LPFA Employers’ Forum Section/EF... · Financial Conduct Authority (Reference number: 724653)....

LPFA Employers’ Forum

13 November 2018

Welcome & Introductions Highlights from 2018 Robert Branagh

LPFA Managing Director

My experience as an employer and employer representative on the LPFA Local Pensions Board (LPB)

Sean Brosnan Head of Payroll Pensions and Taxation

London Metropolitan University

What are the aims of the LPB? • It was established after the Public Sector Pensions Act 2013

• The LPB was set up in 2015 with four employer and four scheme member representatives.

• It replaced the member and employer panels, and one of its functions is to give you a voice in the governance of the LPFA.

• We assist the Local Pensions Partnership (LPP) to:

- Secure compliance with the regulations, other legislation and governance and the pension regulator’s requirements

- Ensure effective and efficient governance of the scheme

- Give additional comfort that the fund is compliant

- Independent review (e.g. cost effectiveness)

Key features of the LPB • Plays an important reviewing role, helping to ensure that the

LPFA, which has responsibility for administering the fund, complies with LGPS and other relevant regulations, and monitors all activities appropriately.

• As the body is made up of member and employer representatives, it is able to bring useful and different perspectives to bear, particularly in improving communication and engagement.

• Meetings take place on a quarterly basis in London and members of the LPB attend induction/training sessions annually.

• Have a good understanding of pension fund management, LGPS knowledge and all issues facing the LGPS.

• Financial and investment awareness.

• Act impartially in the interests of both employers and members.

• Confidence to challenge, influence, and engage.

Topics that we have been involved in Creation of the LPP The LPP, the entity created with Lancashire County Pension Fund to manage assets, liabilities, and administration, we wanted reassurance that it is working for your benefit.

To that end we have encouraged an independent review of its cost-effectiveness, which is due to report later this year. Communications To improve the communications between the fund and its members and employers. We have made recommendations to LPP’s engagement team, and are providing feedback via a working party. • Enhancing the member website • Newsletter to members and employers • Customer survey • Pension surgeries • Pre-retirement courses • Employer meetings • Member conferences • Pension admin strategy

Annual Benefit Statements (ABS)

• Members would have received a more user friendly and descriptive ABS for their benefit. Issued in August 2018 a clearer informative document with notes of guidance including a quick guide to your benefit statement with links to how to improve your pension benefits.

• Employers can assist further on this area by supplying the LPP their staff’s email addresses so they can communicate directly with members advising them that their ABS’s are available on the portal.

• Use the opportunity to remind staff what a significant benefit being a member of the LGPS is by communicating with staff directly and confirming to them that their statements have been issued.

• An extract report is available from the LPP of when staff last logged onto their member record and give them a reminder that it is in their interest to register/log-on in order to check their pension benefits and record and to raise any issues

• Use this as a tool to engage with your staff and reminding them of the excellent pension scheme that they are in at a cost of X% employer contribution.

I would like to remind employers of the above new facility available through the LPFA and Prudential.

• The advantages of implementing this new arrangement over the current scheme is that in addition to the tax relief that is currently received, the employee will pay lower national insurance contributions.

• In addition the employer will benefit from a reduction in the employer national insurance contributions.

• To ensure that the arrangement is compliant with the LGPS regulations, the SCAVC’s has to be set up as a shared cost scheme which means that both the employee and employer has to contribute to the SCAVC’s.

• In practice it works with the employee agreeing to take a contractual reduction in salary, equivalent to the amount of SCAVC's they would like to contribute and the employer then pays this amount into the shared cost SCAVC’s plan on their behalf.

• This does not reduce the scheme member's main pension benefits on retirement.

• Staff who contribute to a LGPS shared cost SCAVC’s scheme will see a reduction in national insurance contributions (NICs).

• For most staff this will result in a 12% reduction in their NIC contributions on the SCAVC’s amount and this will act as an important incentive to help save towards pension provision for both existing and new SCAVC contributors.

• There is also a reduction in employer NICs of approximately 13.8% on the total value of the SCAVC’s.

