Governance Compliance Statement

Background

Regulation 55 of the Local Government Pension Scheme (LGPS) Regulations 2013 requires administering authorities to prepare and maintain a written statement of governance policy on pension fund matters. The statement is required to indicate the extent to which it complies with guidance given by the Secretary of State and to provide reasons for not complying.

Governance is the leadership, direction and control of organisations to ensure they achieve their aims and objectives. In public service organisations particularly these processes need to be clear and open to scrutiny.

Delegation of Pension Fund Management Administration

The Council has delegated its LGPS Pension Fund (“the Fund”) management and administration functions to the Pensions Committee. The Local Pensions Board supports the Pensions Committee by ensuring compliance with regulations and help it take decisions in the best interests of the Fund.

Pensions Committee

The Pensions Committee is scheduled to meet four times a year. Further meetings or sub- committees are arranged as necessary to deal with specific issues.

Committee meetings are generally held in the evenings at the Civic Offices in Bexleyheath and are open to members of the public. All Committee members and observers have equal access to committee papers, documents and advice that falls to be considered at committee meetings.

Reports to the Pensions Committee are published on the Council’s website.

Orders of Reference and Delegated Powers

The Orders of Reference for the Pensions Committee are:

• to oversee the management and investment of the Pension Fund
• the appointment of Fund Managers and independent Fund Advisers and the review of their performance
• pension and retirement matters

The Delegated Powers of the Pensions Committee are as follows:

• to agree the investment strategy having regard to the advice of the Fund’s managers and the independent adviser
• to determine the Fund management arrangements and appointment of Fund Managers and Fund Advisers
• to agree to the admission of bodies into the Council’s Pension Scheme
• to agree discretionary payments in respect of pension and retirement matters
• to agree actuarial valuations

Committee Membership

The committee consists of nine Members, with its membership allocated broadly in proportion to party political representation on the full Council. The Committee also has four observer roles representing:

• admitted and scheduled bodies
• pensioners
• employees
• the Pensions Board

These observers do not have voting rights.

Observers are given the opportunity to express their views on all issues considered by the Pensions Committee but voting rights have not been extended to them as the risk arising from the decisions taken falls on the employers’ contributions to the Fund and the Members are accountable to the Council Taxpayers for the majority of this expenditure. In order to have voting rights eligible observers would need to be appointed/co-opted as members of the Committee.

Training sessions are made available to Members and observers to assist them in making informed investment decisions and to keep them informed on other matters concerning the LGPS. A training budget is specifically provided for members and observers on the Pensions Committee, and they are able to reclaim expenses incurred in undertaking training and attending seminars. A log is kept of all training undertaken and attendance is reported in the Fund’s Annual Report.

At the start of meetings Committee Members are invited to declare any financial or pecuniary interest related to matters on the agenda.

Pensions Board for Bexley

The Pensions Board for Bexley has been established to assist the Pensions Committee in its work. It is scheduled to meet twice a year. Board meetings are generally held in office hours at the Civic Offices in Bexleyheath. All Board members have equal access to papers, documents and advice that fall to be considered at Board meetings. Board reports are published on the Council’s website.

The Board has the following Orders of Reference:

• to assist the Pensions Committee to secure compliance with the LGPS Regulations 2013 (as amended) and other legislation relating to the governance and administration of the LGPS
• to assist the Pensions Committee to secure compliance with the requirements imposed by the Pensions Regulator in relation to the LGPS
• to assist the Pensions Committee to ensure the effective and efficient governance and administration of the LGPS

and Delegated Powers:

• to do anything which is calculated to facilitate, or is conducive or incidental to, the discharge of any of its functions
• to report any matters of non-compliance to the Audit Committee

London Collective Investment Vehicle

In compliance with Government regulations regarding the pooling of LGPS assets, the Bexley Pension Fund is a shareholder and member of the London Collective Investment Vehicle (LCIV). The Pensions Committee decides which of the LCIV pooled funds they want to allocate assets to. LCIV make decisions on the appointment and removal of the investment managers that run their pooled funds.

The Chair of the Pensions Committee is the nominated shareholder representative for the Bexley Fund. LCIV has two general meetings during the year which the Chair attends and votes at on behalf of the Fund. The Vice Chair of the Committee is the nominated deputy shareholder representative.

A Shareholder Committee provides oversight of the LCIV Board. It is made up of 8 Councillors, 4 London Borough Treasurers, the LCIV Chair and a Trade Union Observer. If nominated the Chair of the Pensions Committee, in their role as the shareholder representative of the Bexley Fund, may sit on the Shareholder Committee.

Advice and monitoring

The Pensions Committee is advised by the Director of Finance and Corporate Services, the Head of Legal Services, the Fund’s investment consultant and the Fund’s investment managers. The Director of Finance and Corporate Services is responsible for ensuring that the in-house team is providing adequate support to the Committee.

The investment managers and LCIV present to the Committee at regular intervals on the implementation of the investment policy. In between Committee meetings they report to the Director of Finance and Corporate Services on investment policy. The Pension Fund’s performance is regularly assessed by the Fund’s custodian. The Fund’s procedures are subject to audit and scrutiny by both the Council’s internal and external auditors.

Compliance and secretary of State guidance

The table below sets out Bexley Pension Fund’s compliance with guidance given by the Secretary of State.

A. Structure

B. Committee Membership and Representation

C. Selection and Role of Lay Members

D. Voting

E. Training/Facility Time/Expenses

Funding Strategy Statement

This can be found in full on the Pensions page.

Pension Fund Actuarial Valuation Report 2022

This can be found in full on the Pensions page.

Investment Strategy Statement

1. Introduction
   1. This is the Investment Strategy Statement (ISS) of the London Borough of Bexley Pension Fund adopted by Bexley Council (the Council) in its capacity as Administering Authority ("the authority") of the Local Government Pension Scheme. In this capacity the Council has responsibility to ensure the proper management of the Fund.
   2. The Council has delegated to its Pensions Committee (“the Committee”) “all the powers and duties of the Council in relation to its functions as Administering Authority, save for those matters delegated to other committees of the Council or to an officer".
   3. The ISS has been prepared by the Committee having taken appropriate advice. It meets the requirements of Regulation 7 of The Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 (the Regulations).
   4. The ISS, which was approved by the Committee on 27 September 2023, is subject to periodic review at least every three years and without delay after any significant change in investment policy. The Committee has consulted on the contents of the Strategy with each of its employers and the Pension Board. The ISS should be read in conjunction with the Fund’s Funding Strategy Statement.
2. Statutory Background
   1. Regulation 7(1) requires an administering authority to formulate an investment strategy which must be in accordance with guidance issued by the Secretary of State.
   2. The ISS required by Regulation 7 must include:
      a) a requirement to invest money in a wide variety of investments;
      b) the authority’s assessment of the suitability of particular investments and types of investments;
      c) the authority’s approach to risk, including the ways in which risks are to be measured and managed;
      d) the authority’s approach to pooling investments, including the use of collective investment vehicles and shared services;
      e) the authority’s policy on how social, environmental or corporate governance considerations are taken into account in the selection, non-selection, retention and realisation of investments; and
      f) the authority’s policy on the exercise of rights (including voting rights) attaching to investments.
   3. The ISS must also set out the maximum percentage of the total value of all investments of fund money that it will invest in particular investments or classes of investment.
3. Directions by the Secretary of State
   1. Regulation 8 enables the Secretary of State to issue a Direction if he is satisfied that an administering authority is failing to act in accordance with guidance issued by the Department of Communities and Local Government.
   2. The Secretary of State’s power of intervention does not interfere with the duty of elected members under general public law principles to make investment decisions in the best long- term interest of scheme beneficiaries and taxpayers.
   3. The power of Direction can be used in all or any of the following ways:
      a) to require an administering authority to make changes to its investment strategy in a given timescale;
      b) to require an administering authority to invest assets as specified in the Direction;
      c) to transfer the investment functions of an administering authority to the Secretary of State or a person nominated by the Secretary of State; and
      d) to require an administering authority to comply with any instructions from either the Secretary of State or the appointed person in circumstances when the investment function has been transferred.
   4. Before issuing any Direction, the Secretary of State must consult the administering authority concerned and before reaching a decision, must have regard to all relevant evidence including reports under section 13(4) of the Public Service Pensions Act 2013, reports from the Scheme Advisory Board or from the relevant local pension board and any representations made in response to the consultation with the relevant administering authority. The Secretary of State also has the power to commission any other evidence or additional information that is considered necessary.
4. Advisers
   1. Regulation 7 requires the Council to take proper advice when making decisions in connection with the investment strategy of the Fund. In addition to the expertise of the members of the Committee advice is taken from:
      • The Director of Finance and Corporate Services
      • The Head of Legal Services
      • Redington Ltd - investment consultancy
      • Mercer Ltd - actuarial services consultancy
      • The Fund's investment managers
5. Objective of the Fund
   1. The objective of the Fund is to provide pension and lump sum benefits for members on their retirement and/or benefits on death, before or after retirement, for their dependants, on a defined benefits basis. The sums required to fund these benefits and the amounts actually held (i.e. the funding position) is reviewed at each triennial actuarial valuation, or more frequently as required. To achieve this, the operational objective of the Fund is to maximise the likelihood of reaching 100% funding on an ongoing basis over the next three valuation periods subject to an acceptable level of downside risk.
   2. The assets of the Fund are invested with the primary objective being to achieve a return that is sufficient to meet the funding objective as set out above, subject to an appropriate level of risk and liquidity. Over the long-term, it is expected that the Fund’s investment returns will be at least in line with the assumptions underlying the actuarial valuation.
   3. Related objectives are to seek to minimise the level and volatility of employer contributions necessary to meet the cost of pension benefits.
6. The suitability of particular investments and types of investments
   1. The Committee decides on the investment policies most suitable to meet the liabilities of the Fund and has ultimate responsibility for investment strategy.
   2. The Committee has translated its investment objective into a suitable strategic asset allocation benchmark for the Fund. This benchmark is consistent with the Committee’s views on the appropriate balance between generating a satisfactory long-term return on investments whilst taking account of market volatility and risk and the nature of the Fund’s liabilities.
   3. The approach seeks to ensure that the investment strategy takes due account of the maturity profile of the Fund (in terms of the relative proportions of liabilities in respect of pensioners, deferred and active members), together with the level of disclosed surplus or deficit (relative to the funding bases used).

