Issue - meetings

The purpose of this report is to update the committee on the 2025 Triennial Valuation and to introduce the report from the Fund Actuaries (Hymans Robertson) on the key assumptions.

The purpose of this report is to update the committee on the 2025 Triennial Valuation and to introduce the report from the Fund Actuaries (Hymans Robertson) on the key assumptions.

Sawan Shah (Head of Finance) introduced a report from the Corporate Director Finance and Resources updating the committee on the 2025 Triennial Valuation.

In presenting the report the Sub Committee was advised of the process, undertaken every three years, in terms of a formal valuation of the whole Fund.  The purpose of the valuation was to compare actual experience against assumptions made at the last valuation; value the assets and liabilities of each individual employer and the pension fund as a whole using data from the Fund’s administration system and financial records; set employer contribution rates, including for the Council, for the next 3 years (1 April 2026 to 31 March 2029); review the Funding Strategy Statement (FSS) and also perform a health check on the Fund’s solvency. Members were reminded that the previous valuation had taken place in March 2022 with the current valuation process to be carried out as at 31 March 2025 and the results being reported to the administering authority within twelve months of the valuation date.

Craig Alexander (Hymans Robertson Partner and Fund Actuary) was then introduced to the Sub Committee who provided a presentation on the key inputs and assumptions identified as the basis for undertaking the 2025 valuation, as set out in Appendix 1 of the report.  Members were advised that the assumptions had been designed to reflect both current market conditions and long-term expectations as well as being benchmarked against industry standards and LGPS-wide trends to ensure consistency and prudence.  The following key areas were highlighted by Craig Alexander (Hymans Robertson) in presenting the assumptions to the Sub Committee:

·            The background to the valuation assumptions, with the key focus on the discount rate (used to value liabilities to be paid out in the future); Future investment returns (the rate of return the Fund’s assets were assumed to achieve in the future); Future price inflation (CPI); Salary expectations; how long pensions would be paid for (longevity) and other demographic assumptions.

·            The funding progression and general market insights since the previous valuation in 2022, which had seen an improvement in the whole fund position.

·            An outline of the key financial assumptions, which included considerations in relation to:

Ø   the level of prudence & Future Investment Returns (Discount Rate) leading to the recommended increase in prudence level from 73% to 80% for the 2025 valuation.  In general, it was stated that Pension Funds were expected to be prudent, with most funds currently moving to minimum targets of 70%-80% or above. This was even more so the case following the recent global developments and whilst the decision was noted to be subjective to individual cases, an established process was expected to be put into place for the purposes of good governance.

Ø   Benefit & Salary Increases leading to the recommendation that the same approach be adopted for the 2025 valuation as in 2022, reflecting the current inflationary environment;

Ø   the recommended continue use of the tailored Club Vita assumptions in terms of longevity and adoption of the overall  ...  view the full minutes text for item 11