Salary Sacrifice Shared Cost Additional Voluntary Contributions (SCAVC’s)

Thank you

Sean Brosnan Head of Payroll Pensions and Taxation

London Metropolitan University

Investment Update

Richard J. Tomlinson

Investment Director,

Head of Investment Strategy

LPP

Important information

11

Capital at risk: Past performance is not an indicator of future performance. Investments may go down as well as up and you could get back less than you put in.

Local Pensions Partnership Investments Ltd (LPPI) is authorised and regulated by the Financial Conduct Authority (Reference number: 724653). LPPI is appointed as an Investment Manager to manage the assets of London Pensions Fund Authority (LPFA).

This presentation has been prepared for LPFA Employers Forum to provide information regarding the investment performance of the pension fund of LPFA. It does not provide any advice on legal, taxation or investment matters and should not be relied upon for any such purposes. The recipients of this presentation (whether intended or otherwise) are strongly advised to seek independent professional advice before making any investment decision.

This presentation may contain ‘forward-looking statements, views or opinions’ with respect to certain plans and current goals and expectations relating to the investment performance of the pension fund of LPFA. By their nature, all forward-looking statements, views and opinions are inherently predictive and speculative and involve known and unknown risk and uncertainty because they relate to future events and circumstances which are beyond LPPI’s control. Any projections or opinions expressed are current as of the date hereof only.

Without limitation to the generality of the aforesaid, this presentation is provided “as is” without any warranty (express or implied) as to the accuracy or completeness of any information contained herein. Neither LPPI, its affiliates nor any of said entities’ respective employees, directors and officers shall be liable howsoever to any person for any acts and/or omissions proclaimed to be based on this presentation or any part thereof.

12

£5.6bn as at 31 March 2018

LPFA Fund value Capital at risk. Past performance is not an indicator of future performance. Investments may go down as well as up and you could get back less than you put in.

4.9 4.6 4.5

5.3 5.6

0.0

1.0

2.0

3.0

4.0

5.0

6.0

31 March

2014

31 March

2015

31 March

2016

31 March

2017

31 March

2018

Fund value in billions

13

LPFA investment performance

Data as at 31 March 2018

Capital at risk. Past performance is not an indicator of future performance. Investments may go down as well as up and you could get back less than you put in.

7.8%

11.5%

7.7%

3.8%

1.1%

9.0%

11.9%

9.3%

4.5%

1.3%

7.3%

11.2%

9.4%

3.7%

0.2%

5.4% 6.1%

6.3%

1.6%

0.2%

0%

2%

4%

6%

8%

10%

12%

Five Years Three Years One Year Three Months One Month

Total Fund Return - September 2018

LPFA: (excluding LDI) LPFA: (including LDI) LPFA Total Plan excl LDI excl Cash LPFA Total BM Actuarial Target

14

Current asset allocation


Data as at 30 September 2018. Total may not add to 100% due to rounding.

Equities 48.4%

Private Equity 9.3%

FI Fund 3.8%

Total Return 14.4%

Credit 7.8%

Property 8.7%

Infra 5.3%

Cash & C. Hedge 2.4%

15

LPP pooling progress


Asset Class Launch Date Size (Estimated at 1.10.18)

Global Equity Nov 2016 £6.3 bn

Private Equity March 2017 £2.5 bn (committed)

Global Infrastructure June 2017 £1.8 bn (committed)

Credit Sept 2017 £1.4 bn

Fixed Income Feb 2018 £596 m

Diversifying Strategies Sept 2018 £780 m

Real Estate 2019 TBC

16

Pooling deliverables

• Capital at risk. Past performance is not an indicator of future performance. Investments may go down as well as up and you could get back less than you put in.

£3.5m in savings in fund management fees achieved

between 2016-17 and 2017-18 for LPFA

Our approach


Long term investment horizon

Leverage LPP scale

Internal investment capability

Governance / rigorous investment assessment and risk evaluation

Thoughtful management of portfolio liquidity

Providing capital financing for businesses, real estate and infrastructure projects

17

Responsible Investment

We are committed to responsible investment and engagement. We address

environmental, social, and governance (ESG) issues in our investment process. ESG

is an integral part of our investment decision making process.


