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Pension Board |
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Date of meeting: |
08 February 2024 |
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By: |
Chief Finance Officer |
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Title: |
Business plan, 2024/25 Budget and Quarterly budget report |
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Purpose:
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This report provides an update on the 2023/24 Forecast Financial Outturn and sets out the business plan and budget for 2024/25 |
RECOMMENDATION
The Board is recommended to:
1. note the 2023/24 Q3 forecast financial outturn position
2. note the Business Plan and Budget for 2024/25 in Appendix 1
1. Background
1.1 The East Sussex Pension Fund’s (the Fund) business plan and budget sets out the direction of travel, objectives and targets to be achieved in the financial management for the administering authority to carry out its statutory duties in a structured way. The Pension Committee is charged with meeting the duties of the Council as administering authority in respect of the Fund.
1.2
At its meeting on the
22 February 2023 the Pension Committee agreed a budget of
£4.463m to support the business plan for 2023/24. The budget
estimates do not incorporate any provision for investment fees
earned by the investment managers since there is limited scope for
the Fund influence these costs. This is due to the nature of the
fees being based on factors outside the control of the Fund such as
market movements along with other decisions affecting these such as
strategic asset allocation changes.
2. Supporting information
2023/24 Q3 Forecast Outturn as at 31 December 2023
2.2 The forecast outturn at the third quarter of 2023/24 is £4.379m, this is a slight increase from the last projected position however reflects an underspend to the approved budget of £0.084m. The 2023/24 outturn against budget line items is shown in the table below.
2.3 The change in projected costs mostly relates to a clarification around staffing costs provided by East Sussex County Council along with an increase expected on external audit and operational support services costs. This is being offset slightly by savings on the Fund’s administration IT systems costs where savings have been negotiated by paying costs for licenses upfront along with lower than budgeted indexation charges; lower projected legal advisory costs and lower governance related consultancy costs. Detail on these have been set out in paragraph 2.4 to 2.7.
2023/24 Outturn Report
|
2022/23 Outturn |
Item |
2023/24 Budget |
2023/24 Actual Outturn Q3 |
Previous Outturn |
Current Forecast Outturn |
Variance to previous Forecast |
|
£000 |
£000 |
£000 |
£'000 |
£'000 |
£000 |
|
|
|
Pension Fund Staff Costs |
|
|
|
|
|
|
1,482 |
Fund Officers |
2,023 |
1,351 |
1,834 |
1,968 |
(134) |
|
1,482 |
Sub Total |
2,023 |
1,351 |
1,834 |
1,968 |
(134) |
|
|
Oversight and Governance Expenses |
|
|
|
|
|
|
318 |
Investment Advice |
392 |
291 |
408 |
394 |
14 |
|
125 |
Actuarial Fund Work |
87 |
14 |
59 |
51 |
8 |
|
69 |
Actuarial Employer Work |
81 |
72 |
79 |
87 |
(8) |
|
(76) |
Employer reimbursement |
(81) |
(19) |
(79) |
(87) |
8 |
|
56 |
Legal Fees |
69 |
27 |
74 |
46 |
28 |
|
48 |
Governance consultancy costs |
70 |
29 |
68 |
48 |
20 |
|
96 |
Audit |
71 |
(49) |
71 |
123 |
(52) |
|
636 |
Sub Total |
689 |
365 |
680 |
662 |
18 |
|
|
Investment Expenses |
|
|
|
|
|
|
101 |
Custodian |
97 |
(46) |
97 |
98 |
(1) |
|
101 |
Sub Total |
97 |
(46) |
97 |
98 |
(1) |
|
|
Administration Expenses |
|
|
|
|
|
|
438 |
IT Systems licenses costs and Hardware |
572 |
372 |
568 |
492 |
76 |
|
256 |
Overheads |
475 |
310 |
475 |
448 |
27 |
|
267 |
Admin operational support services |
279 |
147 |
279 |
309 |
(30) |
|
13 |
Improvement projects |
100 |
45 |
100 |
99 |
1 |
|
235 |
Consultancy |
45 |
35 |
81 |
80 |
1 |
|
7 |
Communications |
47 |
7 |
48 |
68 |
(20) |
|
13 |
Training |
20 |
15 |
27 |
28 |
(1) |
|
87 |
Subscriptions |
75 |
62 |
78 |
85 |
(7) |
|
48 |
Other Expenses |
60 |
2 |
60 |
60 |
- |
|
1,364 |
Sub Total |
1,673 |
995 |
1,716 |
1,670 |
47 |
|
|
Income |
|
|
|
|
|
|
(15) |
Other Income |
(19) |
(11) |
(19) |
(19) |
- |
|
(15) |
Sub Total |
(19) |
(11) |
(19) |
(19) |
- |
|
3,568 |
Total |
4,463 |
2,653 |
4,309 |
4,379 |
(70) |
2.4 The Fund has been working with East Sussex County Council to get better forecasts around the staffing costs expected. There have been several clarifications around vacancies taken into account in this forecast which were not included in the last forecast. In addition to this there was no allowance included for a pay award in the previous forecast model, which have now been agreed and paid out. This has resulted in an increase to the last reported position, but remains below budget.
