultation, I guess,
is inevitable, but obviously given the conversation
that we've just had about the report
and the effect and the impact on the scheme,
Is it the case that a result will come back that we simply wouldn't want to put to the,
or we couldn't in all good faith and fulfilling our duties as quasitrustees, that we couldn't
put to the members?
Because I don't know what that might look like, but it seems to me that that would be
perfectly possible.
And I just don't want to, I guess, be in the situation in, not that I'll be in the
situation, but in the situation in June where this committee will be making a decision on
whether to even go to consultation and we haven't managed expectations on that
whatsoever.
Valid point. There is no guarantee that you can make that decision to
definitely go to consult because until you've got that the outcome of that
report you don't know what the financial impact is. Councillor Craig has already
highlighted a potential. Whether that's likely or not I don't know and I
wouldn't say there's a 5%, 10%, 20 % chance of that happening but you'll only
know whether or not what the impact is once you've received that report.
And if it is, you know, such a level that it is going to have a significant impact,
you are not legally allowed to make that decision.
Do you want to go?
Sorry.
No, no, that's quite all right.
No, I think actually most of the answer to the question was given in the previous discussion.
Just to cheque, for the pensions board you seek nominations and then if there are more
nominations than places there are elections and then how long is the term for and do they
set the terms of reference?
So yes, I mean obviously it goes out and people were obviously invited to come in.
I think, well, we had the outcome today so that we had four applications for it.
They were, you know, discussions with them all and a decision will be made as to who
is the most relevant individual.
Are they elected by member?
No, it's not an elected role.
The boards are not, it's not an election.
It's not a committee.
It's not done in that manner.
There are a stakeholder representations and they're interviewed on the basis of this
of a standard process would be like any co -opted member.
It is not, so the framework, the legal framework for Senate and the Board is not elections.
Councillor Gasser and then Councillor Caddy.
Can I just, just to understand what we might be presented with in June then, the analysis
may come back that it's very advantageous actually to disinvest, so no problem, we just
go ahead and do it.
It might be so disadvantageous that we couldn't in all conscious go to consultation even,
but it's probably going to be somewhere in the middle and we go to consultation and let's
say the members say yes, we want you to do this, but the employers are not so keen.
Then what happens?
Do they have the power of veto?
And then I think Councillor Craig, you mentioned, well, the employees will have to make up any
difference, but is there not another route whereby the returns are just not quite as
good?
because our returns are very good, our funding policy position is very good at the moment, isn't it?
Could we not possibly decide to just have it slightly weaker because we think that's the right thing to do?
But we're still very, very well funded.
Yes, to all three points. I mean, what you're saying there, I mean, I can't predetermine what the outcome is.
I think, you know, my best guess will be exactly what you just said.
It's going to fall somewhere in the middle, but it's not going to be significantly bad.
It's not going to be great. So it's going to hit that window.
that means you go out to to consult and then if it is going to be that there's a
differential between you know employers stroke employee that is something that
we'll need to seek advice on there is views on here it's mentioned in the
report already on what the KC has turned around and said and clearly if there is
that discrepancy that is a challenge because you know clearly the employer is
the one who bears the brunt of good or bad so this could end up being a
beneficial and so they will benefit from it.
But I'm sorry, I'm not understanding why the employers would end up having to pay more
necessarily we could decide that we accept a slightly lower, I've forgotten what you
call it now, but we're funded at 121 % at the moment aren't we?
We could say okay, well let's be funded at 120%.
It's still really healthy.
No, the contribution rates isn't quite like that because clearly people are getting a
negative secondary rate.
So whilst we're in a positive territory, it's on a different paper on this agenda,
which actually shows you how it works.
You have a primary rate that is determined by the actuary that actually sets out exactly
what the cost of an individual is, and then you have a secondary rate, which is plus or
minus, which is based on your funding level.
So they are getting a discount to what they should be paying already because of the funding
level.
You can't use it twice.
We're already using that surplus to reduce the contribution rate.
The next, and then Councillor Dickard.
Thank you, Chair.
Yeah, it was just really on page 119.
I think it probably summarised it at the bottom, and it says consultation will be used to test
member and employer support for ethically driven exclusions in circumstances where advice
indicates that financial detriment would not be significant.
And I think probably we do just want to manage expectations that that offers a clear window
in which we won't be consulting.
Okay, thank you.
Yeah, I mean, what do we think?
