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Agenda item

Risk Register review

For Members to consider all risks assessed at amber and above.

Minutes:

The item was introduced by the Head of Pensions & Treasury. The section detailing mitigations for this year and future years was highlighted and how there was a section looking specifically at macro-economic risks.

 

Members explored a number of issues arising from the report.

 

In response to Councillor Hopley’s question it was explained that any risks from the Property Transfer would not be seen for 40 years and therefore were not immediately impactful. This was included on the risk register but as a result only at ranking of 1 or 2. It would be monitored in the background rather than being brought to the attention of the Committee.

 

In response, Members suggested the Property Transfer should be rated as an amber risk. The Head of Pensions & Treasury explained that the Council’s claim on the properties was registered in the head leases of the individual properties. This meant if they were sold, it would become apparent that there was a charge against the sale.

 

It was established by the meeting that the disaster recovery processes were fully tested annually and documented.

 

Councillor Hay-Justice commented that the risk of a potential cash shortfall also need to reflect the impact of the Croydon headcount reduction. The Head of Pensions & Treasury explained that the headcount reduction was not thought likely to have an impact. This was because those approaching retirement age had already been factored in. Whilst this was not an exact processes it would continue to be monitored. The Pension Fund Investment Manager highlighted that there was actually a benefit to the Fund from those retiring early.

 

In response to Councillor Fraser’s belief that the treatment of the risk from Brexit was too optimistic, the Head of Pensions & Treasury highlighted the difficult of this evaluation with this situation developing almost weekly. It was also stressed that there was a need to judge this risk from a global perspective rather than one that was UK centric; the global economy was unlikely to be subject to a lot of damage as a result of Brexit.

 

The Mercer adviser concurred noting that the work done 18 months ago had provided protection through geographical diversification. However, it was thought there might be a need to take action around the administration of the Fund as the risk came from it being structurally anchored to the UK. With payment in Sterling this might lead to some volatility. It was suggested that this might be something the Committee would want to revisit although there was a warning about taking decisions on short term news.

 

It was explained that payments were linked to inflation and that Brexit was inflationary which risked assets not keeping up with the liabilities. There were products that allowed some inflation linkage. It was described how this could be considered as part of the ongoing evaluation of the fund rather than there being a need for immediate action.

 

Gilli Driver asked questions regarding the timescale for the implementation of the McCloud judgement and whether the risk of intervention by the Ministry of Housing, Communities and Local Government had diminished.

 

The Head of Pensions & Treasury highlighted that based on the actuary’s assessment, the Croydon Local Government Pension Fund has shifted from 73% to 87% funded and that therefore the potential for intervention by the Government was likely to have reduced.  Additionally, it was noted that timescales for implementing the McCloud judgement had initially been stated as Spring 2021 but it was thought that this might be relaxed as it was likely other requirements would be included.

 

Based on initial analysis, the Head of HR & Finance Service thought some 5,000 cases might need to be recalculated based on the McCloud judgement. There was a reliance on the software provider to establish the facility to undertake this recalculation and employers to provide the details needed for this to be carried out. Once the legislation was published, its implications would be better understood

 

RESOLVED: The Committee AGREED to note the report.

 

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