   4. As part of the 2022 triennial valuation the Committee at its meeting on 9 March 2023, as advised by Redington, considered its investment strategy alongside its funding objective and agreed the following benchmark structure and target ranges.
       

      	Benchmark % in thousands of pounds	Target Range %
      Global Equities	25	20 - 40
      Impact Equities	5	0 - 10
      Total Equities	30	20 - 40
      Global Bonds (inc Corporates)	10	5 - 15
      UK Government Bonds	15	10 - 15
      Multi-Asset Credit	5	0 - 10
      Total Bonds	30	20 - 40
      Property	15	5 - 25
      Private Equity	7	0 - 15
      Infrastructure	8	0 - 15
      Renewable Infrastructure	5	0 - 15
      Illiquid Credit	5	0 - 15
      Total Alternatives	40	20 - 50
      Total	100	100

   5. Under the existing strategy, the most significant rationale of the structure is to invest most of the Fund assets in “growth assets” i.e., those expected to generate ‘excess’ returns over the long term. These include listed equities and private equity. The structure also includes a small allocation to bonds and alternative assets, including property and infrastructure to provide both diversification and expected returns in excess of liabilities.
   6. The strategy also aims to maximise income production to meet the fund’s liquidity needs, as well as accounting for the committee’s continued commitment to environmental, social and governance (ESG) issues.
   7. The Committee monitors investment strategy on an ongoing basis, focusing on factors including, but not limited to:
      • suitability and diversification given the Fund's level of funding and liability profile
      • the level of expected risk
      • outlook for asset returns
   8. The Committee also monitors the Fund’s actual allocation on a regular basis to ensure it does not deviate from the target allocation. If such a deviation occurs, except for the private equity investment subject to distributions and drawdowns, a re-balancing exercise is carried out. If necessary, the Director of Finance and Corporate Services as Section 151 officer has delegated authority to undertake rebalancing but any such rebalancing activity is reported to the next meeting of the Committee.
7. Asset classes
   1. The Fund may invest in quoted and unquoted securities of UK and overseas markets including equities, government and non-government bonds, cash, property and other alternative investments either directly or through pooled funds. The Fund may also make use of contracts for differences and other derivatives either directly or in pooled funds investing in these products for the purpose of efficient portfolio management or to hedge specific risks.
   2. In line with the Regulations, the Council’s investment strategy does not permit more than 5% of the total value of all investments of fund money to be invested in entities which are connected with the Council within the meaning of section 212 of the "Local Government and Public Involvement in Health Act 2007”.
   3. Apart from the maximum level of investments detailed above the Fund has no further restrictions.
   4. The majority of the Fund’s assets are highly liquid, and the Council is satisfied that the Fund has sufficient liquid assets to meet all expected and unexpected demands for cash. Assets in the Fund that are considered to be illiquid include property, infrastructure and private equity. As a long term investor, the Fund considers it prudent to include illiquid assets in its strategic asset allocation in order to benefit from the additional diversification and extra return this should provide.
8. Managers
   1. The Council has delegated the management of the Fund’s investments to professional investment managers, appointed in accordance with the Local Government Pension Scheme Regulations. Their activities are specified in either detailed investment management agreements or subscription agreements and regularly monitored. The Committee is satisfied that the appointed fund managers, all of whom are authorised under the Financial Services and Markets Act 2000 to undertake investment business, have sufficient expertise and experience to carry out their roles.
   2. The investment style is to appoint fund managers with clear performance benchmarks and place maximum accountability for performance against that benchmark with them. Multiple fund managers are appointed to give diversification of investment style and spread of risk. The fund managers appointed are mainly remunerated through fees based on the value of assets under management. Private equity managers are remunerated through fees based on commitments and performance related fees.
   3. The managers are expected to hold a mix of investments which reflect their views relative to their respective benchmarks. Within each major market and asset class, the managers maintain diversified portfolios through direct investment or pooled vehicles.
   4. The management agreement in place for each fund manager sets out, where relevant, the benchmark, performance target and asset allocation ranges. The agreements also set out any statutory or other restrictions determined by the Council. Investment may be made in accordance with The Regulations in equities, fixed interest, and other bonds, in the UK and overseas markets and alternative assets. The Regulations specify other investment instruments that may be used, for example, financial futures, traded options, insurance contracts, stock lending, sub-underwriting contracts.

