Issue - meetings

That the Committee approve of the Funding Strategy Statement and delegate the refinement of the document to Fund Officers in readiness for the consultation with the participating employers.

The Fund Actuary, Paul Middleman presented the key elements of the 2016 draft Funding Strategy Statement (FSS).  The Committee were asked to approve the draft FSS and delegate the refinement of the document to Fund Officers before it goes to consultation with employers.

In terms of the overall Fund governance it is a requirement to prepare, publish and review the FSS. It was noted as part of the presentation that Mr Middleman does not feel that the pooling of investments in Wales will have a major impact on the 2016 FSS. The Fund is duty bound to consult with participating employers before finalising the document but ultimately it is an Administering Authority decision on the how the funding strategy is implemented. The CIPFA guidance on preparing an FSS is currently being reviewed in light of the change in regulations/oversight and will be published in the coming weeks.  It was noted that the draft FSS incorporated the expected changes in the guidance but may need refinement depending on the final outcome.

Paul Middleman stated the key areas to be addressed in the FSS:

·         Aims and purpose

·         Treatment of Employers (funding and contributions)

·         Solvency target

·         Risk control and management (including Flightpath)

·         Other policies (new and leaving employers)

Paul Middleman discussed the key points of the FSS and main funding objectives which will confirm the employer’s contribution requirements for 2017/2020.  These were detailed in the separate report and draft FSS and supporting presentation.  An additional consideration of this valuation is the scrutiny under Section 13 of the Public Service Pensions Act 2013, which is performed by the GAD on behalf of the Government.  It was noted that whilst this should be a consideration it should not drive funding decisions. Section 13 valuations are simply a mechanism to ensure that all LGPS Funds are setting sufficiently robust funding plans in absolute terms and relative to others.  

The key parameters which are proposed to be changed versus the existing FSS from the 2013 valuation were as follows:

·         Linking the discount rate to the investment returns above CPI - this is the key driver of liabilities

·         Remove allowance for 50/50 benefit take-up other than where a member has already opted for it (for the 2013 valuation, 5% of the membership were assumed to opt for this but the experience does not support it)

·         Life expectancy update – initial analysis for CPF suggests there has been a tailing off of life expectancy improvements versus expected which would reduce liabilities

·         Reducing recovery period deficit where possible with the total Fund average possibly reducing by 3 years – this will also be a key measure under GAD’s Section 13 assessments under the Long Term Cost Efficiency requirements,

·         Update/development of related policies – examples were the termination and admission policies.  A critical addition at this valuation was the implementation of an employer covenant review framework.

Steve Hibbert queried why the 50/50 option take-up was so low and whether it had been communicated fully.  It was confirmed that this is a  ...  view the full minutes text for item 20