Agenda item

Report of Deputy Chief Executive and Director for Corporate Services and presentation by Hymans Robertson

The Committee received a presentation from Hymans Robertson (Hymans) which focussed on the results of the Actuarial Valuation of the Fund at 31 March 2022 and the impact on the contribution levels for the different types of Employers in the Fund. It also highlighted the review of the current Funding Strategy Statement (FSS) that had been undertaken as part of the 2022 Actuarial Valuation.

Employer Contribution Levels

The presentation focussed on:

• Whole Fund results
• Employer level results
• Factors causing diversity in results
  • Funding profile
  • Membership experience
  • Membership profile
  • Contributions being paid
• Specific focus on different employer groups
  • Councils, Police and Fire
    • Generally freezing rates (as % of pay) with some increases
  • Town & Parish Councils
    • Rate will drop by 3% in stabilised 1% of pay reductions each year
  • Colleges and Universities
    • Rate will move by maximum of 1% of pay each year (average. 25.7% of pay)
  • Academies
    • Rates reducing by 1% of pay p.a. for most. Option to opt out of stabilisation and see a bigger decrease at this valuation (average. 24.2% of pay)
  • Housing Associations
    • Contributions reflect own funding position as well as the risk associated with longevity
    • Consider the fact the employer may or may not be heading to cessation
    • Employers may be able to provide some form of security which gives assurance to the Fund
  • Contractors
    • Contribution reductions likely to apply (possibly £nil rate resulting)
    • If “pass through” then no change in contribution rate

Funding Strategy Statement Review

As required by Regulation, a full review of the current FSS had been undertaken as part of the 2022 Actuarial Valuation. Whilst there had been no significant changes to the funding strategy as part of the 2022 Actuarial Valuation of the Fund, the opportunity to make some changes to the FSS, recommended by the Actuary, had been taken. The new draft FSS included separate and updated policies on:

• Academy funding (Appendix E of the draft FSS);
• Passthrough arrangements for Admission Bodies (Appendix F of the draft FSS); and
• Cessations, including a revised ‘risk-based’ corridor approach where applicable (Appendix H of the draft FSS).

Other main changes highlighted included:

• An increase in the time horizon allowed for Academies to reach full funding (2.2 of the draft FSS). This was now in line with that of local authorities and had changed from 15 years to 20 years
• Minor changes to the passthrough admissions process (Appendix F of the draft FSS)
• the fact that climate-related risks had been considered and documented when setting the funding strategy (C3 of Appendix C of the draft FSS).

The new draft FSS was open for a period of consultation with all stakeholders and interested parties until 31 January 2023. Employers had been advised of the revised FSS when results schedules were distributed, but a reminder had been sent directly to all Employers and a further note would be included in the Employer Focus Newsletters for December and January 2023. The Committee was asked to approve that the final version of the FSS be signed off by the Director of Finance (Under the new Senior Leadership Team structure, in effect from 12 December 2022), in consultation with the Chair. Members were informed that should there be any significant changes required because of the consultation, these would be presented to the Pensions Committee for approval at the meeting on 31March 2023 before the final FSS is published.

Resolved: a. That the content of the presentation from Hymans Robertson, attached at Appendix 2 of the report, outlining the results of the Actuarial Valuation of the Fund at 31 March 2022, and its impact on the contribution levels for the different groups of Employers in the Fund, be noted.

b. That the draft Funding Strategy Statement (FSS), attached as Appendix 3 of the report, and the revisions to the format and content of the FSS, outlined in this report and referred to by Hymans in their presentation, be noted.

c. That it be agreed that, subject to there being no significant comments received as part of the consultation with stakeholders, the Final version of the FSS be signed off by the Director of Finance (Under the new Senior Leadership Team structure, in effect from 12 December 2022), in consultation with the Chair.