   5. As at the date of this ISS the details of the managers appointed by the Committee are as follows:
       

      Manager	Asset Class	Benchmark
      LaSalle	Property	AREF/IPD All Balanced Funds Index
      London CIV	Global Equities (Newton)	MSCI AC World
      	Global Equities (RBC)	MSCI World (GBP)(TRNet)
      	Global Credit (PIMCO)	Barclays Agg. Credit Index Hedged (GBP)
      	Inflation Plus (Aviva Property)	RPI + 1.5%
      	Infrastructure (Stepstone)	8% per annum
      	Renewable Infrastructure (Foresight, Blackrock, Quinbrook, Stonepeak, Macquarie)	7% per annum
      	Multi-Asset Credit (CQS and PIMCO)	SONIA + 4.5%
      BlackRock	Global Equities	MSCI World
      	UK Credit	iBoxx Sterling Non-Gilts Index
      	UK Index Linked GILTs	UK Index-Linked Gilts All Stocks Index
      Partners	Private Equity	50% FTSE USA / 40% FTSE Europe / 10% FTSE W Asia Pacific
      UBS	Infrastructure	CPI + 5%
      M&G	Illiquid Credit	SONIA + 5%

   6. Where appropriate, custodians are appointed to provide trade settlement and processing and related services. Where investments are held through funds, the fund appoints its own custodian.
   7. Stock lending is permitted in pooled funds where applicable. Details of investment managers’ procedures and controls are available on request. Managers are permitted undertake stock lending of up to 10% of the Fund's assets subject to the agreement of the Director of Finance and Corporate Services.
   8. Performance targets are generally set on a three-year rolling basis and the Committee monitors manager performance quarterly. Advice is received as required from officers, the professional investment adviser, and the independent advisers. In addition, the Committee requires managers periodically to attend its meetings.
   9. The Council also monitors the qualitative performance of the Fund managers to ensure that they remain suitable for the Fund. These qualitative aspects include changes in ownership, changes in personnel, and investment administration.
9. Approach to risk
   1. The Committee has an active risk management programme in place that aims to help it identify the risks being taken and put in place processes to manage, measure, monitor and (where possible) mitigate the risks being taken.
   2. At least once a year the Committee will review its risk register which details the principal risks identified and the Committee’s approach to managing them. The Funding Strategy Statement also includes a section on risk and the ways it can be measured and managed.
   3. The most significant investment risks and methods of managing them are summarised in paragraphs 9.4 – 9.9 below.
   4. Whilst the objective of the Committee is to maximise the return on its investments, it recognises that this must be within certain risk parameters and that no investment is without an element of risk. The Committee acknowledges that the predominantly equity-based investment strategy may entail risk to contribution stability, particularly due to the short-term volatility that equity investments can involve. The long-term nature of the Fund and the expectation that longer term returns from equity investments will exceed those from bonds mean, however, that a significant equity allocation remains an appropriate strategy for the Fund.
   5. A policy of diversification for its investments and investment managers helps the Committee to mitigate overall risk. Benchmarks and targets against which investment managers are expected to perform are further measures put in place to manage the risks for the Fund.
   6. The Committee looks to balance investment returns with ensuring the Fund has sufficient liquidity and cashflow available to meet benefit payments. More than 60% of the fund is invested in highly liquid strategies such as equities and bonds.
   7. Funding risks
      1. The major funding risks identified are:
         • fund assets are not sufficient to meet long term liabilities
         • relative movement in value of Fund assets does not match the relative movement in Fund liabilities
         • changes in LGPS regulations impacting on Fund liabilities
         • demographic movements, particularly longevity, structural changes in membership and increases in early retirements. and
         • insufficient assets to meet short- and medium-term liabilities
      2. The Committee measures and manages these potential financial mismatches in two ways. As indicated above, the Committee has set a strategic asset allocation benchmark for the Fund. This benchmark was set considering asset liability modelling undertaken in 2023 which focused on probability of success and level of downside risk. The Committee assesses risk relative to the strategic benchmark by monitoring the Fund’s asset allocation and investment returns relative to the benchmark. The Committee also assesses risk relative to liabilities by monitoring the delivery of benchmark returns relative to liabilities. Key metrics such as probability of reaching full funding and downside risk measures will be evaluated periodically in line with the Actuarial Valuation, to ensure the benchmark is still appropriate.
      3. The Committee also seeks to understand the assumptions used in any analysis and modelling so they can be compared to their own views and the level of risks associated with these assumptions to be assessed.