Do we realistically think that the SIV is going to bring forward a pillar that has a
massive financial blow to the funds?
Because then it's in some ways it's a rigged game.
If Pillar 3 comes with exactly the loophole that Paragraph 19 points out, then we're stuck.
And that's why my point about having a stronger policy earlier.
What do we think is going to happen?
Because if Pillar 3 is not taken on by any local authority, then in some ways it's failed in its purpose.
Well, I said I don't want to prejudge, but I would be surprised if it's going to come back with a level
that prevents you going out to consult. And that's my point. But as Councillor Caddy's
turned around and said, I don't want to be sat here and then be told that you said
we would, and we definitely will. If we're talking about trying to manage expectations,
there is a chance, but I don't think it, personally I don't think it will, because
exclusions, we're not talking around taking out huge major companies. But a notion and
example, and I want to use an extreme here, if Microsoft was put on that list for whatever
a reason, that would have a significant impact.
If Nvidia was on that risk, I think that would have a significant impact.
There are certain companies that could fall in that would then mean that the impact on
the returns would be substantial and therefore you would not pass that pillar, that threshold
test for you to enable you to make that call because like I said, you've got the advice,
three stages, you've got the advice, that's what we're doing.
The advice says that it's not going to be significant but if it is significant it's
without that second test.
So you can't go over to Ski Member support.
Can I just sort of jump in there?
I think we've had a fairly lengthy discussion now,
covered a lot of ground, there's more to come.
But just to review the points that we're going to be
agreeing going forward and whether we're ready to agree
those or whether people need more time to discuss.
We obviously, we need to note and thank the deputation
for their proposals, but substantively,
we need to approve the Office of Work Programme and timelines
that Mr. Gelotti has set out, we need to authorise him and the Director of Financial Services
in consultation with the Chair and the Vice Chair to issue a joint letter to London SIV
and to conduct an exposure mapping exercise across all holdings, this vital step of quantifying
things that we've discussed so thoroughly now.
The exposure mapping exercise should include modelling of financial impacts and a high -level
summary of findings by asset class and mandate type
should be published.
This seems like an absolutely crucial next step
to actually gain clarity on where we stand.
And that leads then on to, ultimately to consultation.
A matter I've noted that is still left hanging
is union involvement.
And it's a little bit unclear to me exactly where
that decision needs to be taken.
But I think it is something that should be explored.
We're probably not in a position this evening
to work this out, but what I'd like to suggest is that I and my Vice Chair take this up with
Mr. Gelotti and come up with a process for exploring that, whether it's something...
So, yes, okay, so suggestion from somebody more expert for me is that myself and my vice
chair should write to the leader of the council asking him to take advice on how we can consider
this going forward and come to a recommendation of what the options are, whether it's no involvement
or full involvement or something in between, but at least we've had this explored.
So, okay, and it's a decision that's going to be made.
But hopefully we will be able to reach some kind of decision on that in the course of
2026, which would, if then successful, union representatives will be having input into
this.
As you can tell, this is all not happening tomorrow, so later in the calendar the union
representation would be involved if approved by all these arduous steps.
Do people want more time to discuss important issues here that feel we
haven't covered off or do you think we can draw a line under for now what's
been an extremely thoroughgoing discussion?
Councillor Gasset, I'm sorry there's we're not taking questions from the floor sorry
about that. I'm just a bit uncomfortable that we're not including the unions in
this conversation, if it's going to go to full council, the next one's not till July,
I think, so it's after the June committee.
Can we not informally consult?
Can we not find a way of doing that so that they can at least give them their news?
What I'd like to ask is that we, I don't think we can make a decision about that now, but
that if we can take this offline and pursue this and come back and send a message around
to.
And I'm happy to have conversations in development.
It's not about that.
But it's making sure that any documentation that we issue as part of a consultation is
structured in such a way that everybody is given an equitable chance of doing it.
The azing with concerns of the unions about how they're approached, obviously I'm
happy to engage with unions and have that discussion.
That's what I'm trying to say when we've engaged similarly to the reports of people
being on the board.
We've been very clear and open about that.
It's not the first time we've had any questions and people from the unions have asked can they do it.
He said yes you can, this is the process for you to follow.
If you want to be, this is the process, this is the training that you do if you're doing it.
And we haven't, you know, people have not applied for the role when they've come up.
This is, this is.
Thank you very much.
But this is slightly different.
