Agenda item

Local Government Pension Scheme Regulations 2013 require the Fund to carry out an actuarial valuation every three years, the next is due as at 31 March 2022. The interim valuation provides an update to the current funding plan.

The Group Manager for Funding, Investment & Risk introduced this report to the Committee. She said that the interim valuation provides an update to the current funding plan. She added that conversations have been held with the main employers and that current employer contribution rates and deficit payments are not revised as a result of this update.

She stated that the Actuary presented the interim valuation report at a Committee workshop on 01 December 2021.

Paul Middleman, Mercer addressed the Committee and highlighted the following points from the report.

·  The interim valuation outcome shows the funding level has risen to c.101% on a consistent basis to 2019 valuation; it falls to 99% on the proposed 2022 basis. The Risk Management Strategy has helped significantly.

·  Inflation has risen since 2019 with market derived CPI increasing from 2.4% to 2.9% currently – increasing liabilities.

·  The objective of the Fund is to keep contributions as stable and affordable as possible. Therefore, the aim in 2022 will be to maintain the 2019 overall contribution levels and depending on the actual outcome, allow reductions in contributions where they are supported by the employer covenant assessment and deficit recovery periods.

·  A Committee workshop will be held in June 2022 prior to the June Committee meeting to review the Funding Strategy Statement (FSS) and initial valuation outcome, updated only for financial assumptions. The draft FSS which sets the parameters for the valuation including the actuarial assumptions and the deficit recovery policy will be agreed at the June Committee meeting. The draft FSS will then be circulated to employers for consultation (as required in the regulations).

·  The final Funding Strategy Statement will be agreed at the September 2022 Committee meeting following which the individual employer results will be calculated by the actuary and disseminated to employers. d) 2022 valuation report to be presented at March 2023 committee meeting.

William Liew commented that he found it really helpful to have the report at this stage to assist with the budget setting process.

Shirley Marsh-Hughes asked if the assumptions made in the report take into the potential McCloud Judgement outcome.

Paul Middleman replied that although there has not been a final outcome yet, this is expected in the Summer of 2022, they have a good idea of the direction of travel. He added that no material shift was expected and that the assumptions were in the right region. He stated that primary legislation on this issue was needed to be in place by March 2022.

Shirley Marsh-Hughes acknowledged that discussions had been held with larger employers, but asked if all employers were aware that contributions may change.

Group Manager for Funding, Investment & Risk replied that this would not normally happen as the rates can be different for the types of employer and therefore could be misleading at this stage.

Pauline Gordon asked how the assumption of low salary growth would be monitored.

Paul Middleman replied that the assumptions would be adjusted if required and said that the interim review showed pay grades were higher than expected.

The members of the Committee were minded to advise that the following resolution should be made on Friday 17^th December.

The Avon Pension Fund Committee notes the outcome of the 2021 interim valuation and 2022 valuation timetable.