• LPP is a signatory to the UN Principles for Responsible Investment.

• Oversight by an Investment Board and

Stewardship Committee.

• LPP Responsible Investment Policy sets out our principles for investing pension savings.

• LPP Shareholder Voting Policy ensures proper stewardship and governance.

18

Investments: Pontoon Dock


19

Artist’s impression of the completed development. Actual development may vary.

• Brownfield development

• Build to rent

• 80% equity stake

• JV with Grainger

• Procured through the GLA

London Development Plan

GLIL Infrastructure


£1.8 bn (committed) AUM

GLIL launched as Alternative Investment Fund in March 2018. LPPI appointed as Manager to fund (AIFM)

Direct UK infrastructure investments

4 investors:

o LPPI Global Infrastructure Fund; the pooling vehicle for the

infrastructure assets of LPFA and other LPPI fund clients

o Greater Manchester Pension Fund

o Merseyside Pension Fund

o West Yorkshire Pension Fund

Long term ownership of the assets

20

Investments: Anglian Water


21

• 7.5% stake acquired with 1

Board seat

• Regulated utility providing

predictable and inflation-linked

cashflows in perpetuity

Anglian Water is one of the strongest performing water utilities in the UK

Investments: Semperian


22

• Access to Semperian’s

large and diversified

portfolio of infrastructure

assets within the social

infrastructure sector

• Government-backed and

inflation-linked cash flow

streams Semperian has investments in 92 assets comprising 2.8 million square metres of accommodation, 15,000 hospital beds, 1,600 car-parking spaces, 163 schools and 508km of road.

Investments: Forth Ports


23

• Partnering with investors

including PSP Investments,

Canada’s largest pension

investment manager

• 10% stake owned with 1 Board

seat

• Long-term value accretion

enabled by freehold and

perpetual nature of asset and

GDP-linked characteristics

• Delivers highly resilient cash

flows

Forth Ports owns and operates 8 commercial ports including Tilbury, Grangemouth, Leith and Dundee. It is the 3rd largest ports group by volume in the UK.

Summary


Inflation-linked assets

Meet long-term liabilities

Cash-generative assets

Pay pensions now

Strong governance

Ensure appropriate management of assets and shareholder protection

24

Thank you

Contact: Richard J. Tomlinson Investment Director, Head of Investment Strategy Local Pensions Partnership T: 020 7369 2666 E: [email protected] W: localpensionspartnership.org.uk

25

Pensions Administration Update

Greg Smith

Director of Strategic Programmes & Group Company Secretary

LPP

About us – LPP re-cap

27

Investment management

Asset and liability risk management

Pension administration

(via LPPI1, authorised and regulated by the Financial

Conduct Authority)

Our vision is to be ‘a leading pension services business’ operating on a ‘not-for-profit’ philosophy and working in partnership with our clients and other customers.

LPP at a glance

28

employees

pension fund members across LGPS, Police and Firefighter schemes

assets under management via LPPI, a fully-owned subsidiary authorised and regulated by the Financial Conduct Authority

Pension Administration – key topics

• Changes in the Operating Model • Challenges faced and

implications • Engaging with the membership

and dealing with member queries

29

Pension Administration

Changes in pensions delivery • New target operating model explained • ICT implementation was successful • Contact centre expansion for calls and emails • Anticipated benefits – improved member and employer

experience, greater resilience and a lower cost

30

Member and Employer

Engagement

Member services including contact

centre

Business Development

Pension Administration: Preston 91 London 1

Romford 31 Hertford 29


Challenges faced to date • Scale of change was significant – additional testing

required • Big bang approach was unwise in hindsight • Distinction in service requirements between partners Implications: • Significant backlog – 100% reduced for LPFA and 95%

reduced for all partners • SLA missed for LPFA but now back on track • Customer experience unacceptable

31

Full year 17-18

April 18 May 18 June 18 July 18 August 18

Sept 18 October 18

95% 57% 73% 59% 79% 94% 92% 96%


Update – where are we now? • Stabilisation achieved – staffing increases • Service levels achieved – over 90% for the last 6 weeks across

the business and back in line with SLAs. • Customer experience improving – average 2min wait time and

new emails responded to in 24 hours.

