Agenda item - INITIAL 2019 TRIENNIAL VALUATION RESULTS AND FUNDING STRATEGY STATEMENT (15 MINUTES) BOLA TOBUN

Agenda item

INITIAL 2019 TRIENNIAL VALUATION RESULTS AND FUNDING STRATEGY STATEMENT (15 MINUTES) BOLA TOBUN

Minutes:

Bola Tobun advised that this is good news for the fund, it is now in a surplus position of £39.3 m from a deficit position of £131.9m as at 31 March 2016.

 

The following was highlighted:

·         Page 9 of the report details and compares the results from 2016 to 2019. Attention was drawn to the Total Employer Contribution reducing from 22.8% in 2016 to 20% in 2019. Bola Tobun advised that this would have reduced further to 18.5% but kept at this level to factor in possible costs in respect of the McCloud judgement. Other London boroughs are not accounting for this or it was felt have accounted a too small an amount.

·         The probability of funding success had increased from 69% in 2016 to 80% in 2019, this has been driven by market valuation. The discounted rate has reduced from 4.5% to 4.2% as the expected investment return is not predicted to be as good as in 2016.

·         Page 15 details what the local authority is paying (20.2%) was previously 24.8%.

·         The employer contribution rate will reduce with effect from April 2020. This decision was made by the PPIC in November 2019. The Board was disappointed that this had not been bought to the board for them to scrutinise and were not happy with this reduction.

·         The Funding Strategy Statement contained with the agenda was felt to be very complex, difficult to understand and not user friendly. This should be written in a less complex manner. Bola Tobun agreed to take these comments back to the Actuary and that they could be invited to the Board to explain the strategy.

·         Page 38 provided a summary of the assumptions that had been made.

·         Page 10 contains a table detailing how the 39.3m surplus is made up.

·         It was confirmed that the employee will not see a reduction. This rate is set by the Government.

·         Following a query on if employer contribution reduces, where will money come from if there is a gap. It was confirmed that this is not pension fund contribution and will not impact on PAYE.

·         Concern was raised that lots of assumptions have been made in a very volatile environment. It is unknown what effect leaving the European Union will have and should we be dropping employer contributions at this time. Bola Tobun and actuaries have looked at this in detail, many different scenarios have been examined, to ensure that sound advice is provided. If there is a shortfall employers’ contributions will then go up.

·         Guard sections 13 Report will come back to Board with Enfield funding position in relation to other LGPS funds this is due out in July and will help provide a better understanding of PPIC decision.

·         Bola Tobun said that for next valuation year, timings of meetings of board could be looked at to take into account timing of PPIC taking decisions and sharing in the wider realm. Board could meet shortly after PPIC so that they can scrutinise budget setting and consultation period if the meetings were close together.

 

The Board agreed the following statement:

The Board was disappointed that the Initial Triennial Valuation Results and Funding Strategy Statement did not come to the Local Pension Board prior to the decision being communicated to the wider audience. Further concern was expressed by the Board at the reduction to the employer contribution rate given the uncertainty in the current financial climate. The Board felt that it was inappropriate to have reduced the contribution in the light of the current financial climate. Timings of the Board meetings should compliment those of the PPIC meetings in order for the Local Pension Board to consider reports and decisions in a timely manner so that they can contribute to those decisions prior to the decisions being communicated more widely.

 

Supporting documents: