1 / 24

Leicestershire Pension Fund Annual General Meeting

Leicestershire Pension Fund Annual General Meeting. LGPS up-date. John Wright Barry McKay 15 January 2013. Some topical issues. 2013 Valuation Pensions Reform: LGPS 2014, Governance, Cost Control Auto-enrolment New flat-rate state pension Other issues:

hop
Download Presentation

Leicestershire Pension Fund Annual General Meeting

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Leicestershire Pension FundAnnual General Meeting LGPS up-date John Wright Barry McKay 15 January 2013

  2. Some topical issues • 2013 Valuation • Pensions Reform: • LGPS 2014, Governance, Cost Control • Auto-enrolment • New flat-rate state pension • Other issues: • Infrastructure and local investment

  3. 2013 Valuation

  4. Investment performance since 2010 valuation Bonds Shares Actuary’s long term assumption

  5. But interest rates have fallen March 2010 Government bond yields and inflation

  6. Deficits have increased Lower funding levels, higher contributions • Source: Sample LGPS Fund, 30 September 2012 Navigator Report

  7. Summary • Investment returns in line with long term assumption • But interest rates down and liability values up • Deficits have grown • Savings from new scheme modest – increase in contributions at 2013 less than would otherwise have been the case • Continuing upwards pressure on contributions Contributions likely to stay at current levels or above for longer

  8. Changing LGPS scheme membership Active Deferred Pensioner Active liability: 51% in 2007 to 42% in 2010 to 36%? in 2013 Employee membership falling, more pensioners • Source: Hymans Robertson, based on a sample County Council pension fund – not Leicestershire.

  9. Why is LGPS scheme membership changing? • Redundancies • Early retirements • Fewer new recruits • More outsourcing • Council payroll shrinking • e.g. transfers of staff to academies • Admission agreements often closed to new recruits • 50/50 option in LGPS 2014 What impact will auto-enrolment have?

  10. Cashflow worsening? Cashflow OK now ... ... small reductions in members changes picture But most Funds have enough investment income • Source: Hymans Robertson, based on a large LGPS fund.

  11. Reform: LGPS 2014

  12. New LGPS from 2014 • Accrued rights protected (NRA, Rule of 85, final salary link) • Protection for members within 10yrs of NRA at 1 April 2012 • New “50/50” option to bolster LGPS participation

  13. How much pension is enough? Good design? Chart based on CARE scheme with 1/60th accrual and allows for Basic State Pension of £140 per week. Assumes the member has a full public service career (45 years in this example) and remains in the scheme throughout. Sources: Hymans Robertson (2011) and Turner (2004)

  14. Public Sector Pensions Bill • Covers LGPS & unfunded (all parts of the UK) • Design changes common to all schemes • CARE (no future Final Salary DB), SPA link • “Cost control” measures • Cap and collar on employer contributions • Stronger governance and arms’ length oversight: • High regulatory hurdle to prevent further reform within 25 yrs • Implement by 2015 (2014 for LGPS in E&W) Scheme specific details in secondary legislation

  15. LGPS cost control

  16. Life expectancy increasing faster than SPA LGPS costs could continue to increase Population life expectancy vs State Pension Age

  17. “Cap and collar” cost control “Cap” “Ceiling” 6.5% 13% 19.5% total Employee contributions Employer cost 6.5% 16% 22.5% total Employee contributions Employer cost 6.5% 13% 19.5% total Employee contributions Employer cost Trigger breached, reduce benefits and cost

  18. Threats to sustainability • Benefits still generous and savings modest? • Will SPA keep up with life expectancy? • Cost management (caps/collars etc) effective? • Envy (continuing decline in private sector pensions) • Economy underperforming over long term • Politics (either lack of will or too much interference)

  19. Auto-enrolment

  20. Workers confused? “Thousands baffled over compulsory pensions” Express, 10 December 2012 Need for good communication

  21. Auto-enrolment and LGPS employers • Many have staging dates in first half of 2013 • Many employers will defer until 2018? • To save money? • To avoid implementation cost and effort? • Still need to comply for new joiners, birthdays, pay changes

  22. Other topical issues

  23. Other topical issues • Local investment & infrastructure but ... • Responsibilities of pensions committee • Sufficient diversification? • Best available investment of its type? • Availability of suitable investments? • Riskiness of currently available investment opportunities? • Excessive fees? • Consultation on investment regulations (LLPs) • Fund mergers and shared services

  24. Thank you

More Related