• Annual Benefit Statements and Annual Allowance letters issued on time

• Statutory consultation issued to members • Review of model and lessons learned underway. Next stage is

to confirm how we can use our scale to drive improvements in the member and employer experience.

32


Engaging with employers and members You can contact LPFA via email, phone and post. [email protected] We aim to respond to all email queries within ten working

days When calling our contact centre - we will aim to resolve

your query over the phone and can give you advice on such things as:

- Scheme regulations - Change of addresses - Help navigating the website - Talk through any of our processes - Help you complete documents over the phone.

33


Engaging with employers and members • However, if we’re unable to resolve the query over the

phone or email, we may pass you onto one of our caseworkers who manage more complex queries.

• Our caseworkers will keep you informed throughout the

process and ensure timeframes are made clear.

• To ensure you get the information you need, when you need it, we suggest going to our website and signing up for our member self-service portal.

34


Engaging with employers and members • Customer Service Accreditation • Data Management Accreditation & GDPR • Member Forum September • Employer annual conference November • Annual employer visits • Valuation 2019 • Website review planned for 2018-19 • Roll out of new member self service

functionality

35

Pension Administration – 17/18

36

99% of employer forms submitted

online

95% of cases completed on-

time

97% customer satisfaction

40% active members using

self service

This presentation has been prepared to inform the intended recipient of information regarding LPP Ltd and/or its subsidiary, Local Pensions Partnership Investments Ltd (LPPI) only. It does not provide advice on legal, taxation or investment matters and should not be relied upon for any other purpose without seeking independent advice. No investment decisions should be based upon its statements without such advice.

No other parties may rely or make decisions based on the content of this document whether they receive it with or without consent. LPP and its employees acknowledge no liability to other parties for its content and no representation or warranty is made, expressed or implied, as to the accuracy or completeness of the information provided. This document may not necessarily contain the information that would be provided to another party whose objectives or requirements may be different.

This information may contain ‘forward-looking statements’ with respect to certain plans and current goals and expectations relating to LPP’s future financial condition, performance results, strategic initiatives and objectives. By their nature, all forward-looking statements are inherently predictive and speculative and involve known and unknown risk and uncertainty because they relate to future events and circumstances which are beyond LPP’s control. Any projections or opinions expressed are current as of the date hereof only.

Where referenced, past performance is not an indication of future results. Investments can go up as well as down.

LPPI is authorised and regulated by the Financial Conduct Authority.

© 2018 Local Pensions Partnership


37

Thank you

Contact: Greg Smith Director of Strategic Programmes & Group Company Secretary Local Pensions Partnership T: 020 7369 6058 E: [email protected] W: localpensionspartnership.org.uk

38

Covenant Risk, Valuation & Emerging Issues

Tony Williams

Head of Employer Risk LPP

Membership - April 2018 Active 19k 24% Deferred 27k 34% Pensioner 34k 42% Totals 80k 100% • Relatively mature fund – only 24% of members active

40

Active employers

41

Sector No. Deficit £m

Higher Education 11 203,434-

Charity 23 72,987-

Further Education 13 25,749-

Social Housing 7 9,802-

admitted no guarantor 5 2,089-

'non-safe' guarantor 5 1,752-

Private School 3 919-

Schools & Academies 30 650

'Safe' guarantor 11 1,392

Tax Raising 23 23,058

Implicit govt guarantee 10 30,407

Grand Total 141 261,224-

Risk by sector – the big debate

42

Sector Sector Risk

Previous

Insolvency

in sector?

Could it

Happen?

Higher Education Medium No ??

Charity High Yes Yes

Further Education Medium No ??

Social Housing Medium No ??

admitted no guarantor High Yes Yes

'non-safe' guarantor High Yes Yes

Private School High Yes Yes

Schools & Academies Low No ??

