Speaking at the Pension and Lifetime Saving Association’s (PLSA – now renamed Pensions UK) Local Authority conference, GAD Actuary Garth Foster discussed the need for clarity and a balanced approach to funding and management of surpluses.
The support which the Government Actuary’s Department (GAD) provides to the Local Government Pension Scheme (LGPS) was also discussed at the annual conference for people who manage the LGPS.
Local decision-making
In his talk Garth Foster explained that each fund valuation is managed locally, and outcomes will be determined by local decision-making processes.
He said the current context makes this challenging and that it was important to understand how funds come to their decisions: “We encourage funds to consider ways they can make this information as available as possible for us and other third parties, so that it can be subject to scrutiny and ensure that we’re bolstering the credibility of the scheme and the valuations as much as possible.”
Prudence and stability
Speakers at the conference acknowledged that funds would likely use different approaches to reflect prudence and stability in their valuations. While experts consider this is not unreasonable, some consider it could lead to some divergence in how results are presented.
Panel discussion – from left to right:
Garth Foster, Actuary, Government Actuary’s Department
Richard McIndoe, Director, Strathclyde Pension Fund; Member, PLSA Local Authority Committee
Chair: Neil Mason, LGPS Senior Officer, Surrey Pension Team; Member, PLSA Local Authority Committee
Rachel Wood, Head of Pensions, West Sussex County Council; Member, PLSA Local Authority Committee.
Credit: Pensions UK
Garth Foster observed that funds would be mindful of the risks of returning to deficits, but there can also be challenges where funds become over funded, particularly in the current context of really tight fiscal conditions. He said: “Striking that balance between the two aspects is key to ensuring that intergenerational fairness is being achieved”.
In this context, intergenerational fairness is about preventing one generation of taxpayers from either paying too much into the pension fund or benefiting disproportionately from surpluses at the expense of future generations who will also need to fund the scheme.
Section 13 review
After each cycle of valuations, GAD has been appointed by the Ministry of Housing, Communities and Local Government to carry out a ‘Section 13’ retrospective review of the overall valuation process, as prescribed by the Public Service Pensions Act 2013.
GAD set out plans for its treatment of surpluses in its previous report on the 2022 valuations named Local Government Pension Scheme England and Wales: Review of LGPS fund valuations as at 31 March 2022 under Section 13. Part of this process will be looking at those funds who are releasing surplus most quickly, and least quickly, and any unique or non-standard approaches.