This is, we'd like to be involved, I think I've understood you'd like to be involved in the consultation,
and providing the consultation materials in the first instance.
And that needs to happen soon before we can give them
any formal responsibilities.
With the material, I'm being very clear
that the material that's used for the consultation
will be conducted in such a way that is legally compliant.
That is the primary role in ensuring
that all parties, all stakeholders,
are able to have that involvement.
Talking to unions in general about their views
and the wishes of the members, absolutely fully support
and understand what's been said today
to make sure communication is better.
We want to enhance and we want to improve that.
Totally on board with all of that.
What I'm making sure is that we make no decisions here
that could prejudice the outcome of a consultation process.
So I'm going to, if we may, move to recommendations
that A, note and thank the deputation for their proposals
and for their patience.
I'm very frustrated, I'm sure, to listen to some of this without being able to join in,
as I'm sure many of you want to.
But thank you very much for your tolerance on that and your contribution at the beginning.
Secondly, to approve the officer work programme and timelines.
Thirdly, to authorise the director of financial services in consultation with the chair and
vice chair to issue a joint letter to London CIV and to conduct an exposure mapping exercise
across all holdings.
The exposure mapping exercise should include modelling of financial impacts and a high -level
summary of findings by asset class and mandate type should be published.
And finally, that work should be done by the chair and vice chair with whatever officers
and elected representatives necessary to explore further union involvement in an expeditious
manner.
I just had a point of information that the leader of the council has already written
to the L -CIV articulating the position that we want a Pillar 3 that is representative.
So that's gone in.
Let's make sure that that one is joined up and it's all matching.
If you want to stay and listen to the rest of this, you're very welcome to do so.
We're moving on now to item what was for pension fund valuation.
I'd like to ask Director of Finance to introduce this as soon as people have left.
Okay.
Thank you, Chair.
So this paper sets out the current position of the fund and we've got
we've got basically representatives from Barnet Waddingham who will talk to you
in a bit more detail and hopefully be able to answer your questions. They've
been here a couple of times before so you shouldn't be seeing anything in this
paper that's shocking or relatively new. It shows you that we are in a better
position than we were three years ago. To be honest that is not necessarily to fund
performance, a lot of it is down to the changes in the discount rate which has been influenced
by the rise in interest rates and the market expectations of returns based on that rise
in interest rates. Key element for us though is looking at what the relevant contribution
rates will be for the various different individuals and again that they are
outlined I think it's in paragraph 10 of this report. Yes so you see the table
that is there and go back to Councillor Gasser's query on the other paper about
getting that returns. This shows you in a bit more detail so if you look at it
we've seen the primary rate for the various different, this isn't every
employer but the core main ones we're looking at Richmond Wandsworth, the
shared service and then our Academy Pool. The primary rate is that future rate
what is the cost of a year going forward, how much you need to pay, is that set you
know it's it's variable and the reason why it's variable because the
demographics of each pot are different but you'll see the secondary rate so
that's why we can't take a lower return in essence because we're already giving
back that money from that overfunding shall we say because we're in a well good position.
In the past one of the reasons why Richmond is in a good position in the changes in their
particular discount rate, sorry their contribution rate, is they were paying a surplus last time
so they were paying a top up of their primary rate.
Now they don't have anything.
The ones with old legacy pot as such and those are in the scheme have got a negative secondary
rate that's because the funding level is at a hundred and thirty odd percent so
they're able to get some of the discount back already and that's why by taking a
different judgement in your investment return does have a material impact on
the contribution rate because you're not getting it in that manner hopefully have
explained it in a bit more detail from the from the previous question
illegally obliged to give that discount rate right so that it's not an
exploitative I can't remember from the training but it said there's a like a
legal reason because of a case that was, yeah.
And you've got the funding strategy statement
attached to one of these,
and that sets out the parameters of where it is.
So within that, we set a minimum threshold,
I think it's 115%, you have to hit that
before we'll start triggering a discount rate.
It sets a floor, I think a 12 .5 % contribution rate
within that document.
The actuary can give you a little bit more granular detail
about how and why they've come together
and helped us to set those sort of thresholds.
But no, you're perfectly right,
and exactly in that approach from the training,
that that's where it is.
We can't hold it because ultimately, when the fun ends,
the aim is that there's zero money in the pot.
So you can't continually build up that surplus
because it's unfair to the employers.
They'll be overpaying in that.
But the compensating factor is we want to be prudent.
