LPFA Employer Forum 23 rd November 2015 Welcome & Introductions Stephen Alambritis LPFA Board Review of the Year Susan Martin LPFA Chief Executive Working with Employers Mike Allen LPFA Director of Pensions Employer Engagement key issues End of Year Contribution Returns Annual Benefit Statements The Role of The Pensions Regulator Communications Other issues End of Year Returns Why we need this information? Maintain accurate records Annual Benefit Statements 2015 new CARE arrangements Additional information required Old Pay (2014) and CARE pay Assumed Pensionable pay Timescales Returns by end of April Queries raised response within 30 days End of Year Returns Start planning for 2016 Monthly returns Test files Review of 2015 process Mixed results from employers Some excellent information provided Some difficulties encountered Improvement needed for some Annual Benefit Statements Timescales 31 st August for all members Reportable Breach if timescale not met Oversight from The Pensions Regulator Key issue for next year The Pensions Regulator Legal Requirements Public Service Pensions Act 2013 Governance Cost Control Administration Code of Practice 14 Framework for governance and administration Assess and report breaches Local Pension Boards Knowledge and Understanding Communications & Support Newsletters Monthly updates on key issues Guidance Guides available on HR & Payroll Monthly Returns Year end process Assistance Yourfund website Staff at LPFA Your views Feedback welcomed Other issues for LGPS and employers Valuation 31 st March 2016 Data quality End of Contracting Out Increases in National Insurance Contributions Guaranteed Minimum Pension Reconciliation LGPS & Other Pensions Reform Chancellors announcement on pooling 95k cap Tax Relief Governance Review William Bourne LPFA Local Pension Board Chair Local Pensions Boards Representing you Department of Communities & Local Government governance consultation What do we do? Local Pension Board vs LPFA Board Who we are Member Representatives Omolayo Sokoya Peter Scales Simon Steptoe Jamie Ratcliff Employer Representatives Charles Angus Frank Smith Sean Brosnan Bernadette Jansen To contact your representative please Moving forward Inaugural meeting held Oversight - Monitor risk and performance reports between meetings Assistance - Use meeting time to review particular areas Communication - to and from Members and Employers Whats next.? UK - Actuarial Advisory Firm of the Year UK - Pensions Advisor of the Year LPFA 2015 Employer Forum Outlook for the 2016 actuarial valuation Mark Norquay FFA, Associate 23 November 2015 Agenda Valuations (general) Purpose of the triennial valuation Re-cap of 2013 valuation 2016 Valuation 17 VALUATIONS (GENERAL) 18 Valuations (general) Valuations Cost of benefit promises not known in advance Make assumptions Project the future pension benefit payments Place a value on them Different purposes Triennial funding Annual accounting Employer entry and exit 19 Purpose of triennial valuation Recommend employer contribution rates Check on solvency of Fund Review funding strategy Help Fund manage risk 20 Detail set out in regulationsActuary must have regard to: Desirability of maintaining as nearly a constant rate as possible Current funding strategy statement RE-CAP OF 2013 VALUATION 21 Re-cap of 2013 Valuation New funding framework introduced Agreed by the LPFA Board Framework links employer covenant and funding 22 Discount rate used varies at employer level Employers financial strength Whether open or closed to new members Employers financial strength 23 Employer is categorised as having a strong covenant Employer can take on more funding risk We use a higher discount rate to value the liabilities Contributions are at the lower end of the scale Employer is categorised as having a weak covenant Employer cant take on as much funding risk We use a lower discount rate to value the liabilities Contributions are at the higher end of the scale Open or closed? Open Assumed to carry on indefinitely in Fund Approach as set out on the previous slide 24 Closed No more active members joining means employers leaving date can be estimated Cessation debt payable on exit is often substantial Can modify the funding target to plan for this Discount rate before leaving is calculated in the same way as for open employers Discount rate after leaving is based on principle of minimum risk Closed employers Contribution discussions The above process resulted in initial calculated contribution rates Could be adjusted during discussions with the LPFA, subject to reduced risk, such as: One-off contribution to Fund Guarantee from government/parent Security or escrow account Demonstrating secure income streams to prove financial strength Contribution certificates had these measures written into them 26 Employers Contributions - Summary Percentage of salaries for new benefits Accrual of new benefits Cash amounts paid over either average time to leaving or a maximum of 17 years (i.e. to 2030) To pay for past service deficit Closed employers only Combination of percentage of salaries and cash amounts, paid over average time to leaving To contribute towards expected cessation amount E.g. security on employer assets, demonstration of secure income streams If conditions not met, original contributions apply Can be adjusted subject to conditions 27 2016 VALUATION 28 Whats changed? New LGPS scheme in place from 1 April 2014 New governance arrangements (more oversight) Public sector pay restraint Employer cost cap LGPS environment Currently similar to 31 March 2013 at Fund level At employer level, will depend on employers particular experience Funding levels To be reviewed, expect structure to be similar 2030 target likely to remain Rate stability will depend on whether security remains in place We will look to maintain rates and reduce deficit recovery periods where affordable LPFA employer funding framework 29 Data Checking process already started Previous years cashflows Member data test run Quicker data checks for 2016We need your help though 30 Funding model and assumptions To be discussed with the LPFAWill depend on market conditionsCurrently expecting Same overall smoothed funding model Review of main financial assumptions compared to economic conditions, particularly salary increases Updated Club Vita assumptions for current mortality Similar future mortality assumption and other statistical assumptions 31 Valuation timetable Valuation preparation Data cleansing Submission of data Member data Employer cashflows Fund asset details Valuation results produced Standardised results to Scheme Advisory Board (30 September 2016) Agree FSS and funding framework Produce initial individual employer rates LPFA discussion of rates with individual employers Discussion about security etc. Final documents produced Employers contribution rates certified Valuation report finalised March 2016 Summer 2016 Autumn 2016 Winter March 2017 Any Questions? LPFA Employer Forum Thanks for coming!