Brunel Pension Partnership Questions & Answers

Transcription

1 A A1 Full Business Case approval Is the business case dependent on all 10 authorities signing, how many need to sign for the pool to proceed? The 10 funds have been working together on the pool since 2015 and are committed to continuing with the pool of 10. We have put the best case forward for the pool. All the Funds have collaborated in building up business case, with legal and financial assurance input. The plan to deliver allows for full engagement of the governing bodies to ensure any concerns are addressed and to enable a positive commitment to the process. A2 A3 A4 What happens if one or two Administering Authorities don t approve the Full Business Case? What if an Administering Authority rejects the proposal because the payback period is too long? Three months is a long time for the Full Business Case to go to all the Councils / Environment Agency Board for approval. Why can t this be expedited? How does this impact on the project timescales? It would depend on the reason why approval was not given. If it was a rejection of the pool there would be implications on the financial model for the remaining Administering Authorities which has been stress tested in the Full Business Case. For the exiting Administering Authorities, as pooling is mandatory, they would have to find another pool to join. If it was because of an aspect of the business case, then the matter may already be addressed through the on-going work during the decision period and therefore the issue might be resolved quickly. If there isn t an immediate solution it will be a matter that the Administering Authorities would collaborate together, as they have been doing, to find a fair and reasonable solution. In the first instance we would expect that the Administering Authorities would collaborate together, as they have been doing, to find a solution. If a solution cannot be found and an Administering Authority withdraws from the pool, they would either seek another pool or enter into consultation with the Secretary of State who may intervene if they deem the LGPS (Management and Investment of Funds) Regulations 2016 and guidance have not been implemented properly by a pension fund. The project timetable includes this 3 month period, and work will continue during this period. The work will primarily be on the governance documentation and structure and preparing scoping documents for third party procurement such as the administrator. Updated: 12 December, 2015 Page 1

2 B Costs and Savings B1 Can you clarify the amount of savings per Fund? The biggest area that savings will be realised is in investment fees which will be gained from economies of scale. These vary from Fund to Fund but the combined savings is expected to rise to 28m per annum by B2 B3 Are you comparing the payback periods across Funds? Has any contingency been included in the financial model? In terms of comparing to Funds in other pools, all pools have different starting points. The Full Business Case includes an analysis of the savings projected by each pool in the July submission. In terms of comparing Funds within the BPP the case is the same in that all Funds have different starting position with regard their investment strategy, asset allocation and fee levels. The Full Business Case includes an analysis of the savings projected for each Fund. The financial model has been built with both clarity on the assumptions and the flexibility to look at a wide range of sensitivity analysis. The core model has been built on relatively a prudent basis but also includes 0.5m contingency per annum for the operating costs. B4 Will there be systems development costs? Most of the systems cost will be incurred by the administrator appointed by the Brunel Company. B5 Is there anything that can be done to reduce the financial burden of pooling? We are actively seeking government intervention to ease the financial impact of pooling. At the meeting with Marcus Jones, we raised the pool s concerns over the costs of setting up the pool and transitioning assets into it and asked the Minister to look at ways to alleviate these. We are working with other pools to ensure a coordinated engagement with government on this matter. Updated: 12 December, 2015 Page 2

3 C C1 Brunel company structure and governance Can you clarify the role of the oversight board vs the company board? The Oversight Board will sit outside the Brunel FCA regulated company. It will not be involved in the day to day management of the company, which will have its own board of directors (the company board) as required by company law and the FCA. The role of the Oversight Board will be to act as a client-side body, seeking to ensure that the Brunel company delivers according to the contracts that will be in place between the company and the individual funds, implements each funds investment strategy appropriately, monitoring performance and co-ordinating any new requirements that the individual funds might have. C2 C3 How will Scheme members be represented on the Brunel Oversight Board? Will there be Trade Union representation on the boards? Is the make up the board appropriate considering that not with-standing the Chair casting vote that it actual looks as if it gives the Directors equal weight in decisions that might be about themselves? Will the size of the board allow them to execute their duties without conflict of interest? We recognise the importance of membership involvement in governance, and we are investigating whether we can do that through observer roles on the Oversight Board. However it is important to note that key asset allocation decisions remain with the local Pension Fund Committee, and scheme member representation on Committees and Boards is not impacted by these proposals. Representatives from the committees have had sight of the proposals during their development and formal representation on the project through the Shadow Oversight Board. Firstly, there will be sub-committees with focus on remuneration, audit risk and insurance. The composition of these sub-committees will take account of potential conflicts of interest, for example, the remuneration committee would have a weighting clearly with NEDS and not Directors. This will be documented in the terms of reference for the committees, which are to be drafted in the next stage of the project. Consideration has also been given to the need to balance voting so that NEDs have the majority. The details have not been finalised, but it could be achieved by the Chair having a casting vote. Alternatively the Client Relationship Director could be on the Board but without vote, to ensure a client focus but not creating a conflict of interest in the balance. Both approaches enable the Board size to remain small in size, with Chair plus 3 other NEDs. Updated: 12 December, 2015 Page 3

