Agenda and minutes

Venue: Ascot and Bray - Town Hall

Items
No. Item

99.

Apologies

To receive any apologies for absence.

Minutes:

Apologies for absence were received by Cllr Rankin and Cllr Dennis.

 

It was noted that Billy Webster was no longer the Chairman of the Berkshire Pension Board.

100.

Declarations of Interest pdf icon PDF 131 KB

To receive any declarations of interest.

Minutes:

There were no declarations of interest received.

101.

Minutes pdf icon PDF 63 KB

To approve the Part I minutes of the meeting held on 16 January 2017.

Minutes:

The Part I minutes of the meeting held on 16 January 2017 were approved as a true and correct record.

102.

Integrated Risk Management pdf icon PDF 196 KB

To consider the report.

Minutes:

The Pension Fund Manager informed the Panel that the Pensions Regulator had issued a new defined-benefit regulatory guidance in December 2015, “Integrated Risk Management” (IRM). Whilst this was guidance rather than a code of practice it would be considered by the Regulator to be best practice.  Lincoln Pensions, a company that had extensive experience of undertaking IRM work for large private sector pension funds, had been commissioned to undertake an IRM project for the Fund.

 

The Panel received a presentation from Lincoln Pensions regarding the conclusion of an Integrated Risk Management study they had undertaken on behalf of the Pension Fund.  Draft findings were circulated at the meeting with the final report awaiting approval from the Pension Fund Manager.

 

The Panel were informed that Lincoln's approach on integrated risk with regards to the Pension Fund looked at the impact of selected economic scenarios on both the Fund and theSponsors.  The scenarios were:

 

·         1973 - 1974 Recession

·         2001 – 2003 Dot Com Crash

·         2007 – 2008 Credit Crunch

 

To allow for consistent analysis they had prepared a forecast model based on historical data. Forecast assumptions were then applied to produce ten year forecast projections for each Sponsor’s operating result, asset base and the ability to afford estimated pension contributions.  For this analysis the Fund was split into four Sponsor groups; Councils, Educational Bodies, Housing Associations and Individual Admitted Bodies.

 

The Panel were informed that there were limitations to the economic analysis used as there were unknown impacts on the risk analysis such as an aging population or a change in the political landscape. 

 

The overall conclusion of the report was that the Fund’ solvency level would be sensitive to an environment of exceptionally high interest rates and high inflation especially those Sponsors in the public sector.  It was felt that three of the local authorities could struggle to meet their recovery plans under such scenarios. 

 

The Panel were informed that it was felt that if the Fund was impacted by the stress scenarios it would require higher annual contributions to maintain a 20 year recovery period.  It was recommended that recovery plans should be better aligned to the strengths of each of the sponsors.   

 

The report set out Lincoln Pensions recommendations and next steps to address the risk that certain Sponsors were unable to afford the required contributions to meet a 20 year recovery period.  They felt that the Fund should not rely on being able to go to Central Government to bail it out and they encouraged the Fund to look at its financial position and performance every 6 months.  It was felt that as part of the review the Fund should also consider the impact of unprecedented ‘black swan’ events which captured highlighted potential risks facing the Fund. 

 

The Panel were informed that thought should be given to potential recovery models such as formalising resilience arrangements that may be placed on central Government, the utilisation of Council capital portfolios or the potential use of a local referendum to  ...  view the full minutes text for item 102.

103.

Actuarial Valuation 2016 pdf icon PDF 125 KB

To consider the presentation.

Minutes:

The Panel received a presentation from representatives of Barnett Waddingham, Actuary to the Fund, on the results of the 2016 Triennial Actuarial Valuation.

 

The Panel were informed that the purpose of the valuations was to show how much employers needed to pay in the future to have sufficient assets to pay benefits.  GAD would be carrying out the Section 13 valuations.

 

The administrating authority had the responsibility for producing the Funding Strategy Statement that showed the assumptions that had been used.  It was noted that revised CIPFA guidance had just been issued.

 

The Panel were shown how the valuation was done by projecting all possible benefits payments for each member, then attached probabilities to each possible payment and finally discounted expected payments to obtain the value.     The main question was are assets sufficient to pay the cash flow.

 

The March 2013 valuation results showed a deficit of £527 million with the plan to eliminate over 27 years. The plan was to increase contributions from pensionable pay by 3% over a 6 year period.  

 

The Panel were informed that the Advisory Board had asked actuaries why they did not use the same assumptions for all funds.  The Board were informed that different funds had different strategies; however the Board have asked for  standardised assumptions. 

 

The Section 13 valuation provided an independent review by GAD of the valuation and employer contribution rates to asses they are appropriate and if remedial action was required.

 

(Cllr Hill left the meeting)

 

The Panel were informed that the new Section 13 valuation started on 1st April 2017 with the draft report expected late 2018 or early 2019.

 

The Panel were shown the 20 year inflation curve and were informed that the assumption was for long term salary increases of 1.5% more then the CPI. 

 

With regards to the discount rate this had been based on a number of factors including the proportion of liabilities that were the responsibility of tax raising bodies, the ability of employers to pay more, the attitude to risk, the levels of volatility in the assumed asset returns and consistency with the 2013 valuation.  The demographic assumptions used were updated every three years based on mortality rates. 

 

The results of the valuation was that the funding assumption had decreased from 75% to 73% and thus more money was required to go into the Fund to pay for this deficit.  As a result when looking at the standardised funding levels the Berkshire Fund was ranked at 72% when compared to other Funds with 50% of Funds in the 90% to 100% range. 

 

As the rest of the discussion related to the financial affairs of Fund bodies the discussion continued in Part II – Private meeting.

 

104.

LOCAL GOVERNMENT ACT 1972 - EXCLUSION OF THE PUBLIC

To consider passing the following resolution:-

“That under Section 100(A)(4) of the Local Government Act 1972, the public

be excluded from the remainder of the meeting whilst discussion takes place

on the grounds that it involves the likely disclosure of exempt information as

defined in Paragraphs 1-7 of part I of Schedule 12A of the Act"

Minutes:

RESOLVED UNANIMOUSLY: That under Section 100(A)(4) of the Local

Government Act 1972, the public be excluded from the remainder of the meeting whilst discussion takes place on following items on the grounds that they involve the likely disclosure of exempt information as defined in Paragraphs 1-7 of part I of Schedule 12A of the Act.

104a

Actuarial Valuation 2016

105.

Minutes

To approve the Part II minutes of the meeting held on 16 January 2017.

106.

Action Tracking

To consider the report.