Archive for February 2018

David Davison

The LGPS Scheme Advisory Board (SAB) is seeking the input of charities at a meeting in Birmingham on 28th February 2018. The SAB was established to encourage best practice, increase transparency and coordinate technical and standards issues.

It is currently undertaking a review of Tier 3 employers in the LGPS – details of the project can be viewed here. Tier 3 employers are all those with no tax-payer backing (i.e. colleges, universities, housing associations, charities and any admission bodies with no guarantee from a Council, academy or other tax-payer backed employer).

The aims of the exercise are to identify:

  • the duties, benefits, issues and challenges for LGPS funds, Tier 3 employers and their scheme members with regard to their participation in the LGPS.
  • options for change that would improve the funding, administration, participation and member experience with regard to Tier 3 employers.

As part of this exercise it’s vital that charities get their voices heard. A key element of this project therefore is to gather information and to facilitate this a listening meeting has been set up at 2pm on Wednesday 28th February 2018 at Colmore Gate, 2 Colmore Row, Birmingham, B3 2QD. The meeting will be an informal discussion and provide you with the opportunity to ensure your views are heard and taken into consideration as part of this review of the LGPS.

If you are interested in attending please contact Chris Darby as soon as possible at chris.darby.2@aonhewitt.com.

This is a unique opportunity to have your voice heard and facilitate the change that is needed within LGPS. Hopefully the content I have provided in previous Bulletins from ICAS will help everyone with content.

David Davison

It’s coming up to that time of year when participants in LGPS will be preparing for their year end accounting disclosures under FRS 102. The norm is that the Fund advisers provide an indicative set of assumptions, these receive a cursory glance, you await the results of your report at some time around May and then have this incorporated in your accounts.

Simple….but wait!

Did you realise that it is the Directors /Charity Trustees who have responsibility for these disclosure assumptions and not the Fund actuary?  You can therefore chose to use a different set of assumptions if those are more suitable for you and bearing in mind that one set of global assumptions issued by the Fund actuary can’t be specific to each employer, this is probably something worth considering, especially if your balance sheet position is important.

You may well be surprised by just how much of a difference small changes in the assumptions can make to your liabilities and therefore your deficit and balance sheet position.

I would therefore encourage employers already disclosing an LGPS pension liability to consider the assumptions used and whether or not they are appropriate.

The table below shows the potential impact of varying the assumptions used to calculate the FRS 102 liability.  Please note this will vary for each scheme and the figures below are provided as an example only.

Change in assumption Change in liability
+0.1% p.a. discount rate -2%
-0.1% p.a. inflation -2%
-0.5% p.a. salary increases -1%

Indicative results showing the impact on deficit and balance sheet position are shown below.

‘Standard’ assumptions
£000
Organisation specific assumptions
£000
Assets 2,000 2,000
Liabilities 3,000 2,850
Deficit 1,000 850

So a small change of 2% in liabilities as in this case could reduce the deficit by 15% and improve the balance sheet position by £159,000.

As you can see therefore, for organisations participating in LGPS, it is well worth considering the use of bespoke assumptions, particularly if you are looking to manage your balance sheet. If you would like an indication of how changes could have impacted your 2017 disclosures we would be happy to provide these.

If you are considering a change, you need to consider this now as Funds usually require some advance notice that a different process will be used. We provide this service for many of our clients so don’t hesitate to contact us if you need more information.

Brian Spence

Spence & Partners, the UK actuaries and consultants, today announced their appointment by Edinburgh Airport Pension Plan for their award-winning, fully-integrated approach to DB scheme management – ‘The Spence Approach’.  Services to the 329 member, £95 million Plan will include actuarial, investment and pension scheme administration.

Brian Spence, Scheme Actuary to the Plan at Spence commented: “Trustees are looking for greater scheme transparency and a more joined-up approach to funding, investment and governance.  Our Mantle® system allows schemes to make informed decisions around their funding at any point in time, based upon the live administration and investment data – what we see, they see.  Trustees are no longer looking in the rearview mirror; instead they can be fully responsive to funding opportunities that will benefit the scheme.  We are very pleased to be working with Edinburgh Airport and the Trustees.”

Nicky Muldoon, Head of Procurement and Trustee of the Pension Plan commented: “Appointing an adviser with a fully integrated scheme management approach was something we at Edinburgh Airport and trustees of the airport’s pension scheme identified as a key measure to protect the long term benefits for scheme members, and the appointment of Spence and Partners will deliver on both of those fronts.  We are pleased to be working with Spence and Partners and look forward to a successful relationship with them.”

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