Agenda item

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, Brent Council) introduced a report from the Corporate Director Finance & Resources, which provided an update on the 2025 Triennial Valuation.

In providing a brief overview of the report, the Board was advised that a formal valuation of the whole Fund was undertaken every three years with the purpose being 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.

Members were advised that the Pension Fund Sub Committee, when considering the report had been provided with a detailed presentation by Craig Alexander (Hymans Robertson Partner and Fund Actuary) on the key inputs and assumptions identified as the basis for undertaking the 2025 valuation, as had been 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 with an outline of the key assumptions as follows:

·            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 Funds’, an established process was expected to be put into place for the purposes of good governance.

·            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.

·            the recommended continue use of the tailored Club Vita assumptions in terms of longevity and adoption of the overall Club Vita LGPS future improvement assumption with other demographic considerations and assumptions based on analysis of the Fund’s actual membership experience.  An example was provided in relation to operation of the longevity assumption with figures updated annually.

The Board was advised that a summary of the key assumptions recommended for adoption in relation to the 2025 valuation process as compared to the 2022 valuation along had been provided within Appendix 2 to the main report, which it was noted had been classified as exempt and contained further background on the basis on which the assumptions had been developed.

In terms of timescales, the Board was advised that the 2025 valuation process had now commenced, based on the indicative timeline set out in section 3.2.6 of the report.  It was noted this would include consultation with employers, currently anticipated for October 2025, with the need for complete and accurate membership data also identified as critical in ensuring the valuation results are accurate.  Based on the timetable outlined it was anticipated that the valuation process would be completed by 31 March 2026 with new contribution rates payable by employers from 1 April 2026.

Following the presentation of the report, the Chair invited the Board to raise any questions or comments, with the issues highlighted summarised below:

·            In seeking assurance, the Board sought details on the increase in the Fund level discount rate which it was noted had risen from 4.3% to 6%. Risk free rate of returns were identified as the reason for this change with members advised that the Actuary regarded this figure as the minimum rate obtainable on the Fund investments. With the global economy having moved from a low-interest rate environment to a high-interest-rate environment, as well as UK government bonds being set at a much higher level than in 2022 the Actuary had identified the figure based on the risk free rate of return and consideration of Brent’s investment strategy, such as equities along with prudence level identified in relation to the valuation process.

In welcoming the enhanced prudence level identified and noting that the report had been subject to detailed review at the Brent Pension Fund Sub Committee on 24 June 2025, the Board RESOLVED to note the update on the 2025 valuation and endorse the key assumptions for the 2025 valuation which had been approved by the Sub Committee as summarised in Appendix 1 and detailed in full in Appendix 2 (classified as containing exempt information) within the report.