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Monitoring Employer Strength for LGPS Funding

Stay informed about the financial health of employers contributing to LGPS and their impact on funding levels and member benefits through monitoring and risk assessment.

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Monitoring Employer Strength for LGPS Funding

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  1. Monitoring Employer Strength Claire Connelly Employer Services & FundingLGSS Pensions

  2. Background • LGPS - Funded Scheme • Employer Contributions = Members Benefits • Hot topics: • Grant reductions / cuts • General economic downturn / restriction of credit • Organisations cease trading • Consider Impact on: • Employers to pay contributions now/ future • Funding strategy • Employer specific contribution rates. • Shortfall in funding = strain on the Fund

  3. Changing Employers

  4. Growing Scheme Membership Source – CLG SF3 data for English LGPS Funds

  5. Increasing Pensions & Assets Source – CLG SF3 data for English LGPS Funds

  6. What the papers say... Pension liabilities are devastating charities, umbrella groups tell minister Devastating EU rules will force most UK traditional company pensions to close Analysis: Facing up to the sector's pensions crisis Pension Liabilities scupper merger

  7. Reasons for Employer Covenant Monitoring • Current climate • It's Valuation Year • Health Check for Employers • Agree exit strategy • Manages Risk

  8. Approach Needs to be fair: • predetermined rules / factors • objective and justified • consistent • establish the level of risk for each employer • criteria • work together

  9. Approach Outcomes: • inform • strength of employer covenant • deficit recovery periods • targeted funding levels • discuss / reassessment / mitigation

  10. Risk Assessment Process Identify the risk of the employer to the fund Criteria / rules used to determine risk levels consulted on with Scheme Actuary Other factors – employer information Consider factors when assessing contribution rates Implications / Mitigations……

  11. Criteria

  12. Risk Implications

  13. Employer Information Changes in financing arrangements, expansion plans etc What is your credit rating What are your sponsoring arrangements What are your bond arrangements What is your AE policy – LGPS or comparable? Admitted bodies – how strong is your admission agreement, what is your cessation date

  14. Employer Risk Puzzle Family Tree Type of body Funding Level Cashflow

  15. Communication Direct Communications • Individual meeting offered to each fund employer Website • Updates on the valuation process on the Pension Service Website  http://pensions.cambridgeshire.gov.uk http://pensions.northamptonshire.gov.uk Confidentiality • Results are confidential and will not be released

  16. Sum up – our overall expectation • Joined up funding / investment / covenant • Planning • Parental support / wider group support • Monitoring covenant / reviews • Flexibility • Identify best practice • Get ahead of issues • Pro-active engagement

  17. Questions? • Further information: • http://pensions.cambridgeshire.gov.uk • http://pensions.northamptonshire.gov.uk • Contact: • Mark Whitby • mark.whitby@cambridgeshire.gov.uk • Claire Connelly cconnelly@northamptonshire.gov.uk

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