Agenda item

For Members to receive and agree on the implementation of the Action Plan responding to the London Borough of Croydon Pension Fund Governance Review report.

Members received and reviewed the Action Plan produced in response to the Governance Review of the Pension Fund. This had been commissioned by the Pension Board and conducted by Aon Hewitt. The Head of Pensions and Treasury introduced the item noting that the Action Plan addressed every review finding with a responsible officer allocated for the delivery of action on each item.

The Chair noted the request by Members for there to be more meetings of the Pension Committee and training provided. Both requests were accepted. Meetings were to increase from four to six a year and Members would receive training linked to the recommendations of the Governance Review.

The Independent Chair of the Pension Board was invited to provide some context to the Governance Review. It was noted that not all Funds undertake an independent review and therefore the Independent Chair congratulated Croydon for having taken this step. It was highlighted that whilst there were opportunities for development and improvement, the review had shown there was lots being done well. The Pension Board had welcomed the detailed Action Plan made in response to the review although clarification was sought on what resources would be allocated for this to be fulfilled.

The Independent Chair emphasised the treatment of conflicts of interests and the need for clear blue water. In the light of this, the Independent Chair asked if it was sufficient for this to be covered by reference made to conflicts of interests included in the Council’s Constitution. As an illustration it was described how there might be conflict for Members around the rate of Council’s contributions to the Fund and wanting this to be as low as possible in order to benefit the Council’s overall budget. The Independent Chair stressed that conflicts were not untoward but that they needed to be managed. Lastly, it was noted that the Secretary to the Local Government Pension Scheme Advisory Board had indicated the desire to make governance reviews mandatory.

The Director of Finance, Investment and Risk (Section 151 Officer) addressed the issue of resourcing to fulfil the Governance Review action plan. It was explained that the action plan had been carefully considered and a realistic approach taken with activity timed to happen over the full three years until the next review would be undertaken. Officers would provide the Committee with an update report on the implementation of the action plan every 12 months. (This was slightly different from the recommendations as noted in the report which the Committee agreed would be updated.) It was described how the updates on the Action Plan would be open and honest with transparency on any slippage and the reasons for this provided. It was noted that there continued to be some vacancies in the pension team but that the recruitment process was continuing.

It was confirmed that the Action Plan would be taken to the Pension Board and that the Pension Committee would receive an item on conflicts of interest within 12 months.

With regard to the context for the governance of the Fund, the Head of Pensions and Treasury explained that the Pension Regulator’s remit was extended to include all public schemes from April 2019. It was therefore reasonable to expect some changes to the governance requirements that were expressed through Code of Practice 14.

The Chair explained how it was important to the governance of the Fund that the decisions of the Committee should be followed and that this needed to be reasserted. This was agreed by the Committee.

In response to a Member question, the Director of Finance, Investment and Risk (Section 151 Officer) clarified that only Aon Hewitt had access to the responses to the survey underpinning the Governance Review. There was confidence Aon Hewitt would have reviewed all of the comments made before these had been summarised in its report. Aon Hewitt was not at the meeting because the item was to consider Croydon’s Action Plan made in response to the findings of the review.

In response to a further Member question, the Director of Finance, Investment and Risk (Section 151 Officer) stressed that, as already agreed, the Committee would receive an item on conflicts of interests within 12 months and that the Monitoring Officer would be consulted as part of this work. Reassurance was provided that the action plan contained delivery dates and detailed when action was required to be taken by the Pension Board. It was described how time had been spent going through the recommendations contained in the Governance Review with prioritisation made (although it was acknowledged that some changes to the action plan may result from events over time). The Independent Chair of the Pension Board expressed his preference for a separate provision outside the Council’s Constitution to encompass the treatment of conflicts of interests, describing as good governance the separation between the Council’s role as the scheme’s administrator and lead employer.

A Member questioned the voting rights assigned to the Members of the Pension Committee (with specific reference made to the fact that the employee representative was non-voting). It was noted by the Independent Chair of the Pension Board that Croydon was unusual in having given voting rights to Committee Members who were not Councillors but that having another employer on the Pension Committee might be considered. It was agreed to add to the Committee’s work programme consideration of the Committee’s make-up and voting rights. A review of the make-up of the Committee would be undertaken.

There was discussion of the comments in the Governance Review regarding the challenge posed by the knowledge and skills needed to be an effective Member of the Pension Committee. Concern was expressed about the turnover in Members and the risk this posed in terms of undermining the expertise of the Committee. Members suggested the need to write to those responsible for making appointments in both Groups to recommend the need for consistency. Councillor Fraser, in his capacity as the Group Whip for the Administration, agreed the point was well made and that this would be highlighted.

RESOLVED: The Committee resolved to AGREE the report with the following revisions/additions:

      i.        An update on the implementation of the action plan will be provided to the Pension Committee every 12 months;

    ii.        The Pension Committee will receive an item on conflicts of interests within 12 months of the meeting;

   iii.        The need to follow/implement the decisions of the Pension Committee was reasserted; and

   iv.        An item to give consideration to representation and voting rights would be added to the Pension Committee’s work programme.