Meeting documents

Pension Fund Committee
Friday, 24 February 2006

PF240206-12

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ITEM PF12

PENSIONS FUND COMMITTEE – 24 FEBRUARY 2006

OXFORDSHIRE PENSION FUND BUSINESS PLAN

Report by the Head of Finance & Procurement

Introduction

  1. Following the publication of the Myners Report the Pension Fund Committee requested that officers draw up an annual business plan, which should contain financial estimates for the investment and administration of the Pension Fund and appropriate provision for member training.

  2. This report sets out the annual business plan for 2006/07 and also includes a member training programme and an investment management/scheme administration budget.

    3. Review of the 2005/06 Business Plan

  3. All the investment tasks set out in the 2005/06 Business Plan were successfully carried out.

  4. On the administration side, all the tasks, except for the development of electronic interfaces for scheme employers have been completed. The development of electronic interfaces is included in this year’s plan. Implementation of task management is in progress and linked to the business re-engineering processes.

    5. Oxfordshire Pension Fund 2006/07 Business Plan

  5. Annex 1 (download as .doc file) sets out a recommended business plan for the 2006/07 financial year. The plan lists the investment and pension administration tasks, which should be carried out during 2006/07, and the target date when these should be achieved.

    6. Oxfordshire Pension Fund 2006/07 Budget

  6. Annex 2 (download as .xls file) sets out the Fund’s investment management and scheme administration budget for 2006/07.

  7. The large increase in the Fund Management Fees budget from £2.1 million in 2005/06 to £2.9 million in 2006/07 is mainly due to the large increase in the market value of the Fund over the last 18 months, which increased from £656 million at 30 June 2004 to £890 million at 31 December 2005. Most of the management fees are calculated by applying a sliding scale of fees to the market values of the managed portfolios.

  8. However, there have also been a number of other factors, which have contributed to the higher management fees. These include the switch out of bonds into alternative assets such as property, private equity and hedge funds, which all charge higher management fees. The decrease in the large in house cash balance, which attracted no management fee and the switch from Alliance Bernstein’s global diversified fund to its global value fund also contributed to the higher fees. To date the very strong investment performance have dwarfed the additional management fees.

  9. The increase in the custody fee budget from £115,000 in 2005/06 to £140,000 2006/07 and the forecast increases in income generated from commission recapture and stock lending are also mostly attributable to the increase in the market value of the Fund.

  10. The administration budget staffing costs are increasing by £73,000, which is in the main due to incremental increases and the increase in employer costs. However, we are also seeking to fund another administrative assistant post. As part of our Business Process Re-engineering (BPR) work with the Said Business School, it was concluded that this additional post would release time to more skilled staff to use for technical work, increasing the overall efficiency and effectiveness of the section, and assisting in addressing the current backlogs.

  11. The other significant cost increase is for the pensions software to allow for the development of task management.

  12. A report comparing the investment management and scheme administration outturn figures against the budget for 2005/06 will be produced for the August 2006 Committee meeting.

    13. Member Training Budget and Programme

  13. Following the recommendations of the Myners Review on Institutional Investment in the UK, a member-training budget is now agreed each year. Although it is anticipated that the 2005/06 budget will be underspent it is recommended that the 2006/07 budget be maintained at the same level.

  14. There is a number of external organisations that provide member training seminars and workshops. Further details of known courses being run during 2006/07 are set out in Annex 1. Officers will keep members informed of these events and any others throughout the year.

  15. In addition to external training it has also been decided to run a series of internal talks and training courses for members, which will immediately precede the main quarterly Pension Fund Committee meetings. Officers will also continue to offer members individual briefing/tuition sessions on a one to one basis. New members have found these sessions particularly helpful in the past because they can be tailored to the appropriate level of the individual’s knowledge and expertise.

  16. Throughout the year members will also be provided with topical articles and newspaper cuttings, which officers consider to be of interest.

    17. RECOMMENDATIONS

  17. The Committee is RECOMMENDED to:

          1. approve the Oxfordshire Pension Fund Business Plan, as set out in Annex 1, for 2006/07; and

          2. approve the Oxfordshire Pension Fund’s Investment Management and Scheme Administration Budget, as set out in Annex 2, for 2006/07.

SUE SCANE
Head of Finance and Procurement

Contact Officers
Tony Wheeler, Pension Fund Investments Manager Tel (01865) 815287
Sally Fox, Pension Services Manager Tel (01865) 816080

February 2006.

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