Issue - meetings

The Committee noted the estimated funding position for the Fund along with the progress made on the various elements of the Risk Management Framework.

Mr Middleman briefed the Committee on the following points:

·         At 31 December 2020, the Fund had a funding level of 96%, which was 4% ahead of what was expected at the last actuarial valuation.

·         He raised the issue regarding uncertainty in the market as per the previous agenda item, which could affect whether the Fund would meet the long-term expected returns in the funding plan. For example, a 0.25% p.a. reduction in the expected long-term return would reduce the funding level by 4% back to 92%. This emphasised the sensitivity to returns and the potential impact on the employer contributions.

·         The Fund was in a good position given the relevant risk controls within the flightpath to give more predictability of outcome.  Whilst this does not remove all risks, it provides a good level of protection.

Mrs McWilliam asked whether anything would happen if the Fund reached a funding level of 100%. Mr Middleman said that in that scenario the Fund would need to review their strategy and consider “banking” some of the gains by reducing risk further through the investment strategy e.g. a reduction in growth assets. This will depend on a number of factors, which will be discussed at the Funding and Risk Management Group and implemented as per the delegations.   The outcome of that discussion could be different if the funding level improved to 110% when compared to, say, a funding level of 101%.

            Mr Latham stated that the Fund managed to achieve targets at a relatively low risk and asked Mr Middleman whether this was a fair comment to make. Mr Middleman confirmed and said that the Fund’s strategy is more risk aware than many LGPS funds. The crucial element to the flightpath framework was to monitor the risk in a more structured way and to stabilise and achieve the Fund’s target. Running the Fund at a lower risk had proven successful, however, to protect against downside there will be some potential upside given up but in Mr Middleman’s view, the Fund’s approach is the correct one in the long term.

            Mr Everett asked for the latest funding level figures. Mr Middleman explained that the funding level was very similar to 31 December 2020 i.e.  96% funded. This will be reviewed on a monthly basis as normal.

RESOLVED:

The Committee noted the estimated funding position for the Fund along with the progress made on the various elements of the Risk Management Framework.