Agenda item

The purpose of this report is provide the Committee with an update on the 2025 Triennial Valuation & Funding Strategy Statement (FSS) review.

Members are asked to note the report also includes (as an exempt appendix) details on the Whole Fund Result, which will be considered in the closed session of the meeting.

George Patsalides (Finance Analyst) introduced a report from the Corporate Director Finance & Resources, updating the committee on the 2025 Triennial Valuation and setting the context for the reports from the Fund Actuaries, Hymans Robertson, to be considered in the closed part of the meeting relating to the initial results of the valuation and review of the Funding Strategy Statement (FSS).

The key issues outlined in relation to the Funding Strategy Statement were noted as follows:

·            The requirement for a formal valuation of the whole Fund to be undertaken every 3 years under Regulation 62 (1) of LGPS Regulations 2013 to assess and examine the ongoing financial position of the Fund.  The purpose of the update 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) and to review the Funding Strategy Statement (FSS) whilst also performing a health check on the Fund’s solvency.

·            The last valuation had taken place as of 31^st March 2022 with the next one due to be carried out as of the 31^st of March 2025. The results of each valuation were required to be reported to the administering authority within twelve months of the valuation date.

·            The actuary was required to calculate 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 this figure was less than 100% it meant, there was a shortfall and therefore a deficit; if it was more than 100% then there was said to be a surplus. The previous valuation had shown that the Brent Pension Fund overall had a funding position of 87%.  Sawan Shah noted that the 2025 valuation process had now commenced, with an indicative timeline of the valuation process provided within section 3.3 of the report.

·            In highlighting that the whole fund results look at the overall funding level initial results from the current valuation had identified that various employers had different funding and risk levels.  The initial results of the 31 March 2025 Triennial Valuation had been received from the Fund Actuary (Hymans Robertson) which had been provided for consideration within Appendix 1 of the report (classified as exempt) which members were advised would be subject to a more detailed presentation during the closed part of the meeting with the results outlining how the funding position had changed since the last valuation in 2022.

In terms of a high-level summary, members noted that the results had shown an improvement in the Fund's funding position since the last valuation in 2022. The Fund was now in a surplus position, meaning the value of its assets was higher than the estimated value of its long-term pension liabilities. The overall funding level had improved to 113% compared to 87% at the previous valuation and 78% at the 2019 valuation.

·            The next stage of the valuation process would focus on analysing data at the individual employer level to set individual employer contribution rates from 1 April 2026. Draft employer results would be issued later in the Autumn, and the Fund would also be holding an employers’ forum in November 2025 to communicate the valuation results to the employers.

Moving to cover the Funding Strategy Statement (FFS), George Patsalides advised this formed a key governance document for the valuation with the FSS setting out the underlying assumptions and principles to be adopted when valuing the Fund’s liabilities as well as the setting of contribution rates. The FSS was designed to recognise that different employers within the fund maintained different objectives, with the FFS including deficit recovery periods for different employers and would be subject to review during the valuation process in consultation with the Fund actuary and employers.  Key issues highlighted in relation to the FSS were noted as follows:

·            In January 2025, updated guidance for preparing and maintaining a FSS had been published by the Ministry of Housing, Communities and Local Government (MHCLG), the Chartered Institute of Public Finance and Accountancy (CIPFA) and the Scheme Advisory Board’s (SAB’s) Compliance and Reporting committee which had replaced the 2016 guidance produced by CIPFA.

The updated guidance had included the need for Funds to now write their FSS in clear, non-technical language and adopt a common structure and terminology.  In addition, the FSS would be required to explain (as part of Employer Lifecycle Coverage) how contribution rates were set when an employer joined the fund, at each valuation, and as the employer approached exit with an outline also provided on how exit debts or credits would be managed.  Stronger Consultation requirements had also been introduced based on best practice, including early publication of a timetable, concise materials, and engagement with all relevant stakeholders such as employers, guarantors and the Local Pensions Board. Finally, Funds were asked to provide more information in the FSS to explain the impact of employers being in surplus or deficit, recognising a varying effect across different employer groups.

·            A full review of the FSS document had been carried out to ensure the document was compliant with the updated guidance with an update having been provided by the Fund Actuary (within Appendix 2 of the report) highlighting the key changes being considered for the 2025 FSS review. These changes included structural changes introducing two new parts to the FSS - Key Funding Principles and Employer Events: the revised FSS taking effect on the 1^st of April 2026, following the 31 March 2025 valuation and governing contribution rates for 1 April 2026–31 March 2029 as well as the recommendation for regular annual reviews of the FSS.

·            In addition to these measures, a new policy had been introduced to the FSS to outline how individual employer contribution rates may be reviewed in between valuations. It also outlined the Fund’s policy on employer requests for contribution rate reviews with the draft FSS having been attached as Appendix 3 of the report.  In line with LGPS regulations, the FSS would be subject to formal consultation with employers, which had been scheduled for autumn 2025 enabling the final version of the FSS to be presented to the next Sub-committee in February 2026 for approval.

Given the nature of the update in providing context to the more detailed review on the initial valuation results scheduled during the closed session of the meeting no questions or comments were raised by the Committee at this stage in proceedings.  In taking the opportunity to thank officers for the update provided the Committee RESOLVED to:

(1)       Note the update on the 2025 valuation, as detailed within the report and on the basis of the more detailed presentation to be provided in the closed part of the meeting.

(2)       Note the initial results and the improved funding position since the 2022 valuation as detailed within the report

(3)       Note the key changes to the 2025 Funding Strategy Statement (FSS) outlined within the report with the draft FSS subject to consultation with employers as required by LGPS Regulations, prior to it being presented to the Sub Committee in February 2026 for formal ratification.