Agenda item

The Head of Business, Finance and Pensions presented the report. He said that the main aim of the valuation had been to maintain stability of contribution rates, where possible, in accordance with the Funding Strategy Statement agreed by the Committee in September 2010. There would, as a consequence, be a smaller prudential margin for the solvency of the Fund. In addition, although there was uncertainty as to how the Hutton Commission would impact the rates for future service, future service costs were expected to decline; however, there was less scope for potential changes to the scheme to significantly reduce the costs of past service. The 2010 funding level was 82%. The average employee contribution rate would be held at 16.6%, the same as for the 2007 valuation, which would mean that the deficit recovery period at the Fund level would be extended from 20 to 22 years.  The impact on the individual employers would vary considerably and discussions were taking place with employers to explain individual outcomes.

A Member said that he considered the report inadequate as it contained insufficient detail and that there had not been enough opportunity to discuss it with the actuary, to whom the Fund paid large fees. He was concerned to note that the employers had been informed of future contribution rates before the report had come to the Committee. The Committee should have been provided with information about the impact of the valuation on each individual employer. He felt that the Committee could not accept the conclusions of the actuary without more detailed information. The Head of Business, Finance and Pensions replied that officers relied on the professional judgment of the actuary, who had a fiduciary duty to ensure that his valuation was prudent. Negotiations were taking place with some employers to help them within the Funding Strategy Statement. The Member wondered how negotiations could still be taking place with employers after they had been told what their contribution rates would be and before there had been any discussion with the Committee. Another Member said that the actuary only made recommendations; decisions were taken by the Committee and should be based on full information, which had not been provided. Another Member was concerned to note that contributions were going to be held at 16.6% even though the actuary had advised that they should be raised to 17.2%. She felt that the actuary’s advice to increase rates for past service but none for future service was contradictory. Though Hutton would give some clarity on future service, there would still be uncertainties. The Fund would ignore future service at its peril. Another Member said that better information about actuarial valuations had been given to the Committee in the past. The Head of Business, Finance and Pensions replied that he did not think the involvement of the Committee in this valuation had been different from previous valuations. There was a great deal of pressure on the actuary’s time and the Committee seemed to be seeking more information than the actuary could provide. A Member said that there was strong pressure from central government to keep contribution rates down and that he felt that the actuary had succumbed to this pressure. The Chair suggested that in view of the strongly-expressed concerns of the Committee the actuary should attend a future meeting. A Member said that information should be provided as soon as possible and the actuary invited to attend the March 2011 meeting. The Head of Business, Finance and Information asked what kind of information Members wanted. A Member replied that she believed a copy of the actuary’s valuation papers should be provided. Members agreed unanimously to amend the officer’s recommendation to note “the outcome of the 2010 Actuarial Valuation” and to simply note the report.

RESOLVED to note the report on the 2010 Actuarial Valuation.