Agenda item

The purpose of this report is to present to Committee the 3 Year Service Plan and Budget for the period 1 April 2022 to 31 March 2025. 

The Service Director for Financial Control and Pensions introduced the report to the Committee. He said that a more difficult valuation process was expected this year with respect to the ongoing conflict between Russia and Ukraine.

He highlighted the following points from the Service Plan.

He explained that the operating circumstances have been challenging over the past two years during which, productivity and particularly the management of new developments and projects have remained challenged in respect of delivery times.

He stated that a review will take place of the wider operating model and structure to include member and employer services and separate support and development function.

He informed the Committee that they will develop a new digital service platform providing Customer services and digital records management.

He said that they will be implementing an action plan following a review of TPR’s Single Code of Practice, particularly in regard to cyber security.

He stated that the direction of travel of the Service Plan has been consistent for a number of years.

Charles Gerrish asked for confirmation that new offices will be available for the Fund at the River Suite, Keynsham.

The Service Director for Financial Control and Pensions replied that an arrangement is in place with the Council and that hopefully this will come to fruition by end of the year.

Shirley Marsh-Hughes said that she supported the proposals, but asked does the Plan go far enough.

The Service Director for Financial Control and Pensions replied that it was a question of what work the Fund can manage and to focus on our delivery. He added that investment in technology was also required across the Fund.

Richard Orton asked when the Committee will be able to meet in person.

The Service Director for Financial Control and Pensions replied that officers have tried to arrange in person meetings and have come close, but infection rates for Covid-19 are currently high. He added that this being the case it was felt best to revert to a meeting online as there are no hybrid facilities available at present.

The Chairman added that the Committee has taken its lead from Council and Cabinet who had also made the same decision this month to meet virtually. He said that he hoped that a hybrid solution would be in place soon.

Shirley Marsh-Hughes asked if the Pension Board has a role in this process to approve the Service Plan.

The Service Director for Financial Control and Pensions replied that elements of the Plan are discussed with them, but it was just a matter for the Committee to approve it.

Richard Orton referred to page 10 of the Service Plan where it states that ‘As at 31/12/21, Brunel manage £4.9 billion or 83% of the Fund’s assets’ and asked if that was to be the maximum and which assets do the Fund directly manage.

He also asked what the net savings figure was projected for in 2024 / 2025.

The Group Manager for Funding, Investment & Risk replied that she thought the savings were in the region of £3-4m, but would check and respond in writing.

Following the meeting it was confirmed that in the Business Case we were expected to break even in 2023/24 and by 2024/25 the annual net saving (net of Brunel costs and Transition costs) was c. £3.4m p.a., and cumulative saving of £5.1m (which relates to the £73m quoted in the Service Plan). 

The Group Manager for Funding, Investment & Risk added all Listed Market Assets are managed by Brunel whilst the Fund retains the Legacy Assets that are more in the private markets domain and these will wind down over the next 5 – 10 years. She added that the funds made available following wind down would be given to Brunel to invest in portfolios that we allocate to.

She added that they were in the process of selling down their Hedge Fund portfolio which will be completed within the next financial year and this again will be recycled into Brunel portfolios accounting for around another 5-6%.

Referring to the IFM / Core Infrastructure portfolio she said that they were currently looking at ways in which this can be progressed.

She said that it was the intention that all assets be managed by Brunel where possible, but it will take time with the bulk of the work having already been done.

The Pensions Manager stated that a number of key changes to the business operational model will be taken forward in order to support the drive to deliver a more efficient automated service. He gave the Committee an overview of the proposed operational model and top level structure concept.

Tier 1: Digital Services

·  I-Connect Processing

·  I-Connect Engagement Team

·  Member Contact Centre

Tier 2: Operations

·  Employer Services

·  Member Services

Tier 3: Support & Development

·  Technical & Compliance

·  Communications & Marketing

·  Transformation

The Governance & Risk Advisor said that the model had been developed over the last year and that officers felt that if Tier 1 can be put in place to the best of its ability then more time would be available to work on the other tiers.

The Pensions Manager stated that as part of the Admin Strategy 2022-25 implementation of the new operating model was scheduled for April 2023 following work in relation to the structure, job descriptions and career grading.

He added that there were three key areas to try to clear as part of this process.

• Complete I-Connect Roll out (March 2023)
• Implementation of Heywood Insights (September 2022)
• Implement Digital Office (March 2023)

Shirley Marsh-Hughes said that she hoped staff would see the benefit of the proposals as a positive move.

The Pensions Manager replied that conversations with staff will begin from next month and that nobody was at risk as a result of this process. He added that the new operating model reflects an increase in the management structure and it was hoped that it will be seen as an opportunity to make progress within the administration service as part of a career progression.

Councillor John Cato referred to digital services and in particular I-Connect and asked how likely was it that mistakes could be made as part of the self-service process. He also asked if training would be made available to enable users of the service.

The Pensions Manager replied that as far as data from employers was concerned the Fund has been providing verification for them. He added that they have been training employers to submit data through I-Connect and that the intention is to hand back control of the submission to them on a monthly basis.

He said that a number of exception checks are carried out before the data is uploaded and any errors will be pushed back to the employers to rectify.

Councillor John Cato asked if enough people have experience of using the system.

The Pensions Manager replied that the I-Connect system has been in place for around the past 11 years and APF was one of the first administrations to take it on board. He said that the majority of LGPS Funds were now using it or something very similar.

The Governance & Risk Advisor added that the self service tools I-Connect and My Pension Online were not new and that this was seen as an opportunity to put them together within the Digital Services Team to maximise their potential and to enable better use of the data that is gathered.

The Governance & Risk Advisor advised the Committee that they were seeking to procure a new AVC provider. She added that an interim arrangement has been agreed with current provider Aviva for a further six months whilst discussions are ongoing with Hymans Robertson regarding a new provider.

William Liew commented that he has been using I-Connect for a number of years without any issues. On the matter of the operating model structure he said that it will be important to make sure the right people are assigned to the right roles.

He asked if there was a plan to replace the Service Director for Financial Control and Pensions.

The Service Director for Financial Control and Pensions replied that he had been planning this process for some time with colleagues across the Council. He said that in particular he had discussed putting a revised / interim leadership in place with the Section 151 Officer. He added that there was a possibility that his role might be separated out to provide a more dedicated resource to the Fund.

Pauline Gordon asked if it could be possible to see processes mentioned in action at some point.

The Service Director for Financial Control and Pensions said that he would see if something could be arranged for the Committee.

The members of the Committee were minded to advise that the following resolution should be made on Monday 28^th March.

That the Committee approves the 3 Year Service Plan and Budget for 2022-25 for the Avon Pension Fund.