      4. The Committee seeks to mitigate systemic risk through a diversified portfolio, but it is not possible to make specific provision for all possible eventualities that may arise.
      5. Demographic factors including the uncertainty around longevity / mortality projections (e.g., longer life expectancies) contribute to funding risk. There are limited options currently available to fully mitigate or hedge this risk.
   8. Asset risks
      1. The major asset risks identified are:
         • significant allocation to any single asset category and its underperformance relative to expectation
         • general fall in investment markets
         • failure by fund managers to achieve benchmark returns
      2. The Committee measure and manage asset risks as follows:
         • the Fund’s strategic asset allocation policy requires investments in a diversified range of asset classes, markets and investment managers. The Committee has put in place rebalancing arrangements to ensure the Fund’s “actual allocation” does not deviate substantially from its target. These rebalancing ranges have been designed to allow the Fund to deviate from target in response to economic developments. The Fund invests in a range of investment mandates each of which has a defined objective, performance benchmark and manager process which, taken in aggregate, help reduce the Fund’s asset concentration risk. By investing across a range of assets, including liquid quoted equities and bonds the Committee has recognised the need for access to liquidity in the short term.
         • the Committee has considered the risk of underperformance by any single investment manager and has attempted to reduce this risk by appointing more than one manager. The Committee assess the Fund’s managers’ performance on a regular basis, and will take steps, including potentially replacing one or more of their managers if underperformance persists.
   9. Security
      1. The major asset risks identified are:
         • investment manager may not have an appropriate control framework in place to protect and value Fund assets
         • custody arrangements may not be sufficient to safeguard fund assets
         • counterparty default in stock lending programme
      2. The Committee monitors and manages risks in these areas through the regular scrutiny of the audit of the operations independently conducted for each of its investment managers. Where appropriate (e.g., custody risk in relation to pooled funds). The Fund has delegated such monitoring and management of risk to the appointed investment managers. The Committee has the power to replace a provider should serious concerns exist.
10. Approach to pooling
    1. The Fund, along with all London boroughs, is a shareholder and participating scheme in London LGPS CIV Limited (“London CIV”). The London CIV is authorised by the Financial Conduct Authority as an Alternative Investment Fund Manager with permission to operate a UK based Authorised Contractual Scheme fund. The structure and basis on which the London CIV will operate was set out in the July 2016 submission to Government.
    2. The Fund’s intention is to invest its assets through the London CIV as and when suitable pool investment solutions become available. At each of its meetings the Committee considers an update report on progress.
    3. At the time of preparing this Statement, approximately 55% of the Fund’s assets were invested through the London CIV, with a further 15% of assets invested in pooled passive vehicles which are deemed to be compliant with pooling regulations.
    4. The Fund holds 20% of the portfolio in illiquid assets and these are expected to remain outside of the London CIV pool. The cost of exiting these strategies early would have a negative financial impact on the Fund. These will be held as legacy assets until such time as they mature and proceeds re-invest through the pool assuming it has appropriate strategies available or until the Fund changes asset allocation and decides to disinvest.
    5. Any assets deemed not appropriate for investment through the London CIV will be reviewed at least every three years to determine whether the rationale remains appropriate, and whether the non-pooled investments continue to demonstrate value for money. The next such review will take place no later than 2025.
    6. The governance structure of the London CIV has been designed to ensure that there are both formal and informal routes to engage with all the London boroughs as both shareholders and investors. The governance structure of the London CIV includes a Shareholder Committee which acts on behalf of the Shareholders as a consultative body. It comprises of 12 Committee Members made up of 8 Local Authority Committee Chairs (or Leaders of London Local Authorities), 4 Local Authority Treasurers and the Chair of the Board of London CIV. It also comprises of two Non-Executive Directors and as two further nominated observers, a Trade Union representative and a Local Authority Treasurer. This arrangement replaced the Pensions CIV Sectoral Joint Committee (PCSJC) as confirmed in a letter to the Fund dated 13 June 2018. In addition, the London CIV hosts an AGM each year and a general meeting to approve the London CIV's budget. The Fund attends these meetings with the Chair of the Pension Committee representing the Fund.
