ITEM PF15 PENSIONS FUND COMMITTEE – 25 FEBRUARY 2009OXFORDSHIRE PENSION FUND BUSINESS PLAN AND BUDGET FOR 2009/10
Report by the Assistant Chief Executive & Chief Finance Officer
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 2009/10 and also includes a member training programme and an investment management/scheme administration budget. Review of the 2008/09 Business Plan
3. All but two of the tasks set out in the 2008/09 Business Plan for Investments were completed successfully, including appointing a Passive Fund Manager, a Custodian and a new Independent Financial Adviser. This was despite the fact that Tony Wheeler retired during the year. We were fortunate in being able to secure his services on a contractual basis to help deliver the plan.
4. Of the two tasks that weren’t successfully completed, the review of Hedge Funds investments was carried out but a decision on how to move forward has been deferred because of the current turmoil in the Hedge Fund industry. The completion of this review has been added to the 2009/10 Business Plan. One task was not undertaken: consideration as to whether the Pension Fund should appoint an external consultant. This has been carried forward into the 2009/10 Business Plan.
5. The delivery against the tasks set out in the 2008/2009 Administration Business Plan have been affected by the continuing vacancies within the team. Specifically the target to get the team fully staffed within the year will be achieved by the end of February 2009, although training remains an on going objective. This resulted in work in progress not reducing significantly during the year. The new Regulations received were successfully put in place although the piecemeal issuing of the Regulations, factors or clarification impacted on the delivery of both continuous improvement of processes, which was partially achieved and the rewriting of the service level agreement which was not. Good progress has been made in engaging with employers to improve the data flow into pension services.
Oxfordshire Pension Fund 2009/10 Business Plan
6. Annex 1 (download as .doc file) sets out a recommended business plan for the 2009/10 financial year. The plan summarises the investment and pension tasks to be carried out during 2009/10, and the target dates for these. It includes those tasks carried forward from 2008/09.
Oxfordshire Pension Fund 2009/10 Budget
7. Annex 2 (download as .xls file) sets out the Fund’s investment management and scheme administration budget for 2009/10 and compares it with the budget set for 2008/09. A report comparing the investment management and scheme administration outturn figures against the budget for 2008/09 will be produced for the August 2009 Committee meeting.
8. The Fund Management Fee budget has decreased from £3.4 million to £2.4 million, due to a projected decrease in the average market value of the assets under management compared with 2008/9 and the redemption of the TAA fund.
9. The reduction in the Global Custody Fee is also due to the projected lower average valuation of the fund’s investments compared with the previous financial year.
10. The Independent Financial Adviser budget is based on the new contract fee, including an assumption about special assignments that may be needed in the coming year.
11. A review of the Financial Services Recharge has been undertaken because of the changes in personnel, particularly on the investment side. The increase mainly reflects a higher level of senior management involvement in pension fund investment issues.
12. The main items which increase the Financial Services Recharge for administration are the implementation of revised pay levels for the administration team following a job evaluation exercise; increased charges for Learning and Development (£10,000) and for Human Resources support (£10,000) following the review of activity levels in respect of pensions administration and an increased provision of £15,000 for legal costs taking into account the increased need for advice.
13. The reduction in the Software Support and Licensing charge is due to the storage costs being re-coded.
14. The increase in Actuarial Fees reflects the significant increase in volume and complexity of the work particularly around admission agreements. This will be subject to a major report to the Committee during 2009/10.
15. The small increase in charges for District Audit is as a result of the scale of fees being confirmed. Charges levied are based on fund value, which currently puts the Oxfordshire Fund in the middle band.
16. Increases in Other Costs reflect the decrease in the software support and licensing charge and an increased provision for subscription and membership fees.
Member Training Budget and Programme
17. 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 2008/09 budget will be underspent it is recommended that the 2009/10 budget be maintained at the same level.
18. Following the County Council elections there will be a new Pension Fund Committee. It is likely that there will be at least some new councillors on the Committee. One of the tasks in the Business Plan at Annex 1 is to provide induction training during the summer. In the past officers have offered 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. It may be possible to combine these this year if there is more than one new councillor.
19. There are a number of external organisations that provide member training seminars and workshops. Examples of these are included in Annex 3 (download as .doc file), along with details of known conferences and seminars being run during 2009/10. Officers will keep members informed of these events and others throughout the year.
20. In addition to external training courses the officers will continue to organise a programme of internal training sessions for members. These sessions will normally precede the quarterly Pension Fund Committee meetings.
21. As well as formal events, with the increased use of technology, there are more and more teleconferences and video messages being used by Fund Managers and other organisations. Details of these events can be circulated to members during the year. Throughout the year members may also be provided with topical articles and newspaper cuttings, which officers consider to be of interest.
22. These proposals for member training are clearly for the benefit of members. The purpose is to ensure that members of the Pension Fund Committee can fulfil their responsibilities. As a consequence the Committee is asked whether:
· the proposals meet their needs · whether anything needs to be added to the proposals · which proposals are particularly attractive or beneficial
RECOMMENDATIONS
23. The Committee is RECOMMENDED to:
(a) approve the Business Plan, as set out at Annex 1, for 2009/10;
(b) approve the Investment Management and Scheme Administration Budget for 2009/10, as set out in Annex 2;
(c) comment on the proposals for member training as set out in the report and in Annex 3; and
(d) subject to (c) above, agree the arrangements for member training.
SUE SCANE Assistant Chief Executive & Chief Finance Officer
Contact Officers: Paul Gerrish, Head of Finance and Procurement Tel: (01865) 323969 Donna Ross, Treasury Management & Pensions Investment Manager Tel: (01865) 323976 Sally Fox, Pensions Administration Manager Tel: (01865) 797111
February 2009
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