Devon Pension Fund Governance Policy and Compliance Statement

Introduction

This policy and compliance statement outlines the governance arrangements for the Devon Pension Fund, maintained by Devon County Council, as required by regulation 31 of the Local Government Pension Scheme (Administration) Regulations 2008 (as amended).

Under that provision all LGPS Funds in England and Wales are required to produce a Governance Compliance Statement, revise it following any material change in their delegation arrangements and publish it. The statement is required to set out:

(a) whether the administering authority delegates their function or part of their function in relation to maintaining a pension fund to a committee, a subcommittee or an officer of the authority;

(b) if they do so:

(i) the terms, structure and operational procedures of the delegation;
(ii) the frequency of any committee or sub-committee meetings;
(iii) whether such a committee or sub-committee includes representatives of employing authorities (including authorities which are        not Scheme employers) or members, and if so, whether those representatives have voting rights.

(c) the extent to which a delegation, or the absence of a delegation, complies with guidance given by the Secretary of State and, to the extent that it does not so comply, the reasons for not complying.

Each administering authority is required to:

(a) keep the statement under review;

(b) make such revisions as are appropriate following a material change in respect of any of the matters mentioned in (a) to (c) above;

and

(c) if revisions are made:

(i) publish the statement as revised, and
(ii) send a copy of it to the Secretary of State.

In reviewing and making revisions to the statement, the authority must consult such persons as it considers appropriate.

The Governance Policy has been updated to reflect the governance changes required by the Public Sector Pensions Act 2013 and the Local Government Pension Scheme (Amendment) (Governance) Regulations 2015.

Approved by the Investment and Pension Fund Committee 16 November 2018

Downloadable version

Governance Structure

This Devon Pension Fund governance structure is illustrated below. The structure relates to administering authority responsibilities only. Devon County Council is also an employer within the Devon Pension Fund. A separate governance structure and scheme of delegation is in place in relation to Devon County Council’s employer responsibilities.

The Investment and Pension Fund Committee

The Investment and Pension Fund Committee is composed as follows:

All members and representatives, with the exception of the representatives nominated by the trade unions, have equal voting rights. The Committee has also agreed that the Unitary and District authorities should be able to nominate substitute councillors to attend committee meetings should the nominated councillors be unable to do so.

The Investment and Pension Fund Committee is supported in the execution of its responsibilities by the following:

• The County Treasurer and staff from the Authority’s Investments and Pensions Administration teams.
• An Independent Investment Advisor (currently Steve Tyson of MJ Hudson Allenbridge)
• An Actuary (Currently Graeme Muir of Barnett Waddingham)

The Committee meets quarterly, and also has regular training sessions that all representatives and substitute members are invited to attend, in order to ensure that they are equipped as well as possible to fulfil their obligations.

Role of the Investment and Pension Fund Committee

The Investment and Pension Fund Committee oversees the operation of the Devon Pension Fund on behalf of Devon County Council. The County Council’s Constitution sets out the delegated role of the Investment and Pension Fund Committee as follows:

To discharge the duties of the Council as Administering Authority of the Pension Fund and to review and approve the annual statement of accounts of the Devon Pension Fund, to consider whether appropriate accounting policies have been followed and whether there are concerns arising from the financial statements or from any audit that need to be brought to the attention of the Council. To review and approve the annual statement of the Pension Fund accounts.

Devon County Council Constitution Part 3 Responsibility for Functions paragraph 9.1

In fulfilling that role the Committee undertakes the following tasks:

• Monitoring the administration of the Pension Scheme, including the benefit regulations and payment of pensions and their day to day administration, ensuring that it delivers best value and complies with best practice guidance where considered appropriate.
• Exercise of Pension Fund discretions on behalf of the Administering Authority.
• Determination of Pension Fund policy in regard to employer admission arrangements.
• Determination of the Pension Fund’s Funding Strategy and approval of its Funding Strategy Statement.
• Receiving periodic actuarial valuation reports from the Actuary.
• Coordination of Administering Authority responses to consultations by Central Government, professional and other bodies.
• Approval and review of the content of the Investment Strategy Statement.
• Approval and review of the asset allocation benchmark for the Fund.
• Appointment and review of Investment Managers, Custodian and Advisors.
• Monitoring the quality and performance of each Investment Manager in conjunction with investment advisors and the Section 151 Officer.
• Monitoring the performance of the Brunel Pension Partnership Ltd.
• Setting and reviewing the investment parameters within which the Investment Managers can operate.
• Monitoring compliance of the investment arrangements with the Investment Strategy Statement.
• Assessment of the risks assumed by the Fund at a global level as well as on a manager by manager basis.
• Approval of the Annual Report.

The Pension Board

The Pension Board is composed of nine members as follows:

All members and representatives, with the exception of the Independent Member will have equal voting rights. The Board will appoint a Chairman and Vice Chairman from among its members. Members of the Investment and Pension Fund Committee are excluded from membership of the Pension Board.

The members of the Pension Board serve for a four year term, subject to the following:

• The representatives of the administering authority shall be appointed annually by the Devon County Council Annual Council Meeting, but with a view to maintaining stability of membership.
• Two member representatives and one employer representative shall serve for an initial six year term, after which a four year term will be served, to promote continuity of experience by reducing the risk of all members being replaced by new members at the same time.
• The independent member shall also serve for an initial six year term, after which a four year term will be served.
• The membership of any member who fails to attend for two consecutive meetings or two consecutive training events shall be reviewed by the Board and shall be terminated in the absence of mitigating factors.
• Arrangements shall be made for the replacement of members who resign or whose membership ceases due to non-attendance in line with the procedures for their original appointment.

