Agenda item

Report of the Director of Finance.

The Committee received a presentation from Gemma Sefton, the Actuary, Hymans Robertson LLP, setting out the progress on the triennial valuation to date and, in particular, on the funding strategy review.

Gemma Sefton referred to her presentation slides and made the following key points:

·                     Harrow Council was ahead of other Councils in the reporting of its triennial valuation.  The results of the triennial valuation had a major impact on the management of the Pension Fund and the contributions from the General Fund.  She alluded to the outcomes of the submission of the results to the Scheme Advisory Board and referred to the Contribution Strategy Modelling which had been explained during the training session prior to the meeting.  All scenarios would be considered;

·                     the employer consultation meetings had been well attended. Members of the Pension Board had also received presentations.  Policy changes would be embedded in the draft Funding Strategy Statement which would be consulted upon.  Thereafter, the proposed Funding Strategy together with the Valuation would be considered by the Committee at its March 2017 meeting;

·                     the statutory consultation process would continue and all representations received would be considered.

The Director of Finance responded to questions and advised that employer’s contributions could not be used to finance non pension fund pressures such as redundancies on the basis that the government was the ‘lender of the last resort’.  There was a statutory duty upon the Council to ensure that the Pension Fund was properly funded.  If the Council were to do so, the Pensions Regulator would be obliged to intervene.

An adviser asked if it was possible for the Council to issue a mini bond which could be purchased by the Pension Fund.  He suggested that various mechanisms needed to be explored by the Pension Fund Committee by way of a report.  The Director of Finance advised that this would increase the Council’s borrowing which in turn would impact on the Revenue Account.  She stressed that borrowing had to be prudent.

Gemma Sefton then made further points as follows:

·                     a risk based approach was being used to set the contributions.  Colin Robertson, Independent Adviser, requested that the group be shown the assumptions underlying the modelling and this was agreed;

·                     approximately, there were 11,000 employers across the LGPS.  All of those included in the Harrow Fund were being considered separately. Overall, flexibility was retained and all employers were tracked;

·                     in relation to the colleges, it was proposed that a risk-based approach was used in place of the current “stabilised” contribution rate approach;

·                     in relation to schools, consideration needed to be given to how academies, which were employers in their own right and not under local authority control, ought to be treated.  Concern was expressed that academies were very risky.  Gemma said that academies were immature with strong cashflows which mitigated the risks.  It was proposed that academies were offered the contribution stability mechanism used for the Council;

·                     a communication would be issued to such schools on payment of individual rates, including a stabilised contribution.  The DfE had not issued any direction in this regard but held a ‘watch list’ on how Councils were treating academies and the Council had been included on the ‘watch list’.

The Director of Finance confirmed that the DfE’s intention was to ensure that the academies were being treated fairly compared to local authority schools.

Gemma Sefton explained that should the Council face a legal challenge, it would be costly.  She further explained that whatever contribution was agreed with each academy, the overall deficit would need to be paid off eventually.  In concluding her presentation, Gemma Sefton referred to the slide on ‘Policy Reminder – employers planning for exit’ and the need for open discussion with employers to reach suitable outcomes.

The Chair thanked Gemma Sefton for her presentation.

RESOLVED: That the presentation be received and noted.