Steven Law (Hymans Robertson) will update the Panel on Regulatory changes impacting the Pension Fund.
Minutes:
63.1 Steven Law gave a presentation to the Panel (copy appended to the signed minutes).
63.2 Steven Law outlined the change in legislation for exit credits. Previously, any surplus following cessation would remain within the fund. Following May, any surplus will be returned to the employer.
63.3 Legislation changes also meant the actuary had to perform exit calculations as soon as the last active member left an employer to determine whether a surplus exists. This would have an impact on Town and Parish Councils who could have one clerk employee, as cessation calculations would be immediately required between clerk appointments, rather than being suspended pending any new eligible members joining the Scheme which will add actuarial costs.
63.4 The tax implications of paying back a surplus have not been confirmed. - POST MEETING CLARIFICATION: LGA has confirmed no tax is payable.
63.5 Steven Law also spoke on the updates for the Funding Strategy Statement. Suspension notices would no longer be issued if there were no actives for an employer where a surplus is identified. The option to issue a suspension notice will remain where a deficit is identified. Work was underway to consider the administration costs for this for the fund. Flight plans would be utilised to manage the risks of a surplus emerging.
63.6 It was proposed to hold an informal Pensions Panel to discuss the impact to the investment strategy.
63.7 The Committee made comments including those that follow.
• Queried how the legislation changes may impact the fund stability. – Steven Law explained that he would continue to use Gilts basis for employers with no guarantor – no change. However, further management may be required to control potential surpluses and the cash balance of the Fund. New admitted bodies would be underwritten and so have no impact.
• Sought clarity on the different levels of surplus/deficits for admitted bodies. – Steven Law explained that bodies that had no backer would be calculated on a stricter basis. Other bodies had large time frames and so investments would be used to help deficits.
• Asked how the fund could become cashflow negative. – Steven Law explained that this happened if the fund was paying out more than the contributions received. Rachel Wood added that the fund received income from investment mandates which gave the fund more breathing space.
• Queried how the fund was insulated from the different financial positions of academies. – Steven Law explained that if an academy experienced financial difficulties it would either be transferred to a new Multi-Academy Trust or go under. A new Multi-Academy Trust would take on the old position; if the academy went under the Department of Education would underwrite the deficit.
• Asked who paid the valuation and cessation fees for Parish Councils. – Steven Law explained that this would be netted from the asset position. Whilst a surplus would be payable within three months of the exit date, if a deficit was identified, there is a discretion to allow employers to be given a suspension notice which would give a plan on payment timing.
• Queried if all Parish Councils could be merged in the fund. – Steven Law confirmed that the regulations did not allow this.
63.8 Steven Law gave an update on the Government Actuary Department (GAD) valuation which had put an amber fail flag on the pension fund for increased costs for funding level reductions if there were a shock to the Fund’s growth assets. The actuary has lobbied GAD that raising costs would not be necessary for the Fund due to the already high funding level and changes to the Fund’s investment strategy. GAD have agreed to remove the flag.
63.9 The Panel welcomed the update and agreed to have an informal meeting on the 12 September to discuss the investment strategy.