Issue - meetings

This report sets out the results of 2025 triennial actuarial valuation and the Funding Strategy Statement (FSS) for consideration and approval.

The Board received a report setting out the results of the 2025 triennial valuation and the final version of the Funding Strategy Statement.  The Board was reminded that the key headline results would be familiar from previous meetings during the year, as the whole-fund results and assumption-setting process had been presented at earlier stages. The following points were highlighted:

·            The Fund’s funding position had improved from 87% at the previous valuation to 113% as at 31 March 2025, described as a very significant improvement and a strong position for the Fund to be in, particularly noting that nine years ago the funding level had been as low as 55%.

·            Employer contribution rates for the majority of employers in the Fund would be reduced from 30.5% to 23% from the start of April 2026. The Board was advised that an earlier indicative rate of 26% had been proposed in November, but that the final data had produced a further positive shift across most metrics, enabling a further reduction. The rate of 23% had been agreed with the actuary as appropriate, maintaining prudency and protecting the Fund’s surplus while passing on the benefits of improved funding to employers whose budgets remained stretched.

·            The prudency level had been increased from 70% in the last valuation to 80% at this valuation.

·            Draft employer contribution schedules had been produced and communicated to all employers, and had been reviewed at the November 2025 employers’ forum. The Funding Strategy Statement had been consulted upon with the local authority, academy and other schools, and for the first time with the Department for Education, over the winter period. The final version had been presented to the Sub Committee following consultation for approval.

·            The final version of the valuation report from the actuary was expected within the days following the meeting, subject to completion of the remaining appendices.

Following the update, the Chair invited comments from Board members, with questions and responses summarised below: 

·            Regarding cash flow, it was noted that, based on the prior year’s accounts, the Fund had received £73 million in contributions against £60 million paid out in pensions and lump sums, giving a headroom of approximately £13 million. Given that employer contributions were being reduced by approximately a quarter, and that deficit recovery contributions would no longer be needed, a query was raised as to whether this might result in the Fund moving into negative cash flow position.  In seeking to provide assurance, the Board was advised was not considered a cause for concern. In the short term, the Fund held around £50 million in cash, providing ample capacity to pay pensions without issue. In addition, the deficit recovery rate would not be eliminated entirely given the stabilisation mechanism, which caps and collars contribution rate movements to avoid volatility between valuation cycles. The full picture on the cash flow position would not be known until contributions and payments had been running under the new rates for a month or two, likely in April or May. Longer  ...  view the full minutes text for item 12

This report sets out the results of 2025 triennial actuarial valuation and the Funding Strategy Statement (FSS) for consideration and approval.

Sawan Shah (Head of Finance, Pensions) introduced a report from the Corporate Director Finance & Resources, covering the results of the 2025 triennial valuation and presenting the Funding Strategy Statement for approval. In presenting the report key points summarised were as follows:

·            As reported to the Sub-Committee at the previous meeting, the triennial valuation had shown a significant improvement in the Fund's funding level, rising from 87% at the 2022 valuation to 113%. Individual employer results schedules had been produced and communicated to all employers, and an Employers' Forum had been held at the Civic Centre.

·            Every three years, a formal valuation of the whole Fund was carried out under Regulation 62 (1) of LGPS Regulations 2013 to assess and examine the ongoing financial position of the 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 perform a health check on the Fund’s solvency. The last valuation had taken place as of March 31^st, 2022 with the next therefore due to be carried out as at 31 March 2025 with the results to be reported to the administering authority within twelve months of the valuation date.

·            Under the process, the actuary calculates the funding level at each valuation. This was calculated as the ratio of the market value of the assets and the value of the benefits built up to the valuation date for the employees and ex-employees. If the result was less than 100% this would mean a shortfall (deficit) if more than 100% then there would be a surplus.

·            Hymans Robertson, the Fund actuary, had attended the October 2025 Sub Committee to outline the valuation process, and the initial results from the review of the Funding Strategy Statement (FSS).  This had included a presentation of the whole fund results including the funding level, assets, liabilities and the overall deficit level. It was explained why the funding level had improved since the last valuation 3 years ago with the main driver being the significantly improved investment outlook. It was also explained that different employers within the Fund would have different funding levels due to the profile of their members and contribution rates in the past.

·            The results from the valuation process had shown a significant improvement in the Fund's funding level, rising from 87% at the 2022 valuation to 113%. Individual employer results schedules had been produced and communicated to all employers, and an Employers' Forum had been held at the Civic Centre.

·            The valuation was in its final stages, with the remaining steps principally comprising finalisation of the valuation report, which had been produced in draft and attached as Appendix 1 to the report. Since  ...  view the full minutes text for item 8