Agenda item
PRESENTATION AND TRAINING FROM HYMANS
- Meeting of Pensions Committee, Tuesday, 18th September, 2018 6.30 p.m. (Item 5.)
- View the background to item 5.
Training on Valuation
Minutes:
The Committee received a presentation from Douglas Green and Barry Dodds of Hymans Robertson LLP on Valuation. Members were reminded that the Fund had three major components, investment returns, Member contributions and Employer contributions. The objective of the Fund is to provide benefits to members and dependents. The Fund is determined by its investment strategy, manager performance and LGPS Regulation and must meet balance of cost over longer term. The ‘Valuation’ calculates the latter. The Committee noted the following.
· That there is a full actuarial valuation of all Fund Members’ liabilities. This forms the baseline for all employer contributions and Fund calculations. These valuations are triennial and were last calculated on 31 March 2016. The next valuation will be on 31 March 2019.
· That the Pensions Administration Team provides data to the Actuaries, who will then review and make estimates on how much money is needed to pay the pensions. The data is also used to check the financial health of employers. The contribution rate for the next three years can then be set. These estimates are based on assumptions.
· That assumptions include looking at financial assumptions and demographic assumptions. The former looks at the economic outlook and expected investment returns on the actual scheme assets and historical pay growth and the latter population trends and past scheme mortality experience. The Investment returns are a critical component in the evaluation. The Funding level is very dependent on the ‘Discount Rate’ assumed.
· The assumptions need to be realistic to ensure that a sensible plan is devised and the contribution rate is set correctly and is affordable. These decisions need to be timely and involve a wide range of parties. A miscalculation of the ‘Discount Rate’ would affect the contribution rate; in these instances, contribution rates might need to be increased. There are different school of thoughts on how to calculate the value of the liabilities.
· That there was increased attention towards the governance of funds and that external government bodies also needed to be satisfied with the solvency of all LGPS Funds.
· That it was aimed for the Council to stop subsidising schools deficit contributions through stabilised increases in total contribution rate. Members raised questions about schools transferring into Academies and noted that the contribution rate by these institutions was 33%.
· That previous valuations of the Fund and those made by the LGPS Scheme Advisory Board were on a par. The Assumptions are compared to past estimates and there are annual evaluations which take into consideration factors such as members who are due to retire, ill health retirements and deaths. Other factors which are reviewed are life expectancy (based on postcodes), gender, dates of birth and earnings.
· Members raised questions about ‘improbable events’ such as Brexit and queried whether these factors were taken into considerations when making valuations. The Committee was advised that it was expected that markets would move up and down and that returns from investments in the long term were more important. The Committee was reminded that the Fund could take ‘a long term view’ and that contributions in respect of active members could be expected to continue for many years.
· Members raised questions about support staff in schools and commented whether individuals were aware of their contribution rates and requested that information be provided on what percentage of the Fund was allocated to these beneficiaries.
· That the LBTH LGPS was performing well and that the Government did not set funding levels. The deficit has been reduced by £150m and the current funding level was around 90 % at March 2017. Members were reminded that ‘Active Members’ would continue to enter the Pensions Scheme and that the deficit would be funded over a twenty year period.
Mr Green and Mr Dodds were thanked for their presentation.
RESOLVED
1. To note the Presentation; and
2. That information be provided on what percentage of the Fund beneficiaries comprised of School Support Staff.