2.5 The outturn for the System Services and Licenses has also decreased against the last quarter forecast. The drivers behind this are that the Fund budgeted an allowance for indexation costs. However, these inflationary costs have not materialised this year and the forecast has been reduced to reflect actual costs being incurred for service. Also negotiation on the licences on one of the systems has resulted in a lower than projected costs. Together this has resulted in a £76k reduction in costs.
2.6 The outturn for the Admin Operational Support Services has increased against the previous outturn by £30,000, this is due to an increase in the volumes of calls received by the Helpdesk provided by Surrey County Council. These costs are based on the volumes of calls received. We are in the process of bringing the Helpdesk in house and so should have a better understanding of costs going forward.
2.7 The external audit forecast for the rest of the year includes the audit fee of 2023/24 which was agreed by the PSAA which is now set at £90,337. This increase is being introduced to ensure it reflects current audit requirements and to set fees on a consistent and equitable basis at the start of the new contract period. This means that the scale fee for each opted-in body better reflects the audit work required under the current Code of Audit Practice published by the National Audit Office and the regulatory expectations of the Financial Reporting Council. Updating the fee scale in this way will have the benefit of making expected fees clearer for opted-in bodies much earlier in the audit cycle and reducing the volume of fee variations. This along with finalised cost for the 2021/22 audit have resulted in a £52,000 increase on the previously reported position.
2.7
3. 2024/25 Business Plan and Budget
3.1
The Business Plan and
Budget is set out in Appendix 1.
3.2 Total budget proposed is £4.561m (£4.463m 2023/24) to support the Business Plan activities and administration of the Fund.
3.3 The budget for 2024/25 is an increase of £0.098m on the 2023/24 budget. There has been a full review of the costs for 2024/25 and the budget for individual lines have changed. The overall result was a budget which was slightly above the previous years. The main movement has been from admin operational support as the Helpdesk budget has been removed from here and added to Staff Costs a movement of £0.190m. This is to reflect that the Helpdesk will be provided in house next year however the exact cost of the staff for this is unclear so the budget has been left at the same level but moved to a more appropriate heading. A further reduction of this line has been the removal of most CHF Docmail costs which are now coming through the recharge from East Sussex from the digital postal hub and reflected in the overheads line on the budget.
3.4 There has been a change to the methodology around calculating the budget for staffing costs, as the Fund is close to being fully staffed, instead of budgeting as fully staffed the Fund has left vacancies which are known will be vacant at the beginning of the year with an appropriate start date included. Along with this the Fund is budgeting a 3% pay award and these changes have resulted in the staff costs increasing by £0.223m.
3.5 There is a reduction expected on IT Systems with one off payments incurred in 2023/24 for new system functionality removed, along with specific inflation related allowance £0.043m.
3.6 There have been some smaller reductions to other lines to reflect the current level or work going through these items such as legal advice.
3.7 The other areas that have seen the larger increases in budget are external and internal audit which has been set based on the revised PSAA costs of 2023/24 and chargeable rate this is resulting in an increase to the previous year of £0.044m. Along with an increase to the investment advice line as this the main cost will be going out for procurement this year we have added some prudence on this of £0.050m on a potential new supplier fee model.
4.
Conclusion and
reasons for recommendation
4.1 The Board is recommended to note the Q3 2023/24 forecast position and the Business Plan and Budget for 2024/25.
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Chief Finance Officer |
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Contact Officer: |
Russell Wood, Pensions Manager: Investments and Accounting |
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Email: |
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