Victoria Moffett (Lead Commissioner – Pensions and Investment) introduced the report. She thanked Hymans Robertson personnel for their work to develop the Funding Strategy Statement (FSS), for which approval was sought from the Sub-Committee.
Rob Bilton (Hymans Robertson) introduced the FSS, stating that a valuation of the Pension Fund was undertaken every three years to review the financial position of the Fund and set employer contribution rates. The FSS had been reviewed in detail as part of the valuation. He highlighted the scale of the valuation exercise which required engagement with Fund employers over an 18-month period. This process had run smoothly, and he thanked Fund officers for their support. There had been no material changes to the funding strategy following the valuation. However, he highlighted a slight change to arrangements for academies to introduce further stability to their funding strategy. This was an appropriate course of action given that the employers have a guarantee from central government to provide cover for any LGPS liabilities which could arise in the event of closure of an academy trust.
Rob Bilton advised that the layout of the FSS had been refreshed to make it easier to navigate. The main body of the Statement provided a high-level summary; where detail was needed around specific policies, these were included as appendices. He advised that employers had been consulted on the draft FSS. During the consultation, a comment had been raised by an Academy Trust relating to the assumptions and mechanisms used for dealing with pass-through arrangements – for example, when an employer outsourced a service. He advised that there was no perfect solution in these circumstances; however, engagement with the Academy Trust had led to an improvement.
Rob Bilton advised that the FSS was not significantly different from the initial draft provided to the Sub-Committee in December 2022. Once finalised, the FSS would be published on the Fund’s website.
Councillor Hammersley stated that the FSS was thorough and comprehensive. He commented that, by taking a prudent long-term view to secure long-term solvency, the Strategy was focused on the right areas.
In response to the Chair, Rob Bilton advised that a stabilised approach was a prudent longer-term strategy for the Fund’s local authorities. The size of an employer was an important factor when determining the stability of contribution rates, including where there was a high level of confidence that an employer would be able to fund benefits. In respect of Nuneaton & Bedworth Borough Council and Stratford-on-Avon District Council being designated as mature authorities, he advised that several factors were taken into consideration to determine maturity, including the sensitivity of the contribution rate to movement in assets and liabilities, and the ratio of liabilities against payroll. The review of the Strategy in March 2022 had focused on the robustness of arrangements for contribution rates. Modelling had been undertaken leading to confidence that the right approach was in place. He stated that a material change in liabilities would prompt further analysis. The Strategy was regularly reviewed.