Tying back to the other previous paper
about when we're setting policies around certain types
of investment strategies, that stable contribution rate
is key. That's why we want to diversify our portfolio, we want to keep volatility as low
as possible so that we don't have, you know, this in three years time it moved from 17 .6
for Richmond or from 16 .7 for Wands or 15 .5 for the shared partnership to change by 3,
4, 5 % each time because doing your financial modelling on how and what services can then
go and spend are going to be impacted more by those volatile rates and interest rates
have moved significantly three years ago.
So I'm mindful, and we're seeing
the trajectory of where interest rates are going at the moment.
They're falling, subject to the last couple of weeks
as a hiccup on how quickly they're going to fall.
But that will have a negative impact on contribution rates
next time around.
So can I just ask, is that 4 .2 % a judgement or discretionary,
or is that the number that just sort of falls out of the model,
and we accept that on a Wallingham model
is kind of what it is.
I've got, I'll answer your questions, they can address all of those, but our role really
is we accept what the, you know, the actuaries are skilled and paid for, they've got all
of their statistical analysis and working out exactly what the cost of an individual
is, they look at mortality rates, you know, they're skilled, I'm not, so I'll defer
to them as to questions on how they've come up with their numbers.
And what effect does it have on one's of councils payments, what would the monetary value be?
I couldn't tell you the actual, of course, Cora might have the answer, I'll defer over
to her.
That is something that we model when we come onto the budget paper, we'll go into some
more detail, not on specific numbers, but you'll see contribution rates and what they
are projected in that budget paper will give you some indication of what the implications
are as a result of changing levels. Because that does have an impact on when we're doing
our cash flow modelling. And again, this is how it all sort of like joins up together,
does impact on our investment strategy because we are in negative cash flow. So obviously,
we've got more people paying out than we're collecting from our contributions. So as that
narrows we have to move towards more yield operating sort of investments.
Chris available.
Dan, is Chris on?
So for you.
Hi, Chris.
I don't know whether or not you want to give an overview of your presentation and your
– Yeah, happy to.
Yeah, thank you.
Happy to, thank you.
And I've picked up the questions that were asked by Councillor Dickard and Councillor
Carrey as well, so I'll touch on them pretty quickly as well.
So thanks for inviting me.
I'm conscious of time, but I'm also conscious that the two papers being discussed are, they
may form the basis for a lot of decisions that the committee or even the pool may make
over the next two to three years.
So I'm going to whip through the papers while trying to touch on the key points.
So the two papers that I'll be speaking to are papers 4a and 4b.
And if we actually start with the second, with the draught funding strategy statement, that's paper 4b, pages 59 to 113 in the pack.
So a brief background.
I presented the core principles for this document to the committee at your September meeting before the draught itself went out for consultation between 10th of November and 19th of October.
The director of financial services covered the draught FSS during your December meeting.
As part of the consultation, the document was shared with all of the employers in the fund and with other stakeholders,
such as the Department for Education, as their role as guarantor for the academies in the fund.
That allowed the employers and the Department for Education to scrutinise the proposed approach to funding the scheme at the 2025 valuation,
but also at other times, such as when employers exit the fund.
So the consultation ended after the committee's December meeting,
so this is the first time we're having a chance to discuss it.
Only one piece of formal feedback was received,
and that was from the Department for Education,
who presented a number of technical queries
that we'd seen for other funds as well.
We answered those, we helped the fund to answer those,
the fund officers to answer those,
and there was no resulting change
to the proposed funding approach as a result of those queries. So because no other employers
expressed any material concerns during the consultation the funding strategy statement
you see in the pack is substantively the same as the one issued for consultation
with the addition of a small number of changes that we've highlighted in the version in the pack
in blue. So you'll see them highlighted with blue background. So the small number of changes have
come from emerging best practise or to make certain sections just easier to
fully understand. One aspect worth noting and this is to pick up Councillor
Dickerim's point, one aspect worth noting that's not changed is the proposed
discount rate at 31st March 2025. So item 7 in Appendix B notes the new strategic
asset allocation agreed by the committee at your December meeting. We've re -ran our assumption
setting modelling and while the new allocation does produce a slightly lower long -term best
estimate expected return under our modelling, how much we've reduced that best estimate return by
to get to the fund's prudent discount rate also changes it also lowers. So the two effects broadly
offset each other. So no change to the desiccant rate that was proposed, although we will perform
this modelling again if the strategic asset allocation changes materially at any point
in the future, either at the committees or at your pool's behest. So I just wanted to
note this just in response to Councillor Dickerson's query and also just for the committee's comfort
when reviewing the recommendations. So on that appendix B, the funding strategy statement,
I don't propose to cover it in full but I would be happy to take any questions if the
committee did need to clarify anything. I think Councillor Carri you've just asked how the rates
were set and what impact for example is the current proposals having on one's worth of
Council's payment. So I think just picking up on that latter point I think we've got rough estimates
and it may differ slightly to the estimates the fund officers have, but we had estimates
for £25 -26 for ones with council of about £6 .3 million in employer contributions and
they would drop to about £5 .1 million -ish in 26 -27. So about a 20 % drop, I think.
