|
Pension Committee |
|
|
Date of meeting: |
22 June 2021 |
|
By: |
Chief Financial Officer |
|
Title: |
East Sussex Pension Fund (ESPF) quarterly budget report |
|
Purpose:
|
This report provides the 2020/21 Financial Outturn report |
RECOMMENDATION
The Committee is recommended to:
1) note the 2020/21 financial outturn position for the East Sussex Pension Fund
1. Background
1.1 Under the Local Government Pension Scheme (LGPS) Regulations, East Sussex County Council is required to maintain a pension fund, known as East Sussex Pension Fund (ESPF or the Fund), for its employees and other scheme employers.
1.2 The business plan and budget sets out the direction of travel, objectives and targets to be achieved in the management of the Fund, and for the Council to be able to perform its role as the administering authority in a structured way. The Pension Committee is charged with meeting the duties of the Council in respect of the Pension Fund.
1.3 As reported at the last meeting, the budget estimates do not incorporate any provision for investment fees earned by the alternative fund managers since these are deducted at source by asset managers.
2. Supporting information
2020/21 Investment and Administration Expenses Outturn Report
2.2 The increase in budget requirements for the year was significantly increased due to the insourcing of Pensions Administration which included one off costs for the dissolution from the Orbis partnership and a better understand of ongoing costs as the funding costs became more transparent from the project increasing projections by £1m. In addition, a number of Investments were moved from Fund Managers who deducted fees from the asset valuation into new Fund Managers who invoiced fees directly to the Fund increasing the reportable costs through budget monitoring by £1m.
2.3 The forecast outturn for 2020/21 is £5.896m, against the revised forecast position of £5.895m, an increase of £0.001m. The 2020/21 projected outturn against line items is shown at Table 3 below.
2.4 The overspend, relates to increased investment fees invoiced directly to the fund, offset by a reduction in the costs associated with Pensions Administration. Main movements to the forecast are set out in Table 1 below and movements detailed in Paragraphs 2.6 to 2.9.
Table 1
|
|
2020/21 Forecast Outturn, March Committee |
2020/21 Outturn |
Variance from last reported position |
|
Staffing - Para 2.6 |
435 |
486 |
51 |
|
Investment Management Fees - Para 2.7 |
2,167 |
2,365 |
198 |
|
Legal costs - Para 2.8 |
187 |
285 |
98 |
|
Pensions Administration - Para 2.9 |
2,069 |
1,806 |
(389) |
|
Other line items – minor variations |
1,037 |
1,054 |
43 |
|
Total |
5,895 |
5,996 |
1 |
2.5 Since the last report the Fund has been able to work to provide total figures on the staffing costs incurred for the new structure. This has resulted in an increase of £51,000 from the last report, mainly due to agency staff costs.
2.6 The investment management fees has been increased due to the availability of asset values as at the 31 March 2021 upon which the calculations are based. The overspend on this item has increased by £198,000.
2.8 Arrangements around the Pension Administration Team (PAT) being brought back under sovereign control have started to clarify costs, which were previously incurred by the Surrey Shared Service within Orbis. There has been some movement on elements of the final cost for the administration and this will be £1.680m, which is £0.389m less than reported at the last meeting. Table 2 provides a breakdown of the Pension admin costs.
Table 2 Pensions Administration Forecast 2020/21
|
Line item |
2020/21 Forecast Outturn, March Committee £000 |
2020/21 Outturn £000 |
Movement from previous forecast |
One off or ongoing details |
|
Orbis Business Operations Support services |
1,077 |
894 |
(183) |
Last year of Orbis contract, 2021/22 budget replaces this with ongoing staffing and software licence costs |
|
PAT staffing, post TUPE |
360 |
231 |
(129) |
Direct Staff costs December 2020 to March 2021 as a result of TUPE |
|
One off Data migration costs |
75 |
95 |
20 |
One off costs, ESCC share to replicate Altair system |
|
Systems and licences |
323 |
282 |
(41) |
Altair BAU support, Employer website, i-Connect |
|
IT equipment |
77 |
78 |
1 |
One off IT associated costs for data migration including new servers and equipment for staff |
|
Consultancy and project costs |
150 |
90 |
(60) |
Mostly one off projects, including GMP reconciliation, Mortality screening, licence for data access, address tracing |
|
Other general expenditure |
7 |
10 |
3 |
|
|
Pensions Administration total forecast line |