    7. As an AIFM, London CIV must comply with the Alternative Investment Manager Directive (“AIFMD”) and falls under the regulatory scrutiny and reporting regime of the Financial Conduct Authority (“FCA”). This includes the requirement for robust systems and processes and for these to be documented appropriately in policies and manuals. Risk management is a particular focus for the FCA and London CIV has developed a risk framework and risk register covering all areas of its operations, including fund management. This is achieved through a combination of the London Councils’ Sectoral Joint Committee, comprising nominated Member representatives from the London boroughs, and the Investment Advisory Committee formed from nominated borough officers, which includes both London borough treasurers and pension officers from several boroughs. At the company level it is the Board of Directors that is responsible for decision making within the company, which includes decisions to appoint and remove investment managers.
11. Social, environmental and governance considerations
    1. The Council recognises that it has a paramount duty to seek to obtain the best possible return on the Fund’s investments taking into account a properly considered level of risk. However, it recognises that environmental, social and governance factors can influence long term investment performance and the ability to achieve long term sustainable returns. As a general principle it considers that the long-term financial performance of a company is likely to be enhanced if it follows good practice in its environmental, social and governance activities.
    2. At the present time the Committee does not consider non-financial factors when selecting, retaining, or realising its investments.
    3. All the Fund’s investments are managed by external fund managers, the majority of which are in pooled funds, and the Council recognises the constraints inherent in this policy. Nevertheless, it expects its managers, acting in the best financial interests of the Fund, to consider, amongst other factors, the effects of environmental, social, and other issues on the performance of companies in which it invests. The Council expects its managers to have signed up to “The UK Stewardship Code” and to report regularly on their compliance with the Code and other relevant environmental, social and governance principles.
    4. In addition, the Committee meets most of its managers at least once a year and they are always asked to discuss the activities they undertake in respect of socially responsible investment and how they consider long term environmental, social and governance risks in making specific investment decisions.
    5. The Fund does not hold any assets which it deems to be social investments.
12. Exercise of the rights (including voting rights) attaching to investments
    1. The Committee sees itself as an active shareholder and seeks to exercise its rights (including voting rights) to promote and support good corporate governance principles which in turn will feed through into good investment performance. The Fund is a member of the Local Authority Pension Fund Forum (LAPFF) and in this way joins with other LGPS Funds to magnify its voice and maximise the influence of investors as asset owners.
    2. In practice, the Fund’s equity holdings are expected to be wholly invested through pooled funds in which voting, and engagement decisions are made by fund managers. The Council encourages its fund managers to vote and engage with investee companies worldwide to ensure they comply with best practice in corporate governance in each locality with the objective of preserving and enhancing long term shareholder value.
    3. Accordingly, the Fund’s managers have produced written guidelines of their process and practice in this regard. The managers are strongly encouraged to vote in line with voting alerts issued by LAPFF as far as practically possible to do so.
    4. The fund managers provide reports on their voting and engagement activities.
    5. Any investments the Fund makes through the London CIV will be covered by the voting policy of the CIV which has been agreed by the Pensions Sectoral Joint Committee. Voting is delegated to the external managers and monitored on a quarterly basis. The CIV will arrange for managers to vote in accordance with voting alerts issued by the Local Authority Pension Fund Forum as far as practically possible to do so and will hold managers to account where they have not voted in accordance with the LAPFF directions.
13. Stewardship
    1. The Committee has considered, but not yet signed up to, the revised Institutional Shareholders Committee Code on the Responsibilities of Institutional Investors ("The UK Stewardship Code").
    2. The Committee also expects the London CIV and all managers which it appoints to sign up to the Code.
14. Compliance with "Myners" Principles
    1. In Appendix 1 are set out the details of the extent to which the Fund complies with the six updated “Myners” principles set out in the Chartered Institute of Public Finance and Accountancy’s publication “Investment Decision Making and Disclosure in the Local Government Pension Scheme in the United Kingdom 2012.” These principles codify best practice in investment decision making.