In terms of how the rates were set, this is where the proposed funding strategy statement
contains a number of features that you are seeing across a lot of funds for the 2025
valuation, principally because a lot of funds are now finding themselves predominantly surplus
when a lot of funds in 2022 are still in deficit. It is about the appropriate use of that surplus,
How much of it should be used to make sure that you're meeting the regulatory requirements
for solvency and long -term cost efficiency? How much should be kept in order to try to
immunise the funding level against adverse market movements, which we're starting to
see a number of? And actually the balance, in fact, there are things like affordability,
making sure that there's ability for employers to benefit from strong funding levels. So
A lot of these discussions were taken around, a lot of decisions, discussions held about
how to best balance a lot of these conflicting objectives and there's no single right answer
to this. There's no single silver bullet that produces the best optimal funding strategy.
But the Director of Financial Services Paul has already mentioned a couple of the aspects
that we've already put in there in terms of having a threshold only above which surplus
is released back to employers in lower employer contributions but also the use of a minimum
employer contribution as well just so that contributions aren't set too low that it actually
either threatens the funding of the fund in future or it means that it makes it harder
for employer contributions to rise again in future if need be. So I've given a very brief
explanation there but I'm happy to, if there's any specific questions, I'm happy to cover
I guess just coming back on that one, I guess what I wanted to be clear about was that it's
a sort of technical actuarial recommendation rather than, I don't know, it's not driven
by the desire to bring down employer contributions by the council or by the employer.
I guess my question is, is that 4 .2 percent consistent with market best practise and generated
by you rather than as advised or as judged by us?
Is it a judgement call by us or is it a sort of advisory point by you?
I'll let Chris answer as well on that, but to give some reassurances on, we have quite
good separation here in Wandsworth, so the Section 151 Officer for Leonard -Merry, she
knows obviously the proper conflicts of interest risk that you're highlighting there, proper
segregation of duties so she does not engage with the actuary in this is
directly between Barnett Woodham and myself. Clearly there are some elements
where we influence and a good example of that will be on how much how often we
use that negative secondary rate how quickly that is ramped up and there were
proposals potentially to step that. I was mindful of you know the financial
position that a lot of people are in and thought well ultimately we're in a good
healthy position let's go straight to the maximum discount that we can afford
from day one. So that is one where I've made a call and you know slightly
different necessarily than what the actuary was proposed. I think I did it in
the best interest of the employers to make sure that we that we are looking
after all of our stakeholders and it didn't have a material impact on on the
fund itself and was supported by Barnet Waddington and that's how we that's how
it works here. Can't say how it works for other authorities the risks that you
raise are valid and relevant but here from my side and Chris may have a
differing view, it works effectively because we – obviously, the 151 officer is consulted
on, but a bit similar to what we're talking about other ones, they consult but they don't
direct.
And that's the whole point about it – consult, get views, listen to what they want, and then
inform proper decisions are made by the right individuals.
Yeah, but thanks for that, Paul.
Yeah, the question's a really good one, and actually it drives to one of the points
that came up in recent years. So the 2022 valuation three years ago, there was some
criticism around the funding strategy statement across the UK, across England and Wales as
a whole, not specifically for your fund, about the fact that the funding strategy statement
there wasn't enough of a consultation with employers. So the new guidance around the
FSS that was put in place in January 2025, actually one of the key requirements for that
was to have a meaningful dialogue with employers.
And that's why there was a six -week consultation
between the 10th of November and the 19th of December
to allow employers to fully review,
fully scrutinise the funding strategies theme
and to come back with concerns and to come back with queries.
What experience we're seeing in other funds, for example,
is that a lot of employers have come back
and they've queried,
they've challenged, tried to better understand.
