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______________________________________
________________________________
To Members
of the Pension Fund Committee
Notice
of Meeting
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Meeting
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PENSION FUND COMMITTEE
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Date/Time
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Friday 27 August
2004 at 10.00 am
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Place
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County Hall,
Oxford
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Contact
officer
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Marion Holyman
(Tel:
01865 810177; E-mail)
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Chris Impey
Assistant Chief
Executive
18 August 2004
Membership
Chairman
– Councillor C H Shouler
Councillors:
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Richard
Farrell
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Barbara
Gatehouse
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Neville
F Harris
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Brian
L Hook
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Jim
Moley
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Co-opted
Members:
AGENDA
- Apologies for Absence
and Temporary Appointments
- Declarations of Interest
– see guidance note
- Minutes
To
approve the minutes of the meeting held on 21 May 2004 (PF3)
and to receive for information any matters arising from them.
- Petitions and Public
Address
- Overview of Past and
Current Investment Position
10.05 The
Independent Financial Adviser will review the investment activity during
the past quarter and present an overview of the Fund’s position as at
30 June 2004 using the following tables:
Table
1 - provides a consolidated valuation of the Pension Fund at
30 June 2004;
Tables
2 to 4 - provide details of the individual managers’ asset allocations
and compare these against their benchmark allocations;
Table
5 - shows net investment/disinvestments during the quarter;
Tables
6 to 7 - provide details on the Pension Fund’s Private Equity;
Tables
8 to 10 - provide investment performance for the consolidated
Pension Fund and for the four Managers for the quarter ended 30 June
2004.
Oxfordshire County Council Pension Fund - Overall Valuation of Fund
at 30 June 2004 (download as .xls file)
The
Committee is RECOMMENDED to receive the tables, and that the information
contained in them be borne in mind, insofar as they relate to items
9E to 11E on the agenda.
- Performance of Pension
Fund
10:20 Report
by Russell Mellon. Mr F Berrie (Russell Mellon) will present the report.
- General Report
- Individual
Report for Oxfordshire County Council Pension Fund
The
report gives a brief background to the main markets and the performance
of the major asset classes and also compares the investment performance
of the aggregate Pension Fund against its customised benchmark.
The
Committee is RECOMMENDED to receive the report and to consider any
further action arising on it.
(Copies
of the above report have been circulated to all members of the Committee
and copies have also been placed on public deposit.)
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 - 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 27 November 2004.
7.E Report by Russell
Mellon on the Investment Performance of the Individual Portfolios of the
Pension Fund
10.35 Mr
F Berrie (Russell Mellon) will report orally, analysing in detail the
investment performance of the four companies’ individual portfolios of
the Pension Fund. The new managers were appointed on 11 July 2003 and
so full year investment performance figures, at the individual management
level, are not available this year. However, Mr Berrie will report briefly
on the investment performance of each of the four managers for the nine
months ended 30 June 2004 as follows:
- Alliance
Bernstein
- Baillie Gifford
- Legal and
General
- UBS Global
Asset Management
The
Committee is RECOMMENDED to receive the report and to consider any
further action arising on it.
(Information
Exempt in that it relates to the financial or business affairs of
any particular person (other than the authority).)
8.E Overview
and Outlook for Investment Markets
10.55.
Report
(PF8E) (download as .doc file)
of the Independent Financial Adviser.
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.E
UBS Global Asset Management
11.10 (1) The
Independent Financial Adviser will report orally on the performance
and strategy of UBS Global Asset Management drawing on the tables
at items 5 and 8E.
(2) The
representatives (Mr K Barker and Mr J Pickard) 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 30 June 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 30
June 2004.
At
the end of the presentation, members are invited to question and comment,
the Fund Managers to respond, and finally:-
(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.E 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
5 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 30 June 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 30
June 2004.
At
the end of the presentation, members are invited to question and comment,
the Fund Managers to respond, and finally:-
(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.E 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 30 June 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.E Summary
by the Independent Financial Adviser
12.10 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).)
ITEMS FOLLOWING
THE RE-ADMISSION OF THE PRESS AND PUBLIC
13. Draft Annual Report
and Accounts 2003/04
12.15 The
draft Annual Report and Accounts for 2003/04 (PF13) (download
as .doc file) shows the final accounts for the Pension Fund
for the year ended 31 March 2004 and provides details on how the Fund
operates, including sections on membership and investments. It also
incorporates the Statement of Investment Principles, which has been
updated in the light of changes that have taken place during the year.
