The Chief Finance Officer submitted a report to the Board the purpose of which was to inform members of Myers Principle. Further to the action arising from the Teesside Pension Board meeting held 5th February 2016, the Pension Board identified a number of areas where further training was requested, including training on the Myners Principles.
The Board were advised that In 2000, Gordon Brown (then the Chancellor of the Exchequer) was concerned about the relative lack of entrepreneurial enterprise in the UK. His suspicion was that that this might be due, in part at least, to the conservative way that institutional investments were made in this country and lack of funding available to would-be entrepreneurs. So he commissioned Paul Myners, chairman of a fund management firm (Gartmore) to investigate this issue.
Paul Myners widened his remit considerably. Rather than focusing on the issue of the availability of venture capital, he covered the way in which institutional investments (particularly pension schemes) were governed. His review Institutional Investment in the United Kingdom was published on 6 March 2001.
The Board were made aware that within the original Myners principle, Myners set out principles that he believed to be best practice for the governance of pension schemes. Following consultation, the Government published its response to the review, which included a voluntary code for pension scheme investment based on those principles. There were originally ten principles for defined benefit pension schemes.
In 2007 Myners Principle was reviewed as the Government asked the National Association of Pension Funds (NAPF) to assess the extent to which:
- pension fund trustees were applying the Myners principles;
- scheme governance and the quality of trusteeship had improved; and
- whether key gaps identified in a previous review had been addressed.
The Government accepted the NAPF's principal findings and recommendations. In particular, it agreed that the Principles would be more effective if Government and industry developed more flexible and high-level voluntary principles, rather than prescribing how pension funds should manage specific aspects of their business. They also set up an independent Investment Governance Group under the chairmanship of The Pensions Regulator, to enable the pension's community to take responsibility for the content and implementation of the principles and associated guidance and best practice.
The Panel were advised that there were six high level principles of the Myners principle, together with the best practical guidance as recommend by the Pension regulator.
Principle 1: Effective decision making
Middlesbrough Council members are requested to undergo training every year to develop a baseline knowledge prior to decision making.
Principle 2: Clear Objectives
Trustees should set out overview investment objective (s) for the fund that takes into account of the scheme's liabilities, the strength of the sponsor covenant and the atttitude to risk both the trustees and the sponsor, and clearly communicate these to advisers and investment managers.
The Fund sets clear benchmarks , monitors performance over 1, 3 and 10- year time horizons and investment management arrangements are reviewed every 5 years.
Principle 3: Risk and Liabilities
In setting and reviewing their investment strategy, trustees should take account of the form and structure of liabilities.
Every 3 years, after the actuarial valuation, the Fund requests an Asset/Liability Study to be carried out by the Funds Actuary, assisted by the Investment Panels Independent Advisors.
Principle 4: Performance Assessment
Middlesbrough produce an annual performance report, which will be reported in June to the Teesside Pension Fund and Investment Panel.
Principle 5: Responsible Ownership
Trustees should adopt, or ensure their investment managers adopt, the Institutional Shareholders' Committee Statement of Principles on the responsibilities of shareholders and agents.
The Board were advised that the Investment Panel set a voting template and votes are carried out for all UK company meetings, where the Fund is a shareholder. The Fund is also a member of the Local Authority Pension Fund Forum who carry out company engagement and specific corporate governance projectson behalf of its members.
Principle 6: Transparency and Reporting
Trustees 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.
Middlesbrough Council publish all reports and decisions on the website (except for confidential reports) and ensure we are as transparent as possible.
Agreed as follows :
That the Board notes the report.