'Safe' guarantor Low No No

Tax Raising Low No No

Implicit govt guarantee Low No No

Covenant model

Uses various metrics to assess risk Combine these metrics together to come up with 3 primary measures: • Financial risk score – how well doing financially

• Pension Burden – size of cessation debt/net assets

• Z score – measures short term insolvency risk

43

Valuation timetable

• Finalisation of covenant categorisation by 31 March 2019

• Data submitted to fund actuary by 30 June 2019

• Resolution of data queries 21 July 2019

• LPFA board agree final valuation assumptions and results October 2019

• Consultation on Funding Strategy Statement completed 30 November 2019

• Valuation result issued to fund employers 31 December 2019

44

Valuation timetable - continued

• Valuation meetings held with employers – January/February 2020

• Actuary advised of final LPFA results by 7 March 2020

• Final Valuation certificates issued by 31 March 2020

• New LPFA results commence 1 April 2020

• Implementation of further security by 31 March 2021

45

Key valuation issues

• Effect of unfunded schemes such as Teachers and awareness of the magnitude of planned increases.

• SHPS Valuation and effect of increased contributions.

• Possibility of aligning all public Sector Valuations on a four year cycle.

• Could this mean a further valuation in 2020, position as yet unclear, but may be known by the end of the year?

46

Other key issues

• New Fair Deal Consultation by 31 December 2018

• New Insolvency regimes

• Tier 3 Report

• TPR – New approach to workplace pensions

47

This presentation has been prepared to inform the intended recipient of information regarding LPP Ltd and/or its subsidiary, Local Pensions Partnership Investments Ltd (LPPI) only. It does not provide advice on legal, taxation or investment matters and should not be relied upon for any other purpose without seeking independent advice. No investment decisions should be based upon its statements without such advice.

No other parties may rely or make decisions based on the content of this document whether they receive it with or without consent. LPP and its employees acknowledge no liability to other parties for its content and no representation or warranty is made, expressed or implied, as to the accuracy or completeness of the information provided. This document may not necessarily contain the information that would be provided to another party whose objectives or requirements may be different.

This information may contain ‘forward-looking statements’ with respect to certain plans and current goals and expectations relating to LPP’s future financial condition, performance results, strategic initiatives and objectives. By their nature, all forward-looking statements are inherently predictive and speculative and involve known and unknown risk and uncertainty because they relate to future events and circumstances which are beyond LPP’s control. Any projections or opinions expressed are current as of the date hereof only.

Where referenced, past performance is not an indication of future results. Investments can go up as well as down.

LPPI is authorised and regulated by the Financial Conduct Authority.

© 2018 Local Pensions Partnership


48

Thank you

Contact: Tony Williams Head of Employer Risk Local Pensions Partnership T: 020 7369 6237 E: [email protected] W: localpensionspartnership.org.uk

49

London Pensions Fund Authority Pension

Fund

Looking ahead to the 2019 valuation

Liam Mayne FIA, Partner & Actuary

Ross Anderson FFA, Associate & Actuary

13 November 2018

LPFA EMPLOYER FORUM: LOOKING AHEAD TO THE 2019 VALUATION

Agenda

Valuations (general)

2016 valuation re-cap

Where are we now?

Where are we going?

Cost cap management

Valuations -

general


Valuations - recap

•Accumulation of

contributions and

investment returns

less benefits paid

Assets

•How much are they

worth?

Valuation

4

•Future benefits paid

from the Fund

(pensions, lump sums,

transfer values)

Liabilities

•How much do we need

now to pay future

benefits? (Contribution

rate)

Valuation

Value of liabilities less value of

assetsDeficit

Value of assets / value of

liabilitiesFunding Level


Purpose of valuations

Ongoing triennial funding

valuation

•What contributions need to be paid

to pay benefits as they fall due

•Prefer a higher likelihood to be

sufficient than not

•Actuary agrees assumptions with

Fund

•Long-term prudent return on Fund’s

investments

•Liabilities/costs much lower

•More stable valuation

Accounting (IAS19/FRS102)

•To show cost/liabilities in accounts

•Employer is responsible for setting

assumptions

•AA rated corporate bond yield

•Higher value placed on

liabilities/costs

•Volatile

Cessation valuation

•To ensure enough assets to meet

liabilities with no further reliance on

employer

•Minimum-risk valuation (usually)

•Gilt yields (usually)

•Even higher value placed on

liabilities/costs

•Volatile

Depends on the question being asked!

