Agenda item

This paper updates members on the progress in the Triennial Review, informs them about the next stages.  It also requests that members approve the draft FSS (Funding Strategy Statement) for consultation and that members delegate to officers to fine-tune items within the FSS with regard to the individual employers. The paper also requests that members delegate the decision on the Council contribution rate once the Monte Carlo modelling is complete.

The Sub-Committee considered a report from the Chief Finance Officer which provided updates on the progress in the Triennial Review  The report also requested members to approve the draft FSS (Funding Strategy Statement) for consultation and delegate to officers to fine-tune items within the FSS with regard to the individual employers.

Gareth Robinson (Head of Finance) explained that the FSS was the key document that set out the Pension Fund’s strategy to achieve an appropriate funding level and manage risk appropriately whilst the Whole Fund identified the Pension Fund’s overall funding level.  He continued that The FSS included the time-frame through which the Pension Fund would be expected to become fully-funded by the various type of employers and expectations around guarantees.  The statement further explained how the Pension Fund measured its liabilities, its approach to affording to pay for them and how it complied with regulatory requirements. The Triennial Review would then set the contribution rates of the various employers for the period 2017/18 through 2019/20.  Gareth Robinson then invited Alan Johnson and Douglas Green, representatives of Hymans Robertson, to present to the Sub-Committee on their initial whole fund results.

Douglas Green, with reference to slide presentations, outlined the liability assumptions which fell into 2 broad categories; financial and demographic.  Under financial, assumptions were made of investment return, inflation, pay increases, pension increases taking into account economic outlook, actual scheme assets and historical pay growth.  Under demographic, assumptions were made of life expectancy, retirement age and causes, withdrawals and marriage statistics and considering population trends, members’ social status and past scheme experiences.  He then drew members’ attention to the Whole Fund results which revealed the deficit amount and the overall funding level.  Douglas Green in continuation explained the sources of deficit changes between March 2013 and March 2016 and added that the FSS would establish a clear and transparent fund specific strategy and contributions.

Alan Johnson and Douglas Green were thanked for their presentation.

Members then asked questions about the impact of redundancies, early retirements and shared services on the Fund’s strategy and funding levels.  Conrad Hall explained that the Council no longer pursued a policy of enhanced or added years for early retirement and that as capital cost was paid into the account, there was no significant impact on the fund’s strategy. He added that the shared services had no impact as it did not affect the investment policy. He emphasised that as employer contributions were the single largest component in the Pension Fund’s yearly cash inflow, appropriate contribution rates by the various employers were necessary for the Pension Fund to improve its funding level. Members’ noted that the contribution strategies would bind the employers to differing amounts over the next three years. 

RESOLVED:

(i)         that the update on the Triennial Review process be noted;

(ii)        that the results of the Triennial Valuation – whole fund results be noted;

(iii)      that the Current Draft of the Funding Strategy Statement (FSS) be agreed;

(iv)      that delegated authority be granted to Council Officers for the completion of certain detailed elements with the Fund Actuary, when employer-level calculations become available;

(v)       that it be noted that the FSS would be consulted with employers as required by LGPS Regulations;

(vi)      that it be noted that the FSS would come back to this Committee for formal ratification after consultation had ended;

(vii)     that the decision on Council contribution rate with the Fund Actuary using this modelling and the principles of the FSS be delegated to the Chief Finance Officer.