ITEM PF16 PENSION FUND COMMITTEE – 23 FEBRUARY 2007OXFORDSHIRE PENSION FUND BUSINESS PLAN AND BUDGET FOR 2007/08Report by the Head of Finance & Procurement Introduction1. 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 2007/08 and also includes a member training programme and an investment management/scheme administration budget. Review of the 2006/07 Business Plan3. All the investment tasks set out in the 2006/07 Business Plan were successfully carried out. 4. The delay in the issuing of LGPS regulations to take account of the changes to the tax regime had a huge impact on the work of the administration team. This, coupled with the additional work arising from the move to shared services caused priorities to be reviewed throughout the year. As a result business process re-engineering is on-going as are the resulting changes to both the introduction of task management and the resulting changes to management information. 5. Scheme employers and members have been kept informed of the changes, albeit on an altered timescale to that set out in the communications policy, simply to take account of the way in which the regulations were issued and subsequent clarification information was received. 6. Interface data from scheme employers was put on hold. Oxfordshire Pension Fund 2007/08 Business Plan7. Annex 1 (download as .doc file) sets out a recommended business plan for the 2007/08 financial year. The plan lists the investment and pension tasks, which should be carried out during 2007/08, and the target date when these should be achieved. Oxfordshire Pension Fund 2007/08 Budget8. Annex 2 (download as .xls file) sets out the Fund’s investment management and scheme administration budget for 2007/08 and compares it with the budget set for 2006/07. A report comparing the investment management and scheme administration outturn figures against the budget for 2006/07 will be produced for the August 2007 Committee meeting. Investment Budget 9. The increases in the Fund Management and Global Custody Fee budgets reflect the fact that fees are based on the value of assets being managed and also in the case of custody, the level of trading activity. 10. One large increase in the budget is the increase in the external consultancy fees. The business plan includes two major tasks, which are a comprehensive review of the Pension Fund's investment management arrangements (agenda item PF14E) and the review of the Global Custodian. Both these tasks will require external specialist help and advice. 11. The contract with the Pension Fund's Global Custodian, ABN Amro Mellon,
terminates on 31 March 2008. Officers will review the existing contract
arrangements and report their findings, together with a recommendation,
to the Pension Fund Committee in November 2007. If necessary, and only
after taking appropriate advice from the Council's Procurement Manager,
the Pension Fund will go out to tender for this service. Another local
authority pension fund has recently undertaken a tender exercise for the
appointment of a global custodian and paid £40,000 for a consultant.
12. Taking into account the two major tasks explained in paragraphs 9 to 11, the consultancy budget has been increased from £25,000 to £90,000 in 2007/08 but it is anticipated that the budget will be substantially lower in 2008/09. 13. The above inflation increase in the Financial Services Recharge is due to the Investment Management Section being charged Office Accommodation and ICT Support for the first time. These costs, which amount to £6,500, were previously charged to the Pensions Administration Section. However, now that the Pensions Administration Section has moved into shared services it has been decided to split these costs between the two sections. 14. The income generated from stock lending is projected to increase from £50,000 to £80,000. The actual level of stock lending has increased over the past twelve months, which is generating more fee income for the Pension Fund. A review of the Fund’s stock lending arrangements is contained within the 2007/08 Business Plan. Administration Budget 15. The main increases included within the financial service recharge are staffing costs amounting to £90,000, which include £70,000 for the two new team leader posts, which this Committee agreed at its November meeting; the cost of increments that apply to the majority of the team and estimated mid scale salary points for the posts currently being recruited. There were some reductions in charges amounting to £6,500, as detailed in paragraph 13. Additionally, some charges were moved to “other” to better reflect the way in which charges are made. 16. A sum of £5,000 has been reallocated from the postage budget to the printing and stationery budget to take account of the changed practices whereby actual costs rather than proportional costs will be charged to the pension fund. 17. Software support and licensing charges have been increased by £4,000 to allow for further development of the system in the coming year. 18. The work and therefore the costs of actuarial services rises sharply in a valuation year. This year also sees the introduction of the new look LGPS. It is difficult to gauge how much involvement the actuaries will have, but I have included a significant increase to £35,000 for this. 19. The most significant item included under the heading of other is that of subscriptions amounting to £22,000. The three main subscriptions are payable to National Association of Pension Funds (£3,500), The Local Government Employers (£7,500) and Research Recommendations Electronic Voting (£9,500). The last item is an investment facility but is charged to administration costs in accordance with SF3 guidance. These items were shown as financial services recharges in 2006/2007. Member Training Budget and Programme 20. 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 2006/07 budget will be underspent it is recommended that the 2007/08 budget be maintained at the same level. 21. There are a number of external organisations that provide member training seminars and workshops. Further details of known courses being run during 2007/08 are set out in Annex 3 (download as .doc file). Officers will keep members informed of these events and any others throughout the year. 22. In addition to external training the programme of internal training presentations for members, which will immediately precede the main quarterly Pension Fund Committee meetings, will continue. 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. 23. Throughout the year members will also be provided with topical articles and newspaper cuttings, which officers consider to be of interest. RECOMMENDATIONS24. The Committee is RECOMMENDED to: (a) approve the Oxfordshire Pension Fund Business Plan, as set out in Annex 1, for 2007/08; (b) approve the Oxfordshire Pension Fund’s Investment Management and Scheme Administration Budget, as set out in Annex 2, for 2007/08. SUE SCANE Background Papers: Nil Contact Officer: Tony Wheeler, Pension Fund Investments Manager Tel (01865) 815287 February 2007
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