2016 triennial

valuation re-cap


Background

• to certify levels of employer contributions to secure

the solvency of the Fund and the long term cost

efficiency of the Scheme

Set out in LGPS

Regulations

• As determined by administering authority

• With some actuarial help!

Also have regard to the

Funding Strategy

Statement

• Function of Funding Model / investment strategy

• Spreading and stepping

Actuary to “have regard to

desirability of maintaining as

nearly constant a (primary)

contribution rate as possible”

• Statutory/non statutory bodies

• Open or closed admission agreements

• Look at employer financial strength (“covenant”)

Help Fund manage

employer risk

7


Whole Fund results

Past service funding position

Proposed basis

31 March 2016

£m

Smoothed asset value 4,515

Past service liabilities

Actives 1,075

Deferred pensioners 1,025

Pensioners 2,598

Total 4,698

Surplus (Deficit) (183)

Funding level 96%

•96% funded at whole Fund level

•Improvement since 2013 valuation

(91%)

•Employers have individual funding

levels and funding

plans/assumptions

•Cost of benefits at Fund level:

•Fund Primary rate: 14% of payroll

•Fund secondary rate: 6% of

payroll (around £30m p.a.)

•Deficits targeted by 2030 (usually

earlier – continuation of 2013)

Comments


Employer contributions - summary

Accrual of new benefits (primary rate)

• Percentage of salaries for new benefits

Past service deficits (secondary rate)

• Cash amounts paid over a maximum of 14 years (some over less)

• Maintain contributions if improved but still in deficit

• Increase contributions if adverse experience

If in surplus

• Generally paying primary rate only

Subject to LPFA funding framework

• Financially weaker employers assessed on lower discount rate so fund liabilities quicker

• All employers achieve same investment return

• Employers can move between categories if certain conditions met

LPFA funding framework (info at 31 March 2016)

Category Number of (active)

employers

Asset value as % of

Fund

Discount rate Maximum recovery

period

A 103 70% 5.7% p.a. 14

B 27 21% 5.4% p.a. 14

C 17 9% 4.0%- 4.8% p.a.* Expected future

working lifetime

*for employers who are projected to exit the Fund, this discount rate is until exit, with 2.2% p.a. used thereafter


Section 13

Compliance

•Have valuations been completed in accordance with Regulations?

Consistency

•Has a Fund’s valuation been completed on a basis “not inconsistent” with others?

Solvency

•How well funded are you and can you withstand a market shock?

Long-term cost efficiency

•Are employers paying enough now to ensure no increased burden on future taxpayers?

Government Actuary: LGPS in better position after

funds make ‘significant’ progress – Professional

Pensions 28 September 2018

Current funding -

where are we now?

90

100

110

120

130

140

150

% g

row

th s

ince 2

01

6 v

alu

ati

on

Change in Asset Values

Asset projection

based on 2016

valuation assumption

90

100

110

120

130

140

150

% g

row

th s

ince 2

01

6 v

alu

ati

on


Asset projection

based on 2016


Equities

90

100

110

120

130

140

150

% g

row

th s

ince 2

01

6 v

alu

ati

on


Asset projection

based on 2016


Equities

Gilts

90

100

110

120

130

140

150

% g

row

th s

ince 2

01

6 v

alu

ati

on


Asset projection

based on 2016


Equities

Gilts

Actual assets

LPFA EMPLOYER FORUM: LOOKING AHEAD TO THE 2019 VALUATION 17

Change in real discount rates - liabilities

2.00%

2.50%

3.00%

3.50%

4.00%

4.50%

5.00%

5.50%

6.00%

6.50%

31/0

3/2

016

31/0

5/2

016

31/0

7/2

016

30/0

9/2

016

30/1

1/2

016

31/0

1/2

017

31/0

3/2

017

31/0

5/2

017

31/0

7/2

017

30/0

9/2

017

30/1

1/2

017

31/0

1/2

018

31/0

3/2

018

31/0

5/2

018

31/0

7/2

018

30/0

9/2

018

Change in real discount rates - liabilities

Discount rate

Inflation

Real discount rate


Funding levels – the good news….

