Issue - meetings

FUNDING STRATEGY STATEMENT (FSS)

Meeting: 31/01/2019 - West Yorkshire Pension Fund Joint Advisory Group (Item 30)

30 FUNDING STRATEGY STATEMENT (FSS) pdf icon PDF 80 KB

The Director, West Yorkshire Pension Fund, will present a report

(Document “S”) which advises Members that the current Funding Strategy Statement on New Employers and Exit Valuations both require updating.  The principal changes are in relation to the treatment of a surplus on exit where there is a subsumption commitment following a change in the regulations.

 

Recommended –

 

That, subject to the outcome of the consultation exercise being undertaken in February 2019, the proposed changes to the Funding Strategy Statement be approved.

 

(Caroline Blackburn – 01274 434523)

Additional documents:

Decision:

Resolved –

 

That, subject to the outcome of the consultation exercise being undertaken in February 2019, the proposed changes to the Funding Strategy Statement be approved.

 

ACTION:       Director, West Yorkshire Pension Fund

 

Minutes:

The Director, West Yorkshire Pension Fund, present a report

(Document “S”) which advised Members that the current Funding Strategy Statement on New Employers and Exit Valuations both required updating.  It was explained that the principal changes were in relation to the treatment of a surplus on exit where there was a subsumption commitment following a change in the regulations.

 

The report revealed that In May 2018 regulation 64 of the Local Government Pension Scheme Regulations 2013 was amended to say that if an employer’s admission in the scheme came to an end (whether on the failure of the contractor or otherwise) and there was a deficit in the Fund on exit which could not be met by the company or any bond, the relevant Scheme Employer (i.e. employer letting the contract) would need to make up the shortfall or if there was a surplus in the Fund it must be paid back to the admission body.

 

The Funding Strategy Statement was being amended to cater for the situation where it may not be appropriate to repay a surplus on exit which is based on a discount rate which assumes on continuing employers.  In order to protect the Fund from challenge, however, clear documentary evidence would be required to show that it was a condition of the subsumption commitment that any surplus or deficit should be retained in the Scheme employer’s share of the Fund on exit and if that agreement was not forthcoming that the orphan funding target would be adopted.

 

The Fund’s strong preference would be for scheme employers to review all contracts where the contractor was an admission body in the Fund and ensure they were comfortable with what would happen on exit, ensuring an agreement was clear whether a surplus should be refunded or not.

 

The Fund would be holding a briefing session with representatives of  Councils; West Yorkshire Police and the Fund Actuary on 31 January so employers could further understand the implications of the changes to the regulations.

 

Other changes to the FSS included the Policy on New Employers Exit Valuations and minor changes to tidy up the wording to ensure consistency in references to the Fund and Regulations and some amendments to cover how multi-academy trusts were being dealt with in the future.  In addition it was also being made clear that any asset transfer was capped at 100% of the transferring liabilities.

 

A copy of the draft FSS and policy on New Employers and Exit Valuations was appended to Document “S” and the recommended changes to that document were tracked for ease of reference.

 

In response to questions it was explained that efforts were being made to interpret the regulations to ensure people were treated equally and that legal advice would be sought.

 

The appendix to the report referred to the method and assumptions used in calculating the cost of future accrual.  It was stated that for most employers the actuarial method to be used was the Projected Unit method with  ...  view the full minutes text for item 30