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RESOLVED to exclude the public for the following items of business on the grounds that there would be disclosure to them of exempt information under category 3 of The Local Authorities (Access to Information) (Variation) (Wales) Order 2007).
Apologies were received from Committee Members Trish Fretten and County Councillor Corinna Kenyon-Wade. Apologies for lateness were received from County Councillor Adam Kennerley.
Members of the Committee declared interests as members of the Local Government Pensions Scheme. These are personal interests, not prejudicial interests in accordance with Paragraph 12(b) (iv) of the Members Code of Conduct 2016. Declaration of interest was shared by County Councillors P Lewis, A Jones and A Kennerley for being members of the Powys County Council Pension Fund.
The Chair was authorised to sign the minutes of the Pensions and Investment Committee meeting held on 17th January as a correct record.
Item 7 - Since the Chancellors Mansion House Speech a lot of work had been carried out around pension pooling, which would be discussed at item 7 on the agenda. Item 8 – Work under Project Snowdon had completed and would be discussed. Chair attended a meeting last week at the JGC. And thanked officers Chris Hurst and Jane Thomas for their work which would be discussed at item 8 on the agenda. The Chair, Officer Chris Hurst and Dafydd Edwards (Chair of the Powys Pension Boards) would be attending an LGC Investment seminar on the 27th of March.
Background provided by the Pension Fund Manager. 2.2 Extending Inheritance Tax To Pension Death Benefits Extending inheritance tax to pension death benefits was proposed by government in their Mansion House Speech and budget. This was a consultation which the fund responded to via the Welsh Pensions Officer Group, then submitted up to the National Pensions Officer Group and then back to government. Concerns were raised around the implementation of this due to increased administration needed work between personal representatives and HMRC. 2.3 McCloud This was an ongoing issue but assurance was given that any new retirement benefit calculations or transfers have all had the McCloud check process before any benefits were paid to scheme members. Committee was reminded that the McCloud Remedy was essentially carrying out a test and paying the better of the old pension scheme before it changed to career average and the new career average pension scheme. This would only ever improve scheme members benefits. Historic work was being worked through as quickly as possible. 3 Consultation - LGPS: Fit For the Future This would be discussed under Item 8 on the agenda. 3.2 Funding Strategy Statement (FSS) Updated Guidance Available Committee were advised that updated financial funding strategy statement guidance had been created and would be considered during valuation this year. 3.3 Updated opinion on the fiduciary duty in LGPS Committee were advised that there was updated opinion on the fiduciary duty in the LGPS. A simplified version of the “Local Government Pension Scheme: Investments and Non-Financial Considerations’ document was expected to be presented to the Scheme Advisory Board. This would be brought to the Committee when available. 3.4 Letter To Chief Financial Officers And Pension Committee Chairs The Chair of the Scheme Advisory Board had written to the Chief Financial Officers and chairs of pension committees asking them to consider resourcing within pension funds. This was a national issue. 3.5 Scheme Advisory Board (SAB) Annual Review The scheme Advisory Board have produced an annual review document available for the Committee to read. 4. Pension Dashboards Assurance was provided that data testing had been carried out with positive results. Pension Fund Manager was confident this was on track to meet the October 2025 expectation of integrating into the ecosystem. 6. Risk Register During a meeting of the Pension Board on the 13th of February a deep dive into the governance pillar of the risk register was carried out and resulted in the following recommendations. 1. GOVERN0005 & GOVERN0006 Employer Risk. Updated the wording to reflect that there was different risk measurement processes in place for employers that cease and employers that were active within the scheme. The Committee agreed to the amended wording of these risks. Proposed by County Councillor H Williams and seconded by County Councillor A Jones. 2. GOVERN0016 Paying Pension Benefits. It was proposed to move this residual risk from 6 to 4 due to strong mitigating features being in place. The Professional Lead from Employment Services provided assurances around business continuity plans in place. Assurance was also provided from the pension administration software provider. GOVERN0003 Cyber Security. It was proposed that this risk be revisited once a cyber risk policy for the fund was produced. GOVERN0012 Employer Risk. It was decided that this risk should be revisited following the Pensions Committee receiving Item 11 on today’s agenda. The Committee agreed to the amended wording of these risks. Proposed by County Councillor A Jones and seconded by County Councillor A Kennerley. Issues Raised by the Committee: Responses Received: Committee asked what unused pension funds were. This refers to pensions which had not been drawn down. Did the Chair of the Scheme Advisory Board’s letter to chief financial officers and pension committee chairs provide guidance to the model expected for resource investments concerned? No, it did not give any specific guidance or any proposed structures. That was left to local discretion This was covered by the Committee in an in-depth review carried out in Summer 2024.
There were no fundamental changes to the document. This would be reviewed when a new member of staff was in post. The committee noted the report.
Background provided by the Pension Fund Manager. 2.6 Business Plan 2025-28 Under the inter-authority agreement between the eight funds or administration authorities in Wales and the Wales Pension Partnership (WPP), the Business Plan required approval. The Joint Governance Committee of the WPP first approved the plan, followed by a second stage of approval. Subsequently, each individual pensions committee also approved the plan. The committee’s approval was sought on the WPP Business Plan. Issues Raised by the Committee: Responses Received: Would this be superseded subject to outcome of Project Snowdon? The business plan and Project Snowdon run parallel. Project Snowdon would not change what this document plans to do. The committee would see a revised version of the business case in the future. This would support what the WPP plan to do over the next few years. Training on Monday was useful and helped to understand the documents in this agenda. Pension Fund Manager to feed this back to the officers. Committee approved the Business Plan 2025-28. This was proposed by County Councillor A Kennerley and Seconded by H Williams.