They've had a series of discussions
to help them understand exactly what it means, where it can stretch, you know, those sort of
things. And there have been situations where, for example, you know, cases put forward by
employers have been considered by the Administering Authority when they come to
finalise in the FSS. Now I think, as I said, the Funding Strategy Statement is owned by the
committee. You've undergone a full consultation and you've had no material concerns from any of
employers on the proposals. So I think for us that signifies that you've had a meaningful
dialogue with employers and those employers haven't expressed concerns, nor have they
put you in a position of conflict of interest.
So where there is a fund surplus, there's just adjusting the contribution by the employer.
not the any of the employees or improving the scheme in some ways there's
something to prevent that or so the employees is set by statute and that
ties in with what we're saying with the impact on going back to the earlier
paper that's why the view of an employer might be different and we have to
reflect upon it in your role as trustees because they're the ones who bear the
run of the returns.
So the kind of executive decision that you made to
reduce the employer contributions was based on
trying to, I guess these are public sector bodies, so it's
a financial decision to try and save them.
It's listening to the views of, you know, where we know
that with, you know, schools and everyone else is
struggling and they want the savings as soon as possible.
And that's how when obviously Chris was talking about
engagement and doing everything else, making sure. We do listen to the reviews, we do
not mindful because it clearly, you know, normally you would say let's stagger it,
don't do it all in once, but where we can, clearly we will make those abilities
even if it will have a small detriment to the fund because obviously it means
that I've got that, I've got less income coming in immediately rather than doing
it, but when we come onto that budget paper, this is how it all ties in. We still see
we've got just over a million pounds to play with, not a lot left now, but I had
enough, which is why I was happy to try to say to you actually, would it cause them challenges
if we switched to their initial proposal, and it didn't.
So clearly if the actuary advised me, no, that's going to be too difficult, we shouldn't
be doing it, I clearly wouldn't listen to that advice.
Are there any further questions?
In which case, we are recommended to agree the contribution rates outlined in paragraph
nine of this report from April 2026.
B, agree that the deficit recovery period for any employer is set at six years for those
currently in deficit and 12 years for any new employers who subsequently go into deficit.
C, note the revised funding strategy statement set out in Appendix B to this report.
and, D, delegate to the Director of Financial Services in consultation with the Chair and
Deputy Chair of the Joint Pensions Committee the authorization to agree other employer
rates as described in paragraph 8.
Thank you very much, and thank you very much to Barnet Waddigan for attending this late
in the evening.
Much appreciated.
No problem.
We now move on to item 6, the pension fund budget. Mr. Gelotti.
Just conscious of time, I'll give a very brief overview. So this paper here is really to try
to help and set out our current approaches just to make sure that obviously the impact of what
we just heard about reduced contribution rates isn't going to significantly impact on our
budget, which potentially could mean that we might need to revise our investment strategy
statement.
The things really to note is really, is that we are now getting to the stage where we have
a minimal buffer.
We're only talking about having one million pounds surplus.
And what we're talking about that is, once we take out investment returns that naturally
come off through dividends or from yield, plus the contributions made by employers and
employees, less what we pay out.
That's really what we're looking at and trying to work out, have we got the right sort of
structure and set.
And it is detailed on the table when you look at it just by going on.
Let's find the right page.
So the start of the paper is on 121 and the appendix is on 126.
So when you're looking at it, and that's showing you the changes that we have from
the various different levels of income.
So you've got starts up at the top with how much income we get coming in, and that's
looking at obviously the contributions made from both employees and employers, less what
we pay out in our pensions.
We obviously get additional income that comes through by our natural investments.
Some of that's directly reinvested because we've got share classes that reinvest our
money.
Others, we actually naturally take the cash out from it in order to help meet that, the
difference between our income and our expenditure.
And then what you're looking at the bottom of that complete table, the last line is where
we need to look at.
And that's showing that if we take, if we ignore the amount of income that we get that
we directly reinvest, how much extra are we in surplus or are we in negative?
If we were in negative, we'd have to change our approach.
We are sitting in the positive territory, but it's small.
So that's where we're at.
So we haven't got much room for a manoeuver, much room for change, and it might impact
on what we have to do going forward.
Shouldn't have a material change because quite often what we can switch from is from
reinvestment type share classes to distribution type share classes.
So I'm not panicking even if that does change, but give it 18 months, two years, it might
be different.