4 C4 Where is the Company Secretary in the structure? A decision is still to be made on the Company Secretary, for example the role could be provided by a legal services company. This will be decided by the Board of the Brunel Company once it is in place. C5 C6 How do you avoid the Brunel company s scope of services developing beyond what is set at the outset i.e. mission creep? Where will the Brunel Pension Partnership be located? Much of the detail relating to the BPP s governance arrangements will be set out in three key documents: Articles of Association of the Brunel company; Shareholders Agreement between the Administering Authorities; Terms of Reference for the Oversight Board. They will include specifying shareholder control through reserved matters that will enable the Authorities to ensure there isn t mission creep. An analysis undertaken by PwC concluded that the Bristol area (which includes Bath) would be the most suitable location for the Brunel Pension Partnership D Brunel company policies, services and FCA authorisation D1 What needs to be in place for FCA approval? The following aspects need to be in place for FCA approval: Key people that require FCA authorisation Policies (corporate, investment and client) Agreed operating model e.g. what service are provided internally and what are bought in Key suppliers such as the 3 rd party administrator and identified services it will deliver Legal and corporate/shareholder agreements Compliance and internal controls environment covering investment financial, IT processes D2 What will the pricing policy be? The pricing policy for the services that Brunel company will provide to the Funds will be defined as part of the development of the detailed operating model. It will build on the cost sharing principles that were agreed for the establishment of the Brunel Pension Partnership, and are based on a clear and equitable sharing of costs across the Funds. Updated: 12 December, 2015 Page 4

5 D3 Will procurement arrangements need to comply with OJEU? We have sought legal advice confirming that the new FCA regulated company (Brunel Pension Partnership Limited) as currently structured will be able to provide services to the Brunel Administering Authorities without the need to procure a services contract under the normal public contracts rules as it falls within an exemption in the Public Contracts Regulations Procurement of third party services by the Brunel company, will however be subject to the procedures relating to public contracts. D4 Will there be an exit option for Funds? We are looking for the pooling to be a success but there are exit arrangements in place. As with any good contract the shareholder agreement will have exit provision with in the shareholder agreement and these will be agreed by all 10 authorities before the agreements are signed D5 D6 D7 D8 Will the units be price daily? Will the Brunel Company be able to action the buying / selling of units on a daily basis? What is the impact of unitisation on beneficial ownership? What happens to voting rights? Could a note about the Brunel Pension Partnership be provided so that it could be inserted in the Annual Accounts of employers within the Scheme? What legal assurance has been obtained about the FCA authorisation requirements? There should be no impact on trading timescales under the model. We are continuing to explore impact on voting with Fund Managers, but currently understand that all Brunel shares will need to vote the same way. The BPP has a collaborative and customer focused ethos, therefore such a request from a key stakeholder group such as employers is easy to respond with a Yes of course! In addition to the ongoing professional advice from Osborne Clarke, further legal assurance has been provided by obtaining the legally privileged opinion of a Leading Counsel (QC) on the nature of the regulated activities to be undertaken and the appropriate level of FCA required. Counsel was able to give his opinion with a good understanding both of the background to pooling and also the specifics of the Brunel Pension Partnership model. Prior to the FCA application submission, we expect to verify the opinion with the QC in the light of the agreed detailed specification of the services and company operations. Updated: 12 December, 2015 Page 5

6 E E1 Asset Transition Arrangements How will transition arrangements be managed, will they be outsourced? We will procure a transition manager to bring the expertise and experience to minimise the transition costs. F F1 F2 Investment Industry What has been the response from the Investment Industry to the pooling initiative? Will there be a reduction in the Investment Manager Universe? How do we ensure variety of small, medium and large managers remain? We are aware that the passive providers have reduced their fee rates and have seen other providers looking at LGPS as a whole, so the response looks to be positive. The industry remains very engaged and seeking to take pooling forward. Our access to the universe of investment managers will not be reduced. We have designed the portfolios on an outcome basis, which allows flexibility and diversification, for management risk, including ensuring that you don t limit yourself to a certain type of fund manager. Updated: 12 December, 2015 Page 6