Background provided by the Pension Fund Manager. This report began in 2017 at the advent of pooling and creation of the WPP. The model chosen in 2017 was out of line with some other pools (WPP rent in an operator to run the pool on behalf of 8 funds in Wales). As part of Mansion House Speech in November 2024, WPP had been asked to make a choice; merge with another pool or do something different to retain sovereignty.. Presented was a business case to Government to explain the importance of building an investment management company for Wales and develop upon the success of WPP to date. The business case makes the case for the formation of a WPPIM company, including an opportunity to build a financial entity within Wales, create job opportunities and grow within Wales. The option of merging was considered however transition costs were noted to be a significant risk estimated to be at a cost of £50million. 4.3 New Target Operating Model The new Target Operating Model to deliver Government requirements was presented. Similarities between this and the current WPP Model were demonstrated. Governance currently demonstrated through the Joint Governance Committee, of which the Chair of the Powys Pensions and Investment Committee sits on to represent the Powys Fund. Under the new proposal the Ministry authority would be a shareholder within the investment companies. This would require an appropriate shareholder agreement. The WPP had set up a working group named Project Snowdon, made up of senior officers on the Pension Funds as well as an overall steering group made up of Section 151 Officers. Underneath the steering group were five work streams which looked at the business case submission, FCA application, building the model, legacy assets and a governance stakeholder engagement work stream. 4.5 Organisation Chart – Senior Management And Functional Units The Organisation Chart expected to be in place to deliver this was presented. The senior roles were required as part of the FCA submission. Work was ongoing to understand the governance processes around this. Work was ongoing to identify a critical path for decision making. Consideration was given to holding a workshop for full Council to understand the approval process. The Pension Fund Manager offered to provide a recording of the training provided on Monday to share with Committee, to provide understanding of the workstreams. Issues Raised by the Committee: Responses Received: Why had UK government ruled out the model of renting in an operator to run the pool? The Pension Fund Manager answered that the government’s preferred approach was for the LGPS pools to be FCA regulated entities. Did other schemes using the same model have to make the same decisions? Yes, other schemes had to make the same decisions. When was a response from UK government anticipated? Was there a plan accounting for the possibility of rejection? The Wales Pension Partnership had regularly met with UK government and MHCLG, receiving positive conversations with broad support. What would ‘Plan B’ look like? No detail available regarding this, but Plan B (joining/merging with another pool) could be executed quickly if required There was a risk to the WPP that UK Gov do not approve. Had that risk been written out? The focus of work had been in presenting a business case ready for February 2025. The Director of Corporate Services and Section 151 Officer added that Plan A required more work due to the FCA requirements and setting up new company. Plan B would have the same timescales but would mostly be out of the hands of our officers. The biggest challenge was getting everything done and aligned to Powys’s proposal. The Chair of Powys Pensions Board added that there was reasonable confidence to assume that a second timescale would be provided if Plan B must be adhered to. Plan B would be quicker to deliver. Thus, it would not add risk to the authority or the pension funds because there would be enough timescale to deliver it between Summer 2025 and March 2026. Yes, that is correct. The level of work being conducted and enthusiasm around this was noted by committee. The Portfolio Holder for Finance and Corporate Transformation noted an additional annual running cost of £5 – 5.5 million for the new operating model. The Pension Fund Manager answered that yes, this model would cost more but the business case demonstrated that this cost would be required to deliver all the benefits of retaining a Welsh Pool UK Government anticipate that economies of scale could drive down costs. The Director of Corporate Services and Section 151 Officer added that the relationships that exist across the WPP are solid. This long-standing relationship made the process as smooth as possible. This was a good opportunity for a Welsh company. If the costs would be repatriated, why would it be more expensive? The UK Government were attempting to push a ‘one size fits all’ model onto all the pools. The only way to keep the Wales group would be to set up this company. The additional costs were unavoidable. Regarding governance, would it be 1 investor equals one vote? The Pension Fund Manager answered that this still needed to be worked through. The Chair of the Pensions Board added that based on observations, the governance structure was established with a company setup rather than a joint committee. The committee requested to see a discussion paper or the rationales around options for legal status and where the responsibilities lie. The Pension Fund Manager offered assurance that this would be done. Committee requested a timeline for when this business plan would be signed off. Signing off would more likely take place in the July 2025 meeting, although this remains fluid. Officers were looking to build communication for all councillors regarding this, to ensure appropriate understanding ahead of full council decision. What majority would be needed at full council for this to be signed off? The Monitoring Officer could provide an answer to this. Ask that the timeline is shared with committee as soon as available. ACTION This was agreed. Committee Noted the report.
The Pension Fund Manager requested committee member to complete the training needs analysis form when available online. Committee noted the report.
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RESOLVED to exclude the public for the following items of business on the grounds that there would be disclosure to them of exempt information under category 3 of The Local Authorities (Access to Information) (Variation) (Wales) Order 2007).
RESOLVED to exclude the public for the following items of business on the grounds that there would be disclosure to them of exempt information under category 3 of The Local Authorities (Access to Information) (Variation) (Wales) Order 2007).
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