Do we have, does the CIV offer two versions of each fund, like an income class and an
bigger decision than that. They do but they're on the call so I'll defer to them as to how easy
it will be. Jenny I don't know whether or not you want to ask answer that at all.
Good evening everybody, yes I think it's a relatively easy thing to do but I think we would
look to work closely with the officers to sort of look at your Catholic forecasting and work together
to work out should we be switching on or off. From April the 1st who's in charge of that? It's
grey. So this is part of the process that we're working towards and we'd look at the the general
matters paper we're looking at trying to get a service level agreement or whatever you want to
call it around how things operate and cash management is one which is quite topical and so
that is an iterative process, shall we say, but we're engaging not just us, the other
32 funds, also operate, every fund operates in a different way with how they use their
cash. Some are in surplus, some are in deficit. But, you know, it is something that we are
working towards. It's, you know, it's good dialogue, but ultimately we need to make sure
that we've got certain money coming back. We will do, and we will retain, we've got
two different bank accounts.
You've got one which is used more internally and locally
for actually making all those payments,
and one's linked directly to the investments.
That's where the engagement will be
to make sure there's sufficient cash at the right time,
so we're not in a position whereby we can't afford
to pay our pensions.
And in which case we need to recommend,
And so we note the estimated out turn on the pension fund revenue budget for 2025 -26, approve
the pension fund budget for 2026 -27, and note the projected budget for 2027 -28 and 28 -29
required for medium -term cash flow planning.
Thank you.
Item 7, general pension matters.
Okay.
Rather than go through all the points, I'll just really just highlight two that I'd want
bring to the table. You may have other questions from on the other areas but
the two fundamental bits on this particular paper to note really is
Schroeder's. They were here at the last meeting when we called them in to
discuss their performance and the challenges that they faced. Subsequent to
that meeting two key things have happened pretty much instantaneously
after that meeting. That fund went into suspension which means that there is no
trading from us as a fund that's to label them to help steady the ship and
work out how they're going to work operate long term and the second point
is that they have had a buyout by Naveen who have been known to this authority
ironically we had a Naveen property fund that would transition into a
at Seaport, so you can't make this up.
So, they're now are gonna be the,
the beneficiaries, basically the owners of Schroder's.
The key thing for us really is not necessarily about
who owns it, but it is that fund
and how that is going to work.
Obviously as we've mentioned before, more than once,
it will move over to the CIF going forward.
It's much more difficult to consolidate property funds
and make changes, so no doubt we will have a longer term discussion with the CIF and
involvement on directly these particular assets.
I have met with the portfolio manager, it makes reference to it later on this month,
that meeting has taken place.
They have set out various different options that they will wish to explore with all of
the relevant investors and will come back with some more informed ideas and proposals
once they've had that wider engagement.
But the thing we really want to try to avoid is a situation where they have to continually
sell assets in the short term so that they're not necessarily able to get best value for
those.
So that's the premise of what it's likely to do.
It more than likely might mean that we end up being locked into a product for a period
of time where we're not in a position to sell because it would be gated, but that will be
done in our best interest and in consultation with the CIF because from the 1st of April
this technically will be under their premise.
But I don't know, Jenny, whether or not you wanted to add to anything in regards to property
because I know this is slightly different to all the other asset classes where you probably
are more concerned and would want to be able to consolidate.
Yeah, I think partly to do with pooling and the LGPS pooling, what is happening with Shroeder's
is not atypical. We've seen it happen across a number of UK property funds. And as Paul says,
critical for me is that all investors are treated badly and that there isn't any knee -jerk reaction.
I actually had a session with Nubian yesterday just talking about the wider M &A activity.
And one of the things which we will be keeping an eye on is sort of the merger of two property teams,
because Nubian has quite a property team as does as traders.
But it's an area that we're all over. It's as I say, I've been through a number in the past.
And what is really important is that, as Paul says, you're not selling the jewels and
the crown without a strategic plan in place.
And we will make sure that we report and keep you up to date with all of the issues post
the 1st of April.
And the only other point in the paper I was going to highlight is the section around guilt.
Obviously, we made a decision to move.
We want to get that triggered.
and prior to the 1st of April, at least get things in motion and instructions to the SIF
on that journey.
You'll note that the two funds in there have been provided by the SIF, so we have
already had that dialogue with them and the two suggestions, which was in line with Mercer's
advice to go through on a passive approach with linkers.
