Agenda item

The Investments Manager presented the report. She said that comparative data for the funding levels of other LGPS funds was not currently available, but would be reported to the Committee at a future meeting.

The Fund’s actuary, Mr Middleman, gave a presentation on the 2013 valuation results and funding strategy. A copy of his slides is attached as an appendix to these minutes.

Members raised a number of issues during the presentation and in the discussion afterwards.

Deficit Reduction Strategy

Mr Middleman assured a Member who had expressed concern, that his recommendations for new contributions rates would not impose undue burdens in the future, given that the assumptions had been set with a level of prudence within acceptable bounds.

Ill-Health Retirements

Mr Middleman said these had dropped dramatically since the 1980s. They were now much more tightly controlled via LGPS regulations, and this is reflected in the assumptions adopted.

The Discount Rate for Pension Liabilities

In reply to a question from the Chair, Mr Middleman clarified that lower interest rates increased the deficit by about £900m, which was offset by a reduction of about £300m due to lower inflation at the end of March 2013.

Contribution Rates and Deficit Payments

The Investments Manager and Mr Middleman explained that rates were set by the actuary in accordance with the Funding Strategy Statement previously agreed by the Committee.

A Member asked why there appeared to be two valuations, one at 31 March 2013 and one at 31 August 2013, and why contribution rates were being based on the 31 August valuation. Mr Middleman explained that the actuary’s fiduciary duty under the Regulations required him to state the valuation position as at 31 March 2013. The figure for August 2013 took account of market movements (in particular increases in the discount rate due to bond yield reversion) and other factors, and allowed lower deficit contribution payments to be set. These lower contribution payments had been stress-tested for sustainability against the target of 100% funding and had been found entirely satisfactory within reasonable bounds of likelihood.

The Actuary advised that the declared valuation as at 31 March 2013 should take account of short term pay restraint as evidenced by most employers. 

A Member suggested that pay for some local authority workers might rise more than the Chancellor’s limit of 1%, because of pressures to pay a living wage and other factors. The Chair pointed out that the 1% limit applied to the total pay bill; there was a risk that a future government might raise pay more.

A Member expressed concern that some of the Fund’s employers might not exist at the time of the next valuation. The Investments Manager said that those not guaranteed were mostly small charities and that their combined liabilities were very small. The funding strategy for those employers had been varied to consider these issues within the bounds of affordability. The Chair asked for a report on this at the next meeting. The Head of Business, Finance and Pensions pointed out that academies were guaranteed by the Secretary of State.

RESOLVED to note the outcome of actuarial valuation 2013.