Issue - meetings

(a)       The Committee noted the Funding, Flightpath and Risk Management Framework update; and

(b)       The Committee agreed to the 110% funding level trigger and agreed the funding level de-risking trigger process.

As outlined in the report, Mr Middleman confirmed that at the end of December, the Fund had a funding level of 102%, which was still a strong position. The end of December funding position was lower than previously due mainly to structural factors such as membership experience and the McCloud remedy (combined these equate to roughly a 3% reduction in funding level). 

            Mr Middleman believed the biggest risk for the Fund was the persistency of the current relatively high inflation as the Fund’s liabilities were directly linked to inflation so higher inflation than previously expected would mean an increase in costs, unless expected asset returns increase to compensate. He confirmed this would be a matter for ongoing consideration at future Committees as the Fund reaches the actuarial valuation date on 31 March 2022. Inflation risk was the most significant risk for the Fund with employer budgets and contributions being a key debating point.

An adjustment to the collateral limits was noted in paragraph 1.11 along with the plan to adjust the level of collateral held in the higher yielding assets in the collateral pool pending its investment in Private Markets.

Mr Latham reminded the Committee of the discussions at previous meetings about putting in place a funding level trigger of 110%. Since that discussion, consideration has been given to the governance around the process to change the strategy if the trigger was breached.  Mr Latham explained the report proposed the Committee agree to formalising the funding level trigger of 110% and also included a proposed process, which set out the timescale and milestones should this trigger be hit. This proposed process included corresponding with the Committee setting out the proposed changes for comment. Ultimately, a special Committee meeting could be called to debate the changes if any concerns about de-risking are raised in feedback from Committee.

The Committee approved the 110% funding level trigger and agreed the funding level de-risking trigger governance process.

RESOLVED:

(a)       The Committee noted the Funding, Flightpath and Risk Management Framework update; and

(b)       The Committee agreed to the 110% funding level trigger and agreed the funding level de-risking trigger process.