These changes have been highlighted by being shaded in grey.
The
Committee is RECOMMENDED to receive the draft report and accounts
for 2003/04 and to agree the revised Statement of Investment Principles.
- Pension Fund Investment
and Administration Expenses Out-Turn Figures for the year ended 31 March
2004
12.30 Report
(PF14) of
the Head of Finance
The
report reviews the actual costs against the budget submitted for both
Investment and Administration for 2003/04.
The
Committee is RECOMMENDED to receive the report and note the outturn
position.
- Local Government Pension
Scheme Regulations
12.40.
Report (PF15) of the Head of
Finance
The
report considers whether a member, who left local government service
between 31 March 1974 and 1 January 1980, with less than 5 years’
membership, had a refund of contributions, and has subsequently begun
another local government employment in which s/he is an active member,
can, within 6 months or longer (with the approval of the Authority
which made the refund), repay the refund and count this period of
service in the new employment.
The
Committee is ASKED to decide whether it wishes to extend the 6-month
period for repayment and whether cases should be referred to this
Committee for decision.
16. Funding Strategy
Statement
12.50 Report
(PF16) of
the Head of Finance
The
report updates members on the workshop held on 14 July 2004 and highlights
the key issues identified and the proposed approach to them.
The
Committee is RECOMMENDED to note the feedback from the workshop, endorse
the next steps and offer any comments on the draft Funding Strategy
Statement that it wishes to make at this time.
17. Early Retirement
Costs
12.55 The
Head of Finance reports that following the appointment of Hewitt Bacon
and Woodrow as the new Actuaries to the Pension Fund, officers sought
their advice in respect of the continued appropriateness of the current
calculation of the hidden costs of early retirement. The Actuaries
reported back informally to the Employers’ Meeting on 9 February 2004.
At that stage they were reporting a likely increase in employers’
costs of between 30 and 40%, with an implementation date of 1 April
2005.
The
hidden costs of early retirement arise from a number of factors. An
obvious factor is that the Fund is paying out pension for a number
of years before it expected to do so, and therefore for which no contributions
will be collected. Other factors are:
- the loss of the
employers’ contribution, which in part was contributing to past service
deficits,
- the loss of assumed
investment returns on the assumed employee and employer contributions,
- loss of assumed
investment returns on lump sums paid early,
- and in all cases
where the pension is not reduced, then there is the cost of paying the
full pension through the remaining life of the pensioner.
The
Pension Fund amended its policy in 1998, following an Audit Commission
report on the hidden costs of early retirement, and having taken advice
from the then Actuary, Watson Wyatt. Watson Wyatt based their advice
on factors produced by the Government Actuary Department. Hewitt Bacon
and Woodrow have used a model developed by the Association of Consulting
Actuaries. This model is consistent with the assumptions Hewitt Bacon
and Woodrow will incorporate into their work on the 2004 Fund Valuation.
Hewitt
Bacon and Woodrow have now submitted their final report on this issue.
They have found that the results produced by the current model are
inconsistent with results they themselves have produced. The differences
reflect changes in current market conditions, and new assumptions,
particularly in relation to the expected life of existing pensioners.
Hewitt Bacon and Woodrow have stated that the current factors used
to determine the hidden costs of early retirement, need to increase
by 35%. Officers have accepted this advice, and written to all employers
accordingly, alerting them to this increase, to be introduced from
1 April 2005, allowing for the planning timescales associated with
agreeing early retirements. Officers will monitor the number of cases
being put forward between now and 1 April to ensure there is no sudden
rush of requests to beat the increased costs. Hewitt Bacon and Woodrow
will allow for this decision in finalising the 2004 Valuation, so
reducing the pressure on the employers’ contribution rate.
The
Committee is RECOMMENDED to note the report and endorse the officers’
action.
18. Socially Responsible
Investment and Corporate Governance Issues
13.00 The
Head of Finance will report orally.
The Committee
is RECOMMENDED to note the report.
19. Annual Forum
13.05 The
Head of Finance will report orally on any issues arising from the
last Annual Forum or relevant to the next Forum due to be held on
30 November 2004 at 10.00 am.
The
Committee is RECOMMENDED to note the report.
- Dates of the Committee
in 2005/06
13.10 The
dates for the meetings of the Committee in 2005/06 are:
27
May 2005 )
26 August 2005 ) all
starting at 10.00 am at County Hall.
25 November
2005 )
24 February
2006 )
The
Committee is RECOMMENDED to note the dates.
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