2,069 |
1,680 |
(389) |
|
Table 3 2020/21 Outturn Report
|
2019/20 Outturn |
Item |
2020/21 Budget |
2020/21 Forecast Outturn March Committee |
2020/21 Outturn |
Variance to the last reported Forecast |
|
£000 |
£000 |
£000 |
£000 |
£000 |
|
|
|
Pension Fund Oversight and Governance |
|
|
|
|
|
345 |
Actuarial Fund Work |
250 |
309 |
341 |
32 |
|
97 |
Actuarial Employer Work |
150 |
90 |
87 |
(3) |
|
(97) |
Employer reimbursement |
(150) |
(76) |
(64) |
12 |
|
88 |
Good Governance Program |
47 |
25 |
25 |
- |
|
75 |
Data Improvement Program |
100 |
40 |
40 |
- |
|
8 |
Independent Pension Board Chair |
5 |
12 |
11 |
(1) |
|
307 |
Fund Officers* |
385 |
435 |
486 |
51 |
|
|
Recruitment Costs |
- |
50 |
53 |
3 |
|
30 |
External Audit – Grant Thornton |
26 |
30 |
40 |
10 |
|
- |
Democratic Services Support |
- |
22 |
28 |
6 |
|
17 |
Internal Audit* |
19 |
37 |
37 |
- |
|
119 |
Legal Fees |
115 |
187 |
285 |
98 |
|
11 |
Subscriptions and other Expenses |
70 |
96 |
81 |
(15) |
|
1,000 |
Sub Total |
1,017 |
1,257 |
1,450 |
193 |
|
|
Investment activities |
|
|
|
|
|
114 |
Investment Consultant |
120 |
182 |
200 |
18 |
|
- |
PIRC ESG Report |
11 |
11 |
12 |
1 |
|
- |
EIRIS Carbon Report |
24 |
25 |
25 |
- |
|
11 |
Independent Advisor Basic |
12 |
12 |
12 |
- |
|
5 |
Independent Advisor Project work |
8 |
16 |
9 |
(7) |
|
54 |
Custodian |
150 |
67 |
61 |
(6) |
|
3,003 |
Investment Manager Fee Invoices |
1,200 |
2,167 |
2,365 |
198 |
|
3,187 |
Sub Total |
1,525 |
2,480 |
2,684 |
204 |
|
|
ACCESS |
|
|
|
|
|
67 |
ACCESS Support Unit |
98 |
88 |
82 |
(6) |
|
(3) |
Fund Officer Time Rebates |
(20) |
(2) |
(2) |
- |
|
64 |
Sub Total |
78 |
86 |
80 |
(6) |
|
|
Pension Board/Committee Training: |
|
|
|
|
|
- |
Training Costs |
30 |
3 |
2 |
(1) |
|
- |
Sub Total |
30 |
3 |
2 |
(1) |
|
1,106 |
Pension Administration: |
1,080 |
2,069 |
1,680 |
(389) |
|
5,357 |
3,730 |
5,895 |
5,896 |
1 |
3. Investment Management Fees – Cost Transparency
3.1 The information in table 4 below sets out the investment management fees based on the Scheme Advisory Board’s cost transparency initiative (CTI) templates. These are completed annually by the investment management firms. These are not however all completed at the same date and include additional costs that we do not include above or are not relevant for accounting purposes, so these costs cannot be compared to the figures above or in the accounts. This has been provided to allow the board to get a better understanding of all the costs the Fund likely incurs during a year.
Table 4 CTI Templated cost figures for East Sussex Pension Fund (figures adjusted to represent a full 12 month period).
|
PORTFOLIO TRANSACTION COSTS |
Total |
|
Total transaction costs |
5,968 |
|
ONGOING CHARGES |
|
|
Fund and investment management |
15,546 |
|
Invoiced fees (incl. VAT) |
1,450 |
|
Fees and charges paid through NAV |
10,802 |
|
Investment advisers fees paid through NAV |
0 |
|
Payments for research (RPA) through NAV |
0 |
|
Less: management fee rebates |
(426) |
|
Indirect fees and charges |
3,720 |
|
Administration |
1,103 |
|
Investment administration |
15 |
|
Custody / depositary fees |
110 |
|
Payments for research (RPA) |
21 |
|
Collateral management fees |
0 |
|
Facility fees e.g. prime brokerage |
1 |
|
Other administration charges |
956 |
|
Governance, regulation and compliance |
91 |
|
Audit costs |
30 |
|
Legal and professional fees |
31 |
|
Engagement and voting fees |
0 |
|
Performance measurement |
0 |
|
Risk monitoring |
0 |
|
Tax advice and structuring costs |
2 |
|
Other governance and compliance charges |
28 |
|
Distribution, comms and client service |
1 |
|
Distribution costs |
1 |
|
Communication material |
0 |
|
Other distribution charges |
0 |
|
Total ongoing charges figure |
16,741 |
|
INCIDENTAL COSTS |
|
|
Performance fees invoiced |
0 |
|
Performance fees paid through NAV |
0 |
|
Carried interest charged |
2,305 |
|
Total incidental costs |
2,305 |
|
Total lending and borrowing costs |
650 |
|
Total property expenses |
318 |
|
Total one-off costs |
156 |
|
TOTAL COSTS |
26,138 |
3.2 The Majority of the costs are directly linked to the cost of the investment management fees £15.546m 59.5% of total costs. The next largest single cost are transaction fees at £5.968m 22.8%.
4. Conclusion and reasons for recommendation
4.1 The Committee is recommended to note the Final 2020/21 outturn position; and the Investment management costs based on the CTI template.
|
Chief Finance Officer |
||
|
|
|
|
|
Contact Officer: |
Russell Wood, Pensions Manager: Investments and Accounting |
|
|
Tel. No. |
01273 337177 |
|
|
Email: |
Russell.Wood@eastsussex.gov.uk |
|