Appendix 1 - Compliance with "Myners" Principles

1. Effective decision-making
   1. Administering authorities should ensure that:
      • decisions are taken by persons or organisations with the skills, knowledge, advice and resources necessary to take them effectively and monitor their implementation
      • those persons or organisations should have sufficient expertise to be able to evaluate and challenge the advice they receive and manage conflicts of interest
   2. Fund compliance - Full
      • The Council has delegated decision making in respect of the Pension Fund to the Committee, comprising six Councillors with full voting rights with observers from Admitted and scheduled bodies, pensioners, and employers.
      • The Committee, with advice from its Investment Adviser has appropriate skills for, and is run in a way that facilitates, effective decision making.
      • Members of the Committee are provided with training opportunities in line with the skills and knowledge framework produced by CIPFA and a training log is maintained. Details of training provided each year are included in the Fund’s annual report.
      • There are sufficient internal resources and access to external resources for the Committee to make effective decisions.
2. Clear objectives
   1. An overall investment objective(s) should be set out for the Fund that takes account of the scheme’s liabilities, the potential impact on local taxpayers, the strength of the covenant for non-local authority employers and the attitude to risk of both the Administering Authority and scheme employers. These should be clearly communicated to advisers and investment managers.
   2. Fund compliance – Full
      • The Fund’s Investment Strategy Statement and Funding Strategy Statement set out its investment objectives which are agreed after consultation with the Fund actuary and take into account the Fund’s liabilities, the impact on employer contribution rates, future cashflows and the Fund’s attitude to risk.
      • Asset allocation, benchmarks and risk parameters are set with the aim of achieving these objectives.
      • Fund managers have clear written mandates with individual performance targets and benchmarks and their performance is measured and reviewed by the Committee on a quarterly basis.
      • Full account is taken of the strength of the sponsor covenant for all non-local authority employers admitted to the fund and contribution rates set accordingly.
3. Risks and Liabilities
   1. In setting and reviewing their investment strategy, administering authorities should take account of the form and structure of liabilities. These include the implications for local taxpayers, the strength of the covenant for participating employers, the risk of their default and longevity risk.
   2. Fund compliance – Full
      • A risk register is maintained with specific investment risks identified.
      • The Committee, in setting its investment strategy, has taken account of the form and structure of its liabilities following advice from the Fund’s actuary. The strategy aims to achieve the return required to meet its liabilities whilst considering stability of contributions and affordability for employers.
      • Consideration is given to the payment of a bond by prospective admitted bodies to the Fund to minimise the financial consequences of default.
      • A risk assessment and suggestions as to how the risks can be managed is included in the triennial valuation.
      • Longevity risk is built into the triennial actuarial and is therefore included when determining the investment strategy.
      • Investment risk, including that of underperformance is considered in the Investment Strategy Statement and the Fund’s Annual Report.
4. Performance Assessment
   1. Arrangements should be in place for the formal measurement of the performance of investments, investment managers and advisers. Administering authorities should also periodically make a formal policy assessment of their own effectiveness as a decision-making body and report on this to scheme members.
   2. Fund compliance – Partial
      • In addition to overall Fund performance, the Committee considers the performance of individual investment managers against their benchmarks on a quarterly basis; matters of poor performance are addressed through meetings with fund managers and, if necessary, the termination of contracts.
      • Following the cessation of WM as independent performance measurer for the Fund, Northern Trust, the Fund's custodian is working to provide quarterly and annual reports detailing the performance of the Fund and its managers and identifying the achievements resulting from asset allocation and manager performance.
      • The performance of actuaries and advisers is informally assessed on an ongoing basis.
      • The performance of the Fund is reported annually to all scheme members and is included in the Annual report; the Committee will be considering ways of improving their accountability, particularly following the establishment of the Pension Board.
5. Responsible Ownership
   1. Administering authorities should:
      • adopt, or ensure their investment managers adopt, the Institutional Shareholders’ Committee Statement of Principles on the responsibilities of shareholders and agents
      • include a statement of their policy on responsible ownership in the Investment Strategy Statement
      • report periodically to members on the discharge of such responsibilities
   2. Fund compliance – Partial
      • The Fund’s policy on the extent to which its investment managers take account of social, environmental and ethical considerations is stated in the Investment Strategy Statement.
      • The Fund expects its managers to engage positively and seek to influence companies in which the Fund invests to take account of key social, environmental and ethical considerations.
      • Where applicable, the Fund expects its managers to have adopted the Institutional Shareholders’ Committee Statement of Principles on the responsibilities of shareholders and agents.
      • Whilst the Fund’s equity holdings are wholly invested through pooled funds in which voting and engagement decisions are made by fund managers the Council encourages its managers to vote and engage with investee companies worldwide to ensure they comply with best practice in corporate governance in each locality. The fund managers provide reports on their voting and engagement activities.
6. Transparency and Reporting
   1. Administering authorities should:
      • act in a transparent manner, communicating with stakeholders on issues relating to their management of investment, its governance and risks, including performance against stated objectives
      • provide regular communication to members in the form they consider most appropriate
   2. Fund compliance – Full
      The Fund makes available a range of documents including:
      • Annual Report including Statement of Accounts.
      • Communications Policy Statement.
      • Investment Strategy Statement.
      • Funding Strategy Statement.
      • Triennial Actuarial Valuation.
      • Agenda and Minutes of the Pensions Committee.
      • Annual Statement of Benefits to all active and deferred members.
      • Newsletter to pensioners once a year.
      • Newsletters to active members at least once a year.

