Local Government Pension Scheme Update
To consider an update on the performance and governance of the Local Government Pension Scheme (LGPS).
(Note: At this point in the proceedings the Chairman, Councillor M Blair, declared an interest as a member of the Bedfordshire Local Pension Board).
The Committee considered an update on the governance of the Local Government Pension Scheme (LGPS).
Points and comments included:
· Barnett Waddingham had replaced Hymans Robertson as the new Bedfordshire Pension Fund actuary with effect from 1 October 2018 and would be examining the Council’s next actuarial valuation.
· In his Autumn Statement on 29 October 2018 the Chancellor had announced that, from an unspecified date, pension increases would be in line with Consumer Price Inflation Housing (CPIH) instead of Consumer Price Inflation (CPI). CPIH was CPI but it included housing costs (the average change in residential rents) in the basket of goods that were measured). As housing costs often increased faster than other goods CPIH was generally higher than CPI, though not always. The Assistant Director Finance stated that a considerable impact on pensions could arise relatively easily but local authorities, and their actuaries, could only monitor the situation. If any issues did arise they would be raised with the appropriate authorities.
· With regard to the Separation Project the Assistant Director Finance explained that a project had been commissioned in 2015 to examine the issues and challenges of separating the pension’s functions of the LGPS administering authorities from the host authorities, thereby managing any potential conflicts of interest. A further project had been established for 2019/20 under the actuary Hymans Robertson to see how the recommendations could be made to work in practice. The project had yet to conclude its business and the Assistant Director stated that he was unable to comment until he had seen the resulting report. A report would be made to the Committee on the outcome.
· A full report on developments regarding the Border to Coast Pension Partnership pool would be included in the next LGPS report to the Committee.
· The Pension Fund net investment return for the quarter ending 30 June 2018 had been 3.37% which was below the benchmark return of 4.09%. The Assistant Director explained that the quarter in question had seen very unusual activity in the market, particularly with regard to equities, and there had been a considerable dropdown, which had impacted on the pensions market as a whole. However, the most recent quarter had shown a different performance and the market had recovered but the new data had appeared too late to be included in the officer report.
· The ability of the fund to meet demands from its pensioners was monitored through the valuation by the actuary. Matters such as expected longevity, potential liability and the ability to meet liabilities as they formed were all considered. There was a deficit which meant the Council and other employers had to pay more into the LGPS. There was a plan to ensure that the deficit was always covered in the longer term. It was unlikely that surpluses would be seen in the future.
· In response to a query on whether covering the pension deficit was sustainable the Assistant Director stated that full account was taken of it when drawing up the medium term financial plan. Any changes to the LGPS would be nationally driven rather than by an individual pension fund. He acknowledged the challenge involved.
the Local Government Pension Scheme update.