Report of the Director of Corporate Services
The Director of Corporate Services explained that a full review of both the FSS and the ISS was undertaken as part of the 2019 Actuarial Valuation, to take account of various changes in financial and demographic assumptions, and the Strategic Asset Allocation review, which was carried out alongside the valuation process.
The Committee noted that the FSS governed how employer liabilities were measured, the pace at which these liabilities were funded and how employers, or pools of employers, paid for their own liabilities. At its meeting on 27 September 2019, the Pensions Committee approved the current version of the FSS, which had been updated to reflect various financial and demographic assumptions used in the 2019 Actuarial Valuation. As a result of LGPS Regulatory updates on 23 September 2020, further changes were required to the FSS to reflect:
· A brief comment on the approach to be taken by the Fund in dealing with the uncertainty arising from the Goodwin court case.
· An explanation of the circumstances under which the Fund might amend contribution rates between valuations.
· Detail in relation to the payment of a cessation debt and the considerations that the Fund will make before paying an exit credit in line with their Exit Credit Policy.
· The circumstances in which the Fund would enter into a Deferred Debt Agreement (DDA) as an alternative to the payment of an immediate cessation debt.
The Director of Corporate Services explained that, once again, there would need to be an appropriate period of consultation on the FSS and it was proposed that, unless there were any material changes which it was considered necessary to bring to the attention of the Committee, the Director of Corporate Services be given delegated authority to sign off the final version of the FSS, following the period of consultation and prior to its publication on the Fund’s website.
With regard to the Investment Strategy Statement (ISS), the Committee were informed that the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2016 came into force in 2017 and under Regulation 7(6) and 7(7), the first ISS (which replaced the Statement of Investment Principles) had to be published by 1 April 2017, kept under review and revised from time to time and at least every three years. The Fund’s ISS was first published in April 2017 and had been reviewed annually since, to better reflect the arrangements in place for asset pooling and the transfer of assets into LGPS Central Limited. Having been updated quite substantially, to incorporate the outcome of the 2019 Strategic Asset Allocation review and the 2019 Actuarial Valuation, the current version of the ISS included some relatively minor amendments to better reflect activity during 2020, thus keeping it up to date.
It was noted that under Regulation 7(5), the authority must consult such persons as it considers appropriate as to the proposed contents of its investment strategy. In the formulation of the updated ISS, the Fund had consulted with its investment advisors, Hymans Robertson and the Pensions Panel. The Committee also noted that the document may need further substantial revision following the outcome of the MHCLG’s formal consultation on the Statutory Guidance on Asset Pooling in the LGPS; expected sometime in 2021. At that stage, wider consultation on the ISS may also be considered appropriate.
RESOLVED – (a) That the draft Funding Strategy Statement (FSS), (attached as Appendix 2 to the report), be approved and the need for wider consultation with Scheme Employers be noted and that, accordingly, authority be delegated to the Director of Corporate Services to approve any minor changes required to the FSS, as a result of that consultation.
(b) That the Investment Strategy Statement (ISS) (attached at Appendix 3 to the report) be approved and that the potential requirement for further updates, once the outcome of the Ministry of Housing, Communities and Local Government’s (MHCLG) formal consultation on the Statutory Guidance on Asset Pooling in the LGPS is known, be noted.