The difference in fees is minimal in actual real cash terms, but the advantage of going
with LGIM, we've got the LGIM passive equity product, they've obviously were evaluated
by this committee in the past as a company and they don't lend any of the stock.
So that's why there's a difference in price point is one gets some income through
other sources, there's risk associated with that, low risk but still some risk and it's
so therefore we're recommending because we've done due diligence in the past on
LGIM we opt to move the money into that product.
What we will have to do is I'll need to engage with Jenny and her team about how that's funded.
Some of it will come from cash that we've got to surplus cash which we will reduce.
Others will come out from selling some of our equity stake and reduce that.
But the premise is that obviously that's implementation that will move to the SIV.
But there might be some dialogue, and this is why it's here, you know, we're doing that technically whilst it's still under our remit,
because if we get the ball rolling before April, that's under this fund.
You agree with this approach that we take in making that move across to those funds?
Recommended note updates provided in this report.
Approved recommendation paragraph 19 to make a 5 % investment in the Belgium All Stocks
Index Link Gilt Index Fund to be funded.
A combination of sale of the two overweight investments in London's CIF Global Focus Fund
and Cash.
The funding is expected to be determined by the Director of Financial Services after discussion
with London CIF.
Thank you.
And final item, quarterly investment performance.
Yeah, I don't intend to really give any introduction on this.
You know, this is what it is, and I've got, obviously, the CIF are here to be able to
answer any questions that you may have on the various different elements on the performance.
noting that obviously there are certain equity funds that are still creating some challenges
for us as with other investments that we make.
I was just going to say that in paragraph 12 it's the same thing that's come up time
and again, which is about the passive funds and the managers having – is that having
an influence still on the decision -making that we're taking or the mixed approach
that we have?
Yeah I mean well we had the training and we looked at it and part of the reason
what we're saying is we're not going to take we're not trimming off any of
the passive investment when we're switching to gilts. We'll take
cash and whatever's needed will come out the active and I think that's what we
agreed you know last time which is we don't really want to take a drastic
change in active at the moment. I know we've suffered the pain but now is
probably the time when alpha is most is more likely to be achieved during
this element of the market cycle. So you might be taking more risk by actually moving to
passive at the time. That's not to say though that the individual managers that are delivering
that are not doing what they should be doing and this is your opportunity to liaise with
Jenny and her team about how she's tackling that. So I don't know, Jenny, whether or
not you, bear in mind this is an open meeting, not a closed meeting, I will just reiterate
that. Whether you want to just give some points about how you oversee it and the types of
that you may consider to look at performance on active managers?
Thank you, Paul, and good evening, everybody.
The points really that I wanted to raise is that in your global Alpha Grace Fund,
so this is very much a grace fund, we've talked about grace and how in some respects,
sort of buying into quality companies has had some challenges over the last 15 months,
And those challenges have persisted.
You will recall that I maybe mentioned in the past
that it was a combination of that fund managers
stock selection of individual companies
and also how it structured its portfolio
in terms of sectors.
I'm not in a position given it's open -ended
to sort of say exactly what we are doing about that.
But what I can tell you is that there are active
things happening with respect to that
to look to get it structured and Paul is aware of some of the conversations that are going on for us
to address that side of things. On the focus fund, this is very much a focused fund which is very,
very concentrated. It just has about 25 stocks in it and we are incredibly disappointed with that
fund which is why some of the conversations in terms of implementation, I think my guidance to
you would be that we should be diluting your exposure to that focus fund and look to sort
of work through with what I want to have is a conversation with Paul in terms of the strategic
asset allocation as to how we dilute out of that to fund some of your indexing guilt.
Thank you very much.
So I take it that's all noted.
Excellent.
Well, that concludes the meeting.
Thank you all very much.
Mr. Councillor Craigie.
Just a small, any other business, if I may.
Just a few words.
It's the last committee meeting of the election cycle.
I just want to sort of say thanks to everyone.
Thank you to the chair, who I believe is stepping down from being a councillor.
Thank you to my colleagues.
Thank you to MRSA as well, who are also stepping away
from the table after the last, how many years have you
been supporting the committee?
I've been for 13 years.
Yeah, thank you very much to Paul Giudotti that
steered us through some really tricky conversations,
particularly over the last four or five years of climate change
and more recent challenges as well.
And good luck to those of you that are sticking around.
So yeah, a few that you might be.