Agenda item

(a)        The Committee considered and noted the update for delegated responsibilities and provided comments.

(b)        The Committee reviewed and approved the changes made to the FSS following the consultation performed as required by the LGPS regulations.

(c)        The Committee received and noted the findings and outcomes of the 2018 Funding Review as performed by the Fund Actuary.

Mrs Fielder gave an update on this item of the agenda and firstly mentioned that the business plan is on target for three tasks. She noted that that approval is required from the Committee regarding the update on the Funding Strategy Statement. Updates in the FSS incorporate the recent changes in the exit credit regulations and the additions to on the flightpath strategy e.g. dynamic equity protection.

The Appendix to the report covers the movement in cash during the period. As requested by Mr Hibbert at the last Committee meeting, there is a graph to reflect the cash management on page 232.

Mr Middleman summarised the results of the 2018 Interim Funding Review which allowed for updates of investment outlook and life expectancy trends (based on national statistics). The whole Fund funding level at 31 March 2018 was estimated to be 88% but the position has been volatile since then (rising to 92% and then back towards 88%).  The estimated future service was 18% of pay (versus 15.3% of pay at the last valuation) although this ignores the potential costs related to the cost management outcome.  However, it was still ahead of target and continues to be which is positive.  Mr Middleman explained that whilst the Fund has had a strong run a critical factor will be the expectations of future returns above inflation and ensuring contributions are sufficient to maintain the financial health of the Fund.  Mr Middleman confirmed this will be discussed in more detail as we move towards the valuation date and Mr Ferguson confirmed there is a meeting scheduled with the finance directors of the authorities at the end of January

Mr Middleman said that there are expected changes in relation to the demographic assumptions relating to life expectancy which will have an effect on costs and outcomes.  At the moment these are based on national trends but a bespoke analysis will be done for the Fund early in the New Year which will refine this for the valuation.

Mr Everett mentioned to Mr Middleman that this item of the agenda was very helpful. He questioned how the Fund can get certainty for a long term stability, given the tight employer budgets, especially given Brexit at the end of March 2019 as well as other factors that may leave the Fund in a worse position. Mr Middleman agreed that this uncertainty is not helpful but with the flightpath strategy and asset structure in place the Fund has mitigated some of the risks.  Critical is the impact on long term UK inflation which affects liabilities.

However, Mr Middleman confirmed that part of the discussions is setting a long term strategy and the balance between cash contributions and returns. If markets crashed by, say, 20% due to uncertainty around Brexit, Mr Middleman would not automatically assume that this is the position to set the contributions at, as it is a combination of the market position and future outlook e.g. if markets are (in the opinion of all advisers) temporarily depressed we would factor the recovery into the future investment return assumptions within acceptable bounds.

RESOLVED:

a)         The Committee considered and noted the update for delegated responsibilities and provided comments.

(b)        The Committee reviewed and approved the changes made to the FSS following the consultation performed as required by the LGPS regulations.

(c)        The Committee received and noted the findings and outcomes of the 2018 Funding Review as performed by the Fund Actuary.