The Pension Board requires the support of the Fund’s key advisors to support it in the execution of its responsibilities. These will include the County Treasurer and staff from the Authority’s Investments and Pensions Administration teams. It will also include staff from the Devon Audit Partnership. The Board will also be able to seek advice from other advisors, such as the Fund Actuary, and the Fund’s external auditors.

The Board will meet four times a year, with meetings falling in between the meetings of the Investment and Pension Fund Committee. Additional meetings may be convened if significant issues arise. In addition training sessions will be held, which may be joint sessions with the Investment and Pension Fund Committee.

Role of the Pension Board

The role of the local Pension Board as defined by sections 5 (1) and (2) of the Public Service Pensions Act 2013, is to –

• Assist the Administering Authority as Scheme Manager;

– to secure compliance with the LGPS regulations and any other legislation relating to the governance and administration of the LGPS;
– to secure compliance with requirements imposed in relation to the LGPS by the Pensions Regulator;
– in such other matters as the LGPS regulations may specify.

• Secure the effective and efficient governance and administration of the LGPS for the Pension Fund.
• Provide the Scheme Manager with such information as it requires to ensure that any member of the Pension Board or person to be appointed to the Pension Board does not have a conflict of interest.

The Pension Board will also help ensure that the Devon Pension Fund is managed and administered effectively and efficiently and ensure that it complies with the code of practice on the governance and administration of public service pension schemes issued by the Pension Regulator.

In fulfilling that role the Board undertakes the following tasks:

• Monitor compliance of the Pension Fund with legislation, guidance issued by the Pensions Regulator, and with the policies set out in the Fund’s statutory statements.
• Review and scrutinise the performance of the Pension Fund in relation to its governance and administration, policy objectives and performance targets.
• Approval of the Annual Internal Audit Plan for the Devon Pension Fund and for Peninsula Pensions.
• Consideration of the Internal Audit Annual Report and regular update reports for the Devon Pension Fund and Peninsula Pensions.
• Consideration of the External Audit report on the Pension Fund Annual Report and Statement of Accounts.
• Review of the Pension Fund Risk Register.
• Monitoring of the Fund’s Internal Dispute Resolution Procedures.
• Monitoring of the Pension Fund Breaches Register and Breaches Policy.

Role of the County Treasurer

The Director of Finance and Public Value is Devon County Council’s Section 151 (Local Government Act 1972) Officer and the Proper Officer under s115 of the Local Government Act 1972 responsible for the proper administration of the Council’s financial affairs, including the Devon Pension Fund.

The following responsibilities are delegated to the Director of Finance and Public Value:

• The management, monitoring and reporting to the Investment and Pension Fund Committee of the activities and the performance of the:

a. Investment Managers;
b. Investment Consultants and Advisors;
c. Fund Custodian.

• The management of the Fund’s cash assets directly held by the Administering Authority.
• The authorisation of cash or asset movements between the Administering Authority, the Fund Custodian and the investment managers.
• Accounting for all investment transactions in compliance with standard accountancy and audit practice.
• Taking action to rebalance the Fund by moving funds between current managers, where actual asset allocation varies by more than 2.5% from the target allocation.
• Allocating surplus cash of up to £50m to the Fund’s investment managers, in consultation with the Chairman and Vice-Chairman, when deemed that such an allocation could be made to the benefit of the Fund.
• The payment of fees to the investment managers and the custodian in accordance with their contractual agreements.
• Acting as the Shareholder Representative for Devon County Council in relation to the Brunel Pension Partnership Ltd. including the approval of reserved matters under the Shareholder Agreement.
• The Committee has delegated the use of voting rights on the Fund’s shareholdings to the investment managers. In exceptional circumstances the County Treasurer may, in consultation with the Chairman and Vice-Chairman, direct the investment managers to vote in a specific way.
• The admission of organisations into the Pension Scheme – in accordance with approved policy.
• Under exceptional circumstances, taking urgent decisions regarding management of funds in the event that existing fund managers are unable to fulfil their responsibilities.
• In consultation with specialist advisors determining, on a risk by risk basis, whether to pursue litigation cases to attempt to recover sums due in relation to taxation issues or class actions.
• Exercising the discretionary powers allowed under the LGPS regulations.

Governance Compliance Statement

The following table sets out the Devon Pension Fund’s level of compliance with the latest guidance issued by the Secretary of State for Communities and Local Government.

As a statutory public service scheme, the LGPS has a different legal status compared with Trust based schemes in the private sector. Governance matters in the LGPS therefore need to be considered on their own merits and with a proper regard to the legal status of the scheme. This includes how and where it fits in with the local democratic process through local government law and locally elected councillors who have the final responsibility for its stewardship and management.

 

Explanation of level of compliance: (c) and (d) No secondary committee has been established.

Explanation of level of compliance: (a)(ii) Representatives of scheme members are members of the Investment and Pension Fund Committee, but without voting rights.

Explanation of level of compliance: (b) No secondary committee has been established.