Mr Barry Dodds, from Hymans Robertson introduced the report and explained the role of the Actuary. Mr Dodds referred to his presentation slides and provided a detailed explanation regarding the valuation process and its timeline; why and how assumptions are set; the financial and longevity assumptions which are considered and how these are derived; as well as the demographic assumptions that are taken into account.

In response to comments and questions from members the following was noted:

• Demographic data was provided by Club Vita, who use analytics relating to where fund members lived. Fund members may live in the Borough or in other areas of the country and/or abroad. Club Vita can pinpoint this information and their analysis is used when making the valuation assumptions.
• In response to which postcode had the shortest life expectancy, Mr Dodds said Club Vita produced heatmaps showing this data. He gave an example of how the life expectancy in one city can be lower than another.
• Mr Dodds said the funding position for the Fund was positive as the return on assets had been good even though there could be a possibility of a lower return in future. He said there was a balancing factor in that the value of the liabilities had also grown but over the last three years the funding ratio had grown. This led to the possibility of cutting contribution rates.
• In relation to the assumptions made within the report, Mr Robertson explained there was a degree of subjectivity in making the assumptions and therefore in determining the contribution rates. Mr Dodds agreed different actuaries would have different opinions on prudence levels. However, a bar of a 70% or greater likelihood of the assumptions being achieved was used. He said the modelling used by other actuaries was not dissimilar. He agreed with Mr Robertson that there was some flexibility in whether contributions rates should be cut or held.
• Mr Bartle, Interim Corporate Director for Resources and Section 151 Officer said the point about contribution rates was an important point for the Committee Members to note. He said the Committee would be discussing this further at a future meeting and as such he was grateful this had been highlighted. Mr Bartle agreed there was a degree of subjectivity when making assumptions and thanked Mr Robertson for making this point.

The Pensions Committee RESOLVED to:

1. Consider and approve the triennial valuation assumptions recommended by the scheme actuary Hymans Robertson.

Mr Douglas Green, from Hymans Robertson introduced the report and explained the role of the Actuary. Mr Green referred to Appendix 1 and the presentation slides therein. He provided a detailed explanation regarding the valuation process and its timeline; why and how assumptions are set, the financial and longevity assumptions which are considered and how these are predicted; as well as the demographic assumptions that are taken into account.

In response to comments and questions from members of the Board the following was noted:

• Mr Green stated that the assumptions made, were over for a 20-year period so it was difficult to back test over that period, however the last three years from the last triennial valuation were looked at, to see if the assumptions made were accurate.
• Referring to paragraph 3.8, and the table therein, Mr Thompson asked if there was any concern about increases in Pension benefits. He said the prediction was there would be a large increase in the autumn. Mr Green said that whilst there would be a spike in years one and two the overall expectation was that this would quickly settle back closer to the 2% long run assumption.
• Mr Green said slide 10 showed the assumptions that were needed to make the valuation. He said some elements were common to all funds however there were individual, fund specific details such as longevity and demographics that impacted the assumptions made. He said it was not easy to compare the LBTH fund with others.
• In respect to how the Hyman Robertson’s views/assumptions compare with other actuary consultants, Mr Green said the modelling used was not dissimilar to the one used by others. However, the predicted investment return would differ depending on consultation with officers and Fund administrators. He said whilst the assumptions made were viewed as prudent, each fund made its own decision regarding investments.  Mr Green said there were 87 LGPS funds and each would be making their own assumptions. The Government Actuary did an analysis of the valuations and provides oversight as required.
• Ms Adams explained that the recommendations were put forward by the Actuary and decisions in relation to the triennial assumptions were made by the Pensions Committee and Board. Thereafter further consultation took place between Officers as well as the Employers Forum.
• In reference to slide 12, Mr Thompson asked if the 2040 climate change target had been considered, especially in terms of stock availability and returns. Mr Green responded stating they had spoken to officers and the investment consultants and had taken a long-term view in relation to asset allocation and had factored in plans for this change.
• In reference to slide 17, salary increases, Mr Green confirmed total salary was taken into consideration including promotional scales, which applied on top of CPI calculations. Mr Green said changes to the total payroll would be in the future post 2022 and this would be picked up in future triennial assumptions.
• Referring to Longevity assumptions, slide 21 Mr Green confirmed their  ...  view the full minutes text for item 8