18

90%

95%

100%

105%

110%

115%

120%

Funding Level

Smoothed


14.0%

14.5%

15.0%

15.5%

16.0%

16.5%

17.0%

31/0

3/2

016

31/0

5/2

016

31/0

7/2

016

30/0

9/2

016

30/1

1/2

016

31/0

1/2

017

31/0

3/2

017

31/0

5/2

017

31/0

7/2

017

30/0

9/2

017

30/1

1/2

017

31/0

1/2

018

31/0

3/2

018

31/0

5/2

018

31/0

7/2

018

30/0

9/2

018

Primary rates

Primary rate

Primary rates – less good news


So……..

Strong asset returns since 2016

• Great if you held the assets at 2016

• Not so great if you still have some to buy…

• Equity market falls in October

Lower expected returns (above inflation) going forward

• Offsets some of the asset outperformance to date

Current funding

• Higher cost of future accrual

• Improved funding level due to good asset returns

However!

• Still plenty of time for things to change

• We live in an uncertain world

• Our model designed to help withstand short-term “noise”

20


Mortality improvement slowdown

21


Employers results

We can’t provide an indication of employers results at this stage

•Funding model and assumptions to be discussed/reviewed with LPFA Board

•Employer circumstances different from Fund as a whole

What we know

•Returns have been really good (although setback in October)

•Lower expected returns (above inflation) going forward

•Slowdown in mortality improvements

•Potential for things to change between now and 31 March

What we know that we don’t know

•Changes to assumptions – discount rate in particular

•Individual employer experience

•Individual funding strategy and discussions

•Won’t know until individual results available in October/November 2019

What we don’t know that we don’t know…

•Usually to do with Government

22

2019 valuation

– where are we

going


2019 or 2020?


Why is accurate valuation data so important?

Garbage

data

Amazing

valuation

system

Garbage

answer



Contribution rates

Section 13 conclusions

Assets and

cashflows

Covenant

information

Membership

extracts



Incorrect

and/or out-

of-date

valuation

data

Scheme is as

complex as it’s

ever been

More employers

than ever before

Administering

authorities

perhaps lacking

sufficient

resource

27

Standardisation tPR

Data

improvement

plans

Regular data

checking and

review


BW LGPS Online Data Checker

28

Our software will help Funds provide accurate data for

2019 valuation


Timetable – key milestones TBC

29

Summer/Autumn 2019

Whole Fund results and

assumptions

Reporting of individual employer

rates to the Fund

April 2019

“Early indications” general

briefing note

31 March 2019 end-of-year

returns due


Timetable – key milestones TBC

30

March 2020

Results finalised & valuation report signed off Contributions start 1 April 2020

February 2020

Employer consultation period ends

Winter 2019

LPFA discussion of rates with individual employers

Cost cap

management


A recap!!

What is it?

• Framework for keeping

the cost of the scheme

sustainable

• To ensure costs are fully

recognised by employers

How does it work?

• Considers changes in

member related factors

only e.g. changes in life

expectancy

• Does not allow for

financial or technical

changes

• Valuation tests whether

scheme cost has changed

by more than 2% of pay

What are the next

steps?

• Benefits and/or

contributions are

adjusted to get back to

original levels

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What’s the impact?

2016 valuation

• Valuations indicate

benefits will be made

more generous

• Mainly due to “flatter”

life expectancy

improvements

Budget

announcement for

unfunded schemes

• Reduction in discount

rate to CPI plus 2.4%

• Not allowed for in cost

cap valuations

• Employer contributions

will increase over the

long term

What about the

LGPS?

• No direct impact on

employer contributions

• Cost envelope is 19.5% of

pay for LGPS - this is not

the real cost!!

• Fund actuary still sets

assumptions having

agreed with Fund

• Change to discount rate

and Section 13

33

Questions

Thank you

Liam Mayne and Ross Anderson Barnett Waddingham

LPFA Employers Forum 2018

Thanks for coming

LPFA Employers’ Forum Section/EF... · Financial Conduct Authority (Reference number: 724653)....

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Transcript of LPFA Employers’ Forum Section/EF... · Financial Conduct Authority (Reference number: 724653)....