Meeting documents

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To Members of the Pension Fund Committee

Notice of Meeting

Chris Impey
Assistant Chief Executive

17 February 2005

Membership

Chairman – Councillor C H Shouler

Councillors:

Co-opted Members:

AGENDA

1. Apologies for Absence and Temporary Appointments
2. Declarations of Interest – see guidance note
3. Minutes

To approve the minutes of the meeting held on 26 November 2004 (PF3) and to receive for information any matters arising from them.

4. Petitions and Public Address
5. Actuarial Valuation

10:05 Report by Hewitt Bacon and Woodrow – Actuary to the Fund (PF5) (download as .pdf file).

The report sets out the key issues arising from the Actuary’s triennial valuation of the Oxfordshire Pension Fund, as at 31 March 2004. The Actuary will attend the Committee meeting to present his findings.

It is the Actuary’s statutory responsibility to determine the employer contributions payable over the next three financial years. Each employer was issued with figures in December, calculated in accordance with the draft Funding Strategy Statement, and asked to determine whether they wished to move to their new contribution rate in a single step, or over three steps. Employers were also asked whether they wished to declare any likely changes to their on-going membership numbers, which would make moving to a 25 year recovery period unsound. Responses were requested by 28 February 2005. Until responses have been received from all employers, the Actuary will be unable to finalise his report, determine the actual employer contributions for the next three years, and issue the Statutory Certificate.

The Committee is RECOMMENDED to:

1. note the outcome of the 2004 Valuation as presented by the Actuary, and detailed in his report; and
2. request the Head of Finance & Procurement to seek the outstanding responses from employers regarding their employer contribution rates, in order that the Actuary can issue his final report and statutory certificate by 31 March 2005.

6. Funding Strategy Statement

10:30 Report of the Head of Finance & Procurement (PF6) (download as .doc file).

Under the Local Government Pension Scheme Regulations, the Pension Fund Committee acting as Administering Authority must publish a Funding Strategy Statement for the Oxfordshire Pension Fund by 31 March 2005. This Committee has received full reports on the preparation of this Statement at its meetings in May and August 2004, with an update at its November 2004 meeting. These reports led to the publication of a draft Funding Strategy Statement, prepared with regard to the guidance published by CIPFA, as required under the Regulations. This draft was sent to all Fund Employers seeking their comments. A workshop, to which all employers were invited, was also held in July 2004.

There has been very little feedback from Employers on the content of the Funding Strategy Statement. Those comments that had been received have been incorporated into the last draft Statement as presented to this Committee. Since the publication of the preliminary 2004 Valuation results, which were calculated in accordance with the draft Funding Strategy Statement, there have been no requests for any amendment to the Statement.

As discussed at the November 2004 Committee, the draft statement has been amended to include a clarification of the exceptional circumstances where annual steps in excess of 3 years will be considered (in respect of exceptional variations to funding streams for employers). The Statement has also been amended to take account of the changes to the arrangements for the regulation of the Pension Scheme, with the replacement of OPRA with the new Pensions Regulator from April 2005. The only other changes to the previously presented draft cover typographical corrections.

The Committee is RECOMMENDED to approve the Funding Strategy Statement for the Oxfordshire Pension Fund.

7. Overview of Past and Current Investment Position
   
   PF7 (download as .xls file)

EXEMPT ITEMS

The Committee will be invited to resolve to exclude the public for the consideration of the following exempt items (marked E) by passing a resolution in relation to each such item in the following terms:

"that the public be excluded during the consideration of the following items in the Agenda since it is likely that if they were present during those items there would be a disclosure of "exempt" information as described in Part I of Schedule 12A to the Local Government Act, 1972 and specified below each item in the Agenda."

Note: In the case of items 9E, 10E and 11E, there are no reports circulated with the Agenda. Any exempt information will be reported orally.

The reports from the Fund Managers relating to the Exempt Items at 9E, 10E and 11E and any information to be reported orally have not been made public and should be regarded as strictly private to members and officers entitled to receive them until after 25 May 2005.

8. Overview and Outlook for the Investment Markets

10:45 Report of the Independent Financial Adviser (PF8E) (download as .doc file).

