Issue - meetings

Report attached.

The Committee were informed that the Governments Actuary Department (GAD) had been appointed by the Department of Communities and Local Government (DCLG) to review 2013 valuations, as a ‘dry run’ to assess whether the aims of Section 13 of the Public Services Pensions Act 2013 were being met.

Section 13 (4) required GAD to report on whether four main aims had been achieved:

a)    Compliance – to confirm the fund’s valuation had been carried out in accordance with the scheme regulations.

b)    Consistency – to confirm the fund’s valuation was not inconsistent with other valuations..

c)    Solvency – to confirm employer contributions was set at an appropriate level to ensure the solvency of the pension fund, and

d)    Long Term cost efficiency – to confirm employer contributions were sufficient to meet benefit accrual and existing deficit.

Section 13 would apply for the first time to the 2016 round of fund valuations and the report was expected to be published in the summer of 2018.

The ‘Dry Run’ results summary for the LGPS was as follows:

a)    As anticipated, no compliance issues were found.

b)    GAD reported that they had found both presentational and evidential inconsistencies in the valuation approach adopted by LGPS funds, and in assumptions used and disclosure of results.

c)    GAD reported concerns over securing solvency for two closed transport funds. A number of funds raised amber flags on one or more metrics examined under solvency. No funds were red flagged.

d)    GAD named two funds with whom they would have wanted to have further discussion over the long term cost efficiency of their funding plans. For funds advised by Hymans, no red flags were raised on either solvency or long term cost efficiency reflecting the robust and transparent nature of the funding plans put in place by LGPS Administering Authorities.

e)    GAD clarified that meeting solvency and long term cost-efficiency requirements takes precedence in the regulatory framework over the desirability of stable contributions.

The ‘Dry Run’ results impact on the Havering Pension Fund was as follows:

a)    A number of amber flags were raised under the criteria for solvency. Using the Scheme Advisory Board (SAB) standardised basis, ten funds with the lowest funding levels were highlighted, one of which was the Havering Pension Fund.

b)    The report stated that whilst poorly funded this was not necessarily sufficient, by itself, to warrant a recommendation for remedial action had section 13 been in force, they may have engaged with these funds to better understand how they intended to improve their funding position.

c)    The fund actuaries were in the process of preparing the 2016 valuations, when section 13 would be in force. Hymans would have consideration of the outcome of the dry run report as part of this process and officers and the Fund’s Actuary would report back to the committee when the 2016 valuations results were finalised.

The report was noted.