Meeting documents

Pension Fund Committee
Friday, 21 February 2003

PF210203-16

Return to Agenda

ITEM PF16

PENSIONS FUND COMMITTEE – 21 FEBRUARY 2003

OXFORDSHIRE PENSION FUND BUSINESS PLAN

Report by Director for Business Support & County Treasurer


Introduction

  1. In May 2002 the 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. Oxfordshire Pension Fund 2003/04 Business Plan

  2. Annex 1 (download as .doc file) sets out a recommended business plan for the 2003/04 financial year. The plan lists the investment and pension tasks, which should be carried out during 2003/04, and the target dates when these should be achieved. This is the first occasion that a business plan has been drawn up for the Pension Fund and it is hoped to develop this in future years, incorporating performance indicators, a mission statement and reviewing the success of the previous years plans.

  3. The business plan shows that there are going to be substantial changes during 2003/04 both in the Pension Fund’s administration and investment management arrangements.

    4. Oxfordshire Pension Fund 2003/04 Budget

  4. Annex 2 (download as .xls file) sets out the Fund’s investment management and scheme administration budget for 2003/04. The budget takes account of the new tasks listed in the business plan, including the new investment management structure, new custody arrangements, transition management costs and the transfer of the scheme administration from an outsourced to an in house function.

    5. Transition Management

  5. Significant costs can be incurred during a major pension fund restructuring exercise, such as the one being carried out by the Oxfordshire Fund. The WM Company conducted a survey that suggested the average cost incurred by a fund when changing managers was 2.7%. On a £500 million sized Fund, which is the approximate current value of the Oxfordshire Pension Fund, this equates to £13.5 million.

These costs include: -

    • Direct transaction costs such as commissions and taxes.

    • Indirect dealing costs such as market impact and bid/offer spreads

    • The Opportunity Cost arising from not being in the desired portfolio (at both an asset class and stock level).

  1. It is recommended that a transition manager be appointed to manage the transition process with the objective of minimising and monitoring the costs referred to in paragraph 5.

  2. The typical fee for a transition manager is 0.05% on transactions made but this cost can be justified when an efficiently carried out transition exercise can save between 1% to 2%.

    3. Member Training

  3. One important addition to the 2003/04 budget is a specific item for member training. The Review on Institutional Investment in the UK, better known as the Myners Review, recommended that trustees should receive more formal training "so as to be able to take decisions with the skill and care of someone familiar with the issues concerned"

  4. The importance of local authority member training has been recognised by a number of external bodies including the National Association of Pension Funds (NAPF) and the Local Government Pensions Committee (LGPC), which is a committee of the Employers’ Organisation for Local Government.

  5. During the current 2002/03 financial year the LGPC has been running a three day course for elected members, entitled LGPS Fundamentals, which has the support of the Local Government Pensions Division of the Office of the Deputy Prime Minister. This course not only covers investment but also other aspects of the Scheme, including benefits and fund administration. Members who attend all three sessions receive an attendance certificate signed on behalf of the Local Government Pensions Committee. The three days training is being recognised, as the minimum training required satisfying new legislation.

  6. The LGPC will be repeating this course between September and December 2003 and is also planning to run an elected members pension conference in September 2003. Members are encouraged to attend both these events.

  7. In addition to the external training courses officers will provide new members the opportunity of individual briefing/tuition sessions. Members have found these sessions useful in the past because they can be pitched at the appropriate level of the individual.

  8. The Business Plan sets out details of elected member-training courses being run during 2003/04. Other external courses are likely to be organised during the year and members will be notified of these as they arise. An elected member-training budget of £12,000 recognises the level of importance in developing member skills and knowledge.

    9. RECOMMENDATIONS

  9. The Committee is RECOMMENDED to:

          1. ask the officers to appoint a transition manager so as to minimise the costs and manage the risks during the Pension Fund’s restructuring exercise;

          2. approve the Oxfordshire Pension Fund Business Plan, as set out at Annex 1, for 2003/04; and

          3. approve the Oxfordshire Pension Fund’s Investment Management and Scheme Administration Budget, as set out at Annex 2, for 2003/04.

CHRIS GRAY
Director for Business Support & County Treasurer

Background papers: Nil

Contact Officer: Tony Wheeler, Directorate for Business Support, Tel (01865) 815287

January 2003.

Return to TOP