Sixty Second Summary
Rain drops keep falling on our heads…
24 Jul 2019 - Estimated reading time: 1 minute
- The remedy and costs associated with the McCloud case are highly uncertain
- It is very likely that funds will have local discretion over how to manage the uncertainty and risk at the 2019 valuation
- Agree the risk management approach with your Fund Actuary, and ensure it is communicated to employers and documented in your Funding Strategy Statement.
Although most LGPS funds and employers have just dried out after the inconvenience the McCloud case caused to year end accounts, the deluge continues as we now start to consider what impact it will have on the 2019 valuation.
Glossing over the rather tedious weather-related title and introduction (I am typing this looking out on a lovely Scottish summer day of heavy rain and cloud), the recent developments in the McCloud case highlight it as a specific funding risk that we would expect all funds to consider as part of the 2019 valuation.
Why is it a risk to LGPS funds?
After the Supreme Court denied the Government leave to appeal the McCloud and other associated cases on 27 June 2019, a written ministerial statement confirmed that as ‘transitional protection’ was offered to members of all the main public service pension schemes, the difference in treatment will need to be remedied across all those schemes, including the LGPS.
As the remedy will involve ‘levelling up’ member benefits, it is expected that any agreed outcome will increase the cost of LGPS pensions. However, at the time of writing, there is no certainty about how much this additional cost will be.
Download our full summary here.
Please get in touch with your usual Hymans Robertson contact to discuss McCloud – or any other aspect of the valuation – in more detail.