Agenda item

[To provide an overview of the valuation process to enable the Local Pensions Board to review the 2016 valuation process]

Rachel Brothwood, Director of Pensions presented the report on an overview of the 2016 actuarial valuation process to enable the Board to review the 2016 process.  Consultations were still ongoing on the actuarial valuation and would run until the end of the month.

Sharon Campion expressed concern that the outcome of the Government Actuary Department (GAD) review of the 2016 actuarial valuation results could trigger Secretary of State (SoS) intervention in the Fund’s funding and investment strategy.The Director of Pensions reported that the advice was that this would be a last resort and that the Fund was not expecting to be singled out in the report based on the approach proposed for the 2016 Actuarial Valuation.

Adrian Turner asked for a worst case scenario for the Fund on who would meet an employers’ costs if they could not afford their level of contributions over the three years to March 2020.  The Director of Pensions reported that the Fund had to balance its responsibility of being able to pay pensions and the employers’ ability to make their contributions.   The Fund had a strategy as to how this would be managed and it was having a dialogue with employers to manage their pensions contributions over time where the employer had alerted the fund to an issue. The Fund is also talking to employers about alternatives to cash funding to ease short term financial pressures but noting the Fund’s exposure to the risks of employer default. If an employer did fail to meet their contributions, the answer to who would meet their costs would depend on whether they had a guarantor.  New employer contribution rates take effect from 1 April 2017.  Regarding the budgetary arrangements for Academies being set around the academic year, the Fund is being flexible with Academies regarding payment of their contributions.

Chris West commented that organisations who are struggling financially were receiving excellent support from the Fund.  It was his understanding that colleges, schools and local authorities could not close the Local Government Pension Scheme to their employees but that this did not apply to TUPE transfer employees.  For a lot of organisations who were struggling, an increase in pension contributions might mean a closure of the scheme to new members.

Sharon Campion reported that she was concerned that the dialogue taking place with employers and the Fund was not being relayed back to employees.  The Director of Pensions reported that the Fund could not engage in dialogue with employees about potential changes to their pension arrangements as this was a matter between the employer and employee requiring specialist advice.

Annette King asked about the current position regarding the £95,000 exit cap.  The Director of Pensions advised that information and guidance on the matter was awaited.  Changes to the Local Government Pension Scheme (LGPS) early retirement terms had been suggested but to date no further details or proposals had been forthcoming.

Resolved:

That the process undertaken by the Fund to deliver the 2016 actuarial valuation for both the West Midlands Pension Fund (Main Fund) and the West Midlands Integrated Transport Fund (WMITA Fund) be noted.