The report sets out an overview of the current and future investment scene and market developments across various regions and sectors. The report itself does not contain exempt information and is available to the public. The Independent Financial Adviser will also report orally and any information reported orally will be exempt information.

(Information Exempt in that it relates to the financial or business affairs of any particular person (other than the authority).)

The Committee is RECOMMENDED to receive the report and tables, to receive the oral report, to consider any further action arising on them and to bear the Independent Financial Adviser’s conclusions in mind when considering the Fund Managers’ reports.

9. UBS

10:55 (1) The Independent Financial Adviser will report orally on the performance and strategy of UBS Global Asset Management drawing on the tables at items 7 and 8E.

(2) Mr D Rowe (UBS Wealth Management Division) will make a presentation on Oxfordshire Pension Fund's 2% investment in hedge funds. The presentation will consider the four different funds in which Oxfordshire is invested and will review the investment performance to date (net of management fees). The presentation will conclude by briefly discussing the strategy going forward.

(3) Mr K Barker (UBS Global Asset Management) will:

(a) report and review the present investments of their part of the Fund and their strategy against the background of the current investment scene for the period ended 31 December 2004;

(b) report on whether or not voting rights have been exercised and if so details of the rights exercised;

(c) give their views on the future investment scene.

In support of (2) and (3) is their valuation report for the period to 31 December 2004.

At the end of the presentations, members are invited to question and comment and the Fund Managers to respond.

(Information Exempt in that it relates to the financial or business affairs of any particular person (other than the authority).)

The Committee is RECOMMENDED to consider and to adopt or amend any recommendations before them.

10. Baillie Gifford

11:35 (1) The Independent Financial Adviser will report orally on the performance and strategy of Baillie Gifford drawing on the tables at items 7 and 8E.

(2) The representatives (Mr I McCombie and Mr L Robb) of the Fund Manager will:

(a) report and review the present investments of their part of the Fund and their strategy against the background of the current investment scene for the period ended 31 December 2004;

(b) report on whether or not voting rights have been exercised and if so details of the rights exercised;

(c) give their views on the future investment scene.

In support of the above is their valuation report for the period to 31 December 2004.

At the end of the presentation, members are invited to question and comment and the Fund Managers to respond.

(Information Exempt in that it relates to the financial or business affairs of any particular person (other than the authority).)

The Committee is RECOMMENDED to consider and to adopt or amend any recommendations before them.

11. Report of Main Issues arising from the Quarterly Valuation Reports by Fund Managers not represented at this Meeting

12:00 The Independent Financial Adviser will report on the main issues arising from the quarterly valuation reports from Alliance Bernstein and Legal & General for the quarter ended 31 December 2004.

(Information Exempt in that it relates to the financial or business affairs of any particular person (other than the authority).)

The Committee is RECOMMENDED to note the main issues arising from the quarterly valuation reports and to take any necessary action, if required.

12. Summary by the Independent Financial Adviser

12:05 The Independent Financial Adviser will, if necessary, summarise the foregoing reports of the Fund Managers and answer any questions from members.

(Information Exempt in that it relates to the financial or business affairs of any particular person (other than the authority).)

13. Additional Voluntary Contributions (AVC) – Annual Review

The Committee is RECOMMENDED to:

ITEMS FOLLOWING THE RE-ADMISSION OF THE PRESS AND PUBLIC

14. Shareholder Activism and Corporate Governance

12:20 Report by the Head of Finance & Procurement (PF14).

The report reviews the policies of the Oxfordshire Pension Fund's four managers on shareholder activism. The report concludes that all four managers comply with the industry's best practice on this corporate governance issue and recommends that the Pension Fund's Statement of Investment Principles should be revised to reflect this.

The Committee is RECOMMENDED to note this report and to amend the Pension Fund’s Statement of Investment Principles to reflect that the CIPFA principle on activism is now being fully complied with.

15. Monitoring Transaction Costs

12:30 Report of the Head of Finance & Procurement (PF15).

