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Agenda item

Business Plan 2018/19 to 2020/21

To provide Committee Members with the Business Plan for approval.


1.    That the Committee members noted the progress made towards the Fund’s Business Plan during 2017/18


2.    That the Committee approved the Business Plan in Appendix 2 relating to the period 2018/19 to 2020/21




The Chairman introduced the main item on the agenda to the Committee and passed over to Mr Latham. Mr Latham asked the Committee for approval of the Business Plan for the upcoming 3 years and directed the room to page 24 of the papers where the bullet points emphasised the main purposes of the Business Plan.


The key points in relation to the Business Plan were;


  • Page 19-21 showed the progress versus the 2017/18 business plan.  The vast majority was on target or complete.
  • Page 25 showed the updated structure for the pool with the new WPP.
  • There is a lot of business as usual tasks on the Business Plan which shows the amount of work needed to run the Fund; page 30 onwards outlined the 9 different areas of work and it was noted the Employer Liaison team tasks were a new addition.
  • The bottom of page 32 highlighted the achievements over the past 3 years which were improvements on governance, risk management and the governance arrangements for the WPP.
  • The main issues that would be faced over the next 3 years were defined on page 33 where pooling will dominate the Business Plan but there could also be implications from the outcome of the cost management process (probably from 2020).
  • Page 35 shows the cost budget for 2018/19 and the 2017/18 budget versus estimate.
  • In terms of governance of the Fund (page 41) key tasks included the implementation of the new GDPR data protection requirements and recognised the necessity for more training needs for the Committee as per the recent training needs analysis.


Mr Latham continued by stating that the section on Funding and Investment risks (page 47) showed that risks will always be high since the Fund is not 100% funded or able to hedge out all of the risks. The flightpath is the “plan” put in place in order for the Fund to move towards full funding and also minimise the risk of deterioration.  An interim actuarial review will be undertaken in 2018 to help with budgeting for employers and alongside this is the finalisation of the employer risk management framework.


Other risks take account of the administration and member communication. The administration involves training and supplementing that with the outsourcing of work to external parties to clear the backlogs etc. The communication with members is now more and more through the Member Self Service (MSS).


The upcoming tasks for the administration team (including communications) are displayed on page 52 where most of the items are already familiar as ongoing work; however these tasks would take time to implement. These tasks are as follows;


  1. Improvement on the quality of member data which is critical for the Fund through various initiatives e.g. GMP reconciliation (which has been outsourced to Equiniti) and the aggregation project (some assistance from Mercer).
  2. The data improvement plan (which would be completed on the back of the Pensions Regulator guidance).
  3. The implementation of iConnect for the Fund for a wider number of employers


Mrs Fielder then discussed the finances in delivering the Business Plan.  Page 34 showed the three year cashflow 2018 to 2021 on an annual basis and forecast for 2017/18.  The intention was that this assists with treasury management.


She added that the figures that are estimated for Lump Sums, Transfers-In and Transfers-Out are calculated based on historic figures. The pension benefits and contributions forecasted over 3 years is easier to measure because of the Actuarial Valuation and the certified contributions. Mrs Fielder confirmed that the Fund will get more clarification after the funding review for estimations regarding the figures over 2018- 2021.


The key details that Mrs Fielder explained in relation to the cashflow projection for 2018/19 and the budget for 2018/19 were that;


  • The uncertainties are around the in-house investments on drawdowns for private markets.
  • Drawdowns been much higher than the income that the Fund had received due to the market conditions.
  • Currently the Fund is expected to be cashflow positive (by c£10m) in 2018/19 but this could move depending on a number of factors.  More consideration will be given after the 2018 interim review.
  • The main change in terms of the cost budget is the fund manager fees, the budget in 2017/18 was roughly £11.9 million and estimations of the actuals are around £15.2 million. The main reason for the difference was that the value of the Fund has increased more than expected.
  • There has been an increase in the fees, mainly due to the additional work that the Fund has completed e.g.  Equity protection and assisting the Fund with private markets.
  • There are contingencies for the Trivial Commutation project that may or may not be outsourced, as well as the aggregation.
  • The pooling budget covers the cost of any external advice for the pool going forward, but any internal works i.e. meetings, do not include salary costs separately.


Cllr Bateman queried the investment fees and why the fund manager fees have increased. Mrs Fielder stated that there has been an increase in the value of the Fund more than expected. The future budget analysed all of the asset classes expenses based on what the Fund paid for all of those underlying assets. This allowed for the average basis points expenses.  If the value of the Fund goes up more than expected, it would be higher than that and  this makes it  difficult to estimate accurately unless markets are very stable.   


Cllr Bateman asked Mrs Fielder to explain the last paragraph on page 35 in regards to the Employer Liaison Team (ELT). Mrs Fielder clarified that employer contribution rates are in the Actuarial Valuation, whereby administration costs for ELT services are to be paid by an additional amount which would be incorporated into their contribution rate at the next valuation.


Cllr Bateman questioned Mrs Fielder on page 26 regarding what the difference in costs is between the 7 core external fund managers and the 45 non-core external managers. Mrs Fielder stated that the costs are split out for each manager. The core managers are investments such as listed in equities, fixed income and the non-core managers are investments such as private market funds. The investment managers used are shown in the JLT report to the Committee.


Mr Hibbert asked whether the Fund needs to set any money aside in the budget for 2018/19 for further development in regards to the MSS. Mrs Burnham stated that historical MSS costs were the additional implementation costs for the new software and so it did not recur in future years.


In terms of the representation of risk, Mr Hibbert asked whether the Fund is content in areas which are more than one colour between where we are and where we want to be at e.g. amber and yellow. An example is shown on page 38 where it described the number of insufficient staff with a current risk status as red and a target of green. On page 39 the employers current staff risk status is red and also moves to a green target. Therefore Mr Hibbert queried whether the Fund is comfortable with level of detail in the Further Actions on these pages where the risk status would need to make a significant jump from red to green.


Mr Everett agreed and wondered whether employers should be in amber rather than red in the key risks.


Mr Latham noted that the expected time that is shown should also be considered in this context and noted that the current risk scores are a subjective judgement in some cases.  He welcomed any comments that the Committee had and would reflect on them for the next iteration of the Risk Register


Mrs Burnham noted that Flintshire County Council had only recently implemented iConnect, therefore this is why the Employer risk colour is higher than what perhaps might be deemed appropriate. Mr Latham agreed with Mrs Burnham that it is early days and suggested that this would be put this on the agenda every Pensions Advisory Panel (PAP) to update for any changes.


Mr Hibbert noted that a member who was a teaching assistant and had four different jobs received statements for four different pensions; therefore Mr Hibbert asked whether the aggregation project would deal with this sort of issue. Mrs Burnham responded to Mr Hibbert by confirming that this would be the case.


The Chairman thanked the officers on the success on delivering the tasks in the previous business plan. Particularly in paragraph 1.03 of the covering report it referred to the 1st Tier rating for the Stewardship code where he understood that this is not held by many other LGPS funds. The Chairman also thanked the administration team for the additional work at the end of the recent year i.e. the rolling out of iConnect ahead of schedule as outlined in paragraph 1.04.





1.    That the Committee members noted the progress made towards the Fund’s Business Plan during 2017/18


2.    That the Committee approved the Business Plan in Appendix 2 relating to the period 2018/19 to 2020/21


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