Communications Policy Statement

Background

The Local Government Pension Scheme (LGPS) Regulations require administering authorities to prepare, publish and maintain a policy statement setting out its communication strategy for communicating with scheme members, scheme members’ representatives, prospective scheme members and their employing authorities.

An effective communications strategy is vital for any organisation which strives to provide high quality and consistent service to its customers. In public service organisations particularly, these processes need to be clear and open to scrutiny.

The principles and methods (the policy) to achieve effective communications are shown below.

Principles

• to provide clear and consistent information reducing the potential for confusion and uncertainty
• to provide timely and accurate communications and a proactive information service that is factual and precise
• to undertake customer satisfaction surveys and to act upon feedback and comment
• to use the most appropriate communication medium for the customer audience
• to address, where possible, the requirements of a diverse customer base with regard to information access

Method

The Fund’s principal method of communicating with and providing information to members and employers is the Local Pensions Partnership Administration website.

The administering authority will deliver its communications policy, in partnership with the Local Pensions Partnership Administration (LPPA - the Council’s pension scheme administrators), by the following methods:

Scheme Members and Representatives

• access to the Local Pensions Partnership Administration website which contains scheme details, news items, annual reports and guides to the scheme with links to other relevant organisations and the option of viewing personal details via a secure logon
• a comprehensive range of scheme literature is available from the LPPA or accessible from the website
• members, including pensioners and deferred members, will be able to access the Annual Report on the Council website each year. This provides an overview of any changes to the scheme and a report of the Fund’s performance
• current and deferred scheme members will receive a Benefit Statement in August each year detailing the current and prospective value of their pension benefits
• pensioners will be given access to their personal details and electronic payslips via an online Member Self Service system
• an individual annual pension statement will be published online for all pensioners in April each year. This will notify them of the paydays for the next twelve months and detail their gross pension payable including any relevant pensions increase and an estimated net value. A paper copy will be sent to pensioners by the end of May each year - if they opt for this method
• P60 statement of earnings will be available via the Online Member Self Service system, and a paper copy will be sent to pensioners by the end of May each year - if they opt for this method

Prospective Members

• a short scheme guide is available for prospective employees via the Local Pensions Partnership Administration website
• new employees are automatically enrolled into the scheme as part of their employment contract
• any employees who have opted out of the LGPS will be automatically re-enrolled every three years however they are able to opt out again if they so wish
• information relating to joining the LGPS and the right to opt-out is available via the Local Pensions Partnership Administration website

Scheme Employers

• an Employer Forum will be organised each year where employers will be informed on changes to the scheme and current topics of interest
• regular contact will be maintained to ensure prompt communication of changes to the scheme and topical issues as they arise will be featured as news items accessible via the Local Pensions Partnership Administration website
• employers are emailed a quarterly newsletter updating them on new developments and administrative requirements for the scheme
• an ‘employers pack’ detailing the interactions between the administering authority and employers will be provided and maintained
• access to a secure portal for Employers via the website for transmission of data to LPP as and when required