The report reviews the actions taken by the Oxfordshire Pension Fund's four managers in monitoring and measuring their transaction costs. The report explains that there is now a Code of Good Practice in place, published by the Investment Management Association. There are two levels of disclosure associated with this code and all four of Oxfordshire's managers comply with both levels.

The Committee is RECOMMENDED to note this report and to amend the Pension Fund’s Statement of Investment Principles to reflect that the CIPFA principle covering transaction costs is now being fully complied with.

BREAK FOR LUNCH

16. Facing the Future – Propositions and Principles for an Affordable and Sustainable Local Government Pension Scheme

13:35 Report by the Head of Finance & Procurement (PF16).

The report sets out the key issues for consideration, and recommends the key points to be included in the response of this Committee, acting as Administering Authority to the Oxfordshire Pension Fund.

The Committee is RECOMMENDED to consider the report, and authorise the Head of Finance & Procurement to send a response to the ODPM by 31 March 2005, in accordance with the recommendations as set out in the report, as amended during the course of debate on this report. The Head of Finance & Procurement is asked to consult with the Chairman, Deputy Chair and group spokesperson for this Committee in finalising this response.

17. Recommended Process for Reviewing the Pension Fund’s Strategic Asset Allocation

14:05 Report by the Head of Finance & Procurement (PF17) (download as .doc file).

The report briefly explains the process that led to the Pension Fund's existing strategic asset allocation. It recommends a process for keeping the strategic asset allocation under review. The report explores the pros and cons for periodically rebalancing back to the strategic benchmark.

The Committee is RECOMMENDED to:-

(a) request officers to produce a report on tactical asset allocation overlay;

(b) request that officers rebalance back to the strategic benchmark every 12 months coupled with a tactical asset allocation overlay;

(c) request that the Independent Financial Adviser reviews the Fund’s strategic asset allocation annually and reports his findings and recommendations to the Committee;

(d) request that officers report to the Committee on changes to the Pension Fund’s liability profile, following the triennial actuarial valuation, or earlier if there are exceptional circumstances.

18. Oxfordshire Pension Fund Business Plan

14:15 Report by the Head of Finance & Procurement (PF18).

This report sets out a recommended business plan for both investments and administration in 2005/06, an investment management and scheme administration budget for 2005/06 and details on member training courses.

The Committee is RECOMMENDED to:

1. approve the Oxfordshire Pension Fund Business Plan, as set out at Annex 1, for 2005/06; and
2. approve the Oxfordshire Pension Fund’s Investment Management and Scheme Administration Budget, as set out in Annex 2 (download as .xls file), for 2005/06.

19. Local Government Pension Scheme Regulations (LGPS) – Amending Regulations

14:25 Report by the Head of Finance & Procurement (PF19).

This report sets out the regulation changes to be implemented on 1 April 2005 and identifies the changes from the draft regulations.

The Committee is RECOMMENDED to accept this report.

20. Local Government Pension Scheme Regulations (LGPS) – Early Retirement Costs

14:30 Report by the Head of Finance & Procurement (PF20).

A report was submitted to Committee in August 2004 detailing advice from the actuaries to apply a percentage increase to the factors used in the calculation of early retirements. The actuaries have now revised their initial advice. This report seeks members’ views on the increase to be applied.

The Committee is RECOMMENDED to determine whether:

1. it wishes the factors used to be uplifted by 35%, from 1 April 2005, as previously advised; or

(b) to accept the revised advice to uplift factors by 25%, as part of a move to a common national approach, from 1 April 2005.

21. Local Government Pension Scheme Regulations (LGPS) – Applications for Admission as Community Bodies

14:40 Report by the Head of Finance & Procurement (PF21).

This report asks members to consider the applications from two bodies to join the Oxfordshire Pension Fund under the community admission agreements.

The Committee is RECOMMENDED to:

1. approve the applications of Reading Quest subject to their agreeing to the terms of the Admission Agreements, and this Committee being informed when the agreement has been signed;
2. reject the application from Connexions, Berkshire on the basis that this would be a closed agreement for 3 people and the remainder of their staff would be signed to the Berkshire Pension Fund.

22. Annual Forum