Current Issues in the LGPS
05 Nov 2018 - Estimated reading time: 5 minutes
Overall, the Budget was relatively quiet from a pensions point of view. Further details are available in our summary.
‘eSCAPE to new factors
It stands for Superannuation Contributions Adjusted for Past Experience in case you were wondering. The SCAPE discount rate is used to determine the actuarial factors used across all of the public service pension schemes, including the LGPS. This discount rate reduced with effect from 29 October which means that some non-club transfers, some interfund calculations and all CETVs for divorce will need to be put on hold until new factors are issued. We understand that new transfer factors will be issued by the Secretary of State in due course, within approximately 6 weeks. We have prepared a summary which considers what impact the new factors will have.
Actuaries respond to Section 13 report
The GAD’s Section 13 valuation report on the LGPS in England and Wales, published at the end of September, contained a number of recommendations to SAB on how they believe future valuations can better meet the four criteria of Compliance, Consistency, Solvency and Long Term Cost Efficiency. We, alongside the other actuarial firms who advise LGPS funds, have written to MHCLG and SAB with our views on the recommendations and the GAD’s report in general. A copy of the correspondence has been shared with all Administering Authorities. Please get in touch if you would like to discuss this further.
Caps, cycles and pain: public service pensions race continues
The terms ‘caps’, ‘cycles’ and ‘pain’ may make you think of the Tour de France, but this summary is about something much longer and more gruelling: assessing the cost of the various public service pension schemes (including the LGPS).
NCA – National Report makes good reading for the LGPS
Following the end of our summer long search for LGPS confidence - in the shape of the National Confidence Assessment of Committee and Pension Board members - we recently released our national results report. This was hot on the heels of our webinar, where experts from our Actuarial, Investment and Governance teams gave their respective insights. The results give LGPS funds a good indication of Committee and Pension Board knowledge and understanding, with many funds now turning to ways to verify their results. Please contact us for your individual report and to discuss next steps.
CIPFA change – no benefit?
Our LGPS accounting team have responded to the latest consultation on a proposed change for the 2019/20 CIPFA Code of Practice. We feel the proposed adoption of a specific IAS19 amendment has the potential to add significant costs and complexity to LGPS pension accounting without any tangible benefit to local authorities over the current approach. As a result, our consultation response included details of why our preference is for this change to not be automatically adopted in the new Code.
LGC Investment Seminar Scotland
The LGC’s annual Investment Seminar Scotland was held on 23/24 October. Key themes from the conference were: structural reform in Scotland (and potential lessons that could be learned from England & Wales); a focus on generating predictable returns (from real assets and low volatility equities); responsible investment and the impact of technological change on investments. Read our conference highlights.
You may have seen that the High Court has ruled that occupational pension schemes are required to equalise male and female benefits for the effect of unequal GMPs. It will take time for the full detail to emerge, and there is a period for further questions to be submitted and the possibility of an appeal. This could have a significant impact on some private sector schemes depending on their own particular circumstances. It is likely to be much less of an issue for public service schemes such as the LGPS although it’s something to keep an eye on.
The LGPS keeps growing
The Government recently published the 2017/18 SF3 statistics for the LGPS in England & Wales, providing a useful snapshot on the health of the scheme across a range of indicators. The scheme now serves nearly 5.8m members (2m actives, 2.1m deferreds and 1.7m pensioners) across just over 17,000 employers. The market value of the funds continues to increase – up 4.7% to £271bn. Total income continues to increase (a 21.4% like-for-like increase), with much of this traced back to increases in employer contributions during the year. Total expenditure was £12.7bn which was 73% of LGPS income, less than the previous year due to the large increase in income. Governance and oversight costs remained steady at £52m. There was a small increase in the number of retirements (1.1%) and the numbers of ill health retirements remained much the same as 2016/17.