Local Government Pension Scheme 24 March 2010 PENSION LIAISON OFFICERS’ GROUP (PLOG)

Local Government Pension Scheme WELCOME / INTRODUCTIONS David Anthony – Head of Pensions Martin Summers – Pensions Manager Andy Cunningham – Employer Relationship Manager

Local Government Pension Scheme AGENDA 1.Welcome/Attendance 2.Valuation data requirements (Andy Cunningham) 3. Valuation outlook and potential outcomes (David Anthony) 4. AVCs (Martin Summers) 5. FRS17 update (David Anthony) 6. Regulation changes and final pay protection (Martin Summers) 7. AOB 8. Dates/venue of forthcoming meetings

Local Government Pension Scheme 2. VALUATION DATA REQUIREMENTS - General data requirements Valuation will use data and accounting position as at 31 st March 2010 to determine funding levels for all employers. Fund has until June to resolve all data issues up to 31 st March. Out of date or incorrect records on our system have a direct effect on contribution rates (although the smaller the employer, the more significant one discrepancy will have)

Local Government Pension Scheme 2. VALUATION DATA REQUIREMENTS - End of year requirements End of year contributions spreadsheet sent out on 12/03/10 to be returned as soon as possible after 1 st April 2010 (but no later than 19/05/10.

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES 2010 Valuation Outlook Where are we now? Potential outcomes?

Local Government Pension Scheme Outlook Not good! – Funding Levels or Contribution Rates Political Pressure / Employer Affordability Remember long term game for most Longer term outlook: –Economy –Markets and returns –Future benefit changes –Further mortality improvements 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES CLG Consultations Consultations on valuations –Review of financing plans (short, medium and long term) –Local funding targets –Revised employee contributions Consultations on benefits and administration –Cost Sharing? –Revised benefits?

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES Wiltshire – 2007 Results – Whole Fund Liabilities£1335.0m Assets£1131.3m Deficit£ 203.8m Funding Level85%

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES Wiltshire – 2007 Results – Whole Fund (% of payroll) Future Service Rate15.1% Deficit Recovery 4.4% (over 20 years) Net employer rates19.5%

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES Inter-Valuation Monitoring Hymans Robertson – Navigator Report Picks up 3 things (mechanically) Asset returns Contributions paid Yields available …simply an early warning system

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES What Assumptions have changed since 2007? Mar 2007Dec 2009 Real Discount Rate2.8%2.2% Inflation3.3%3.8% Salary Inflation4.7%5.2% FTSE All Share3,2832,761

Local Government Pension Scheme Hymans Robertson – Navigator Report Extract from Navigator Report – approximation of changes in overall funding levels since 2007 Valuation based only on changes in financial assumptions (not experience of liabilities) March % December %

Local Government Pension Scheme Hymans Robertson – Navigator Report Extract from Navigator Report – approximation of changes in the theoretical common contribution rate since 2007 Valuation based only on changes in financial assumptions (not experience of liabilities) Overall Rate = Future Service Rate +Deficit Funding March %15.1%4.4% December %18.2%14.3%

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES Valuation Approaches Political interference Review assumptions and approach including –Deficit recovery periods –Levels of prudence in assumptions Formal stabilisation and modelling

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES Stabilisation Modelling Undertaken by Actuary No longer rely on single set of assumptions Range of Long Term outcomes over range of Financial Conditions

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES Stabilisation Policy WPF needs to be comfortable 100% Funding Level achieved over Long Term (24 years) Avoid ‘knee-jerk’ increases in Contribution Rates Stable contributions over time (e.g. max +1% / -1% p.a.) Set Contribution rates for next 6 years Review every 3 years validity of assumptions

Local Government Pension Scheme STEWARDSHIP – Funding Level over 24 Years No stabilisation Contributions stabilised (Maximum of 1% increase/decrease p.a.) SAMPLE FUND

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES Stabilisation Policy applicable to which Employers? Long term stable employers –Tax raising powers –Most Scheduled bodies –But will still need to take a case by case view Other Employers –All different (covenants? contract length? open / closed? maturity? experience?) –Individually asses funding level & contribution rate –Early dialogue to discuss affordability issues

Local Government Pension Scheme 3. VALUATION OUTLOOK AND POTENTIAL OUTCOMES Summary Difficult valuation – contributions key area of concern! Prudence v Affordability Stabilisation policy –Reduce contributions volatility –Provide budgetary certainty –Applicable to long term secure employers More challenging for Admitted Bodies –Pragmatic approach where possible

Local Government Pension Scheme Current provider - Clerical Medical Prudential from 1 st April 2010 (Launch day 8 th April 2010) Why a change? –Pro-active –Improved service to members –Service to other authorities –In depth knowledge of LGPS 4. Additional Voluntary Contributions (AVC’s)

Local Government Pension Scheme 4. Additional Voluntary Contributions (AVC’s) What will employers need to do? –Additional payroll set up –Pay AVC’s to Prudential each month –Presentations

Local Government Pension Scheme Current Clerical Medical contributors –Continue with current arrangement –Stop contributing (Leave funds with Clerical Medical) –Stop contributing (Transfer) –Letter from Pension Fund 4. Additional Voluntary Contributions (AVC’s)

Local Government Pension Scheme 5. FRS17 UPDATE Commission reports of behalf of Employers (24 p.a) –Prescribed format –Compare pension obligations of employers –Different from Valuation Standardised Reports –Economies of scale –Standardised Financial / non financial assumptions –Standard Discount Rates Quotes for additional work –FRS17 projections –Non-standard reports –New employers

Local Government Pension Scheme March 2010 Reports –Earlier delivery of reports (w/c 19 th April) –Based on 31 December 2009 data –Notify WPF of any material changes post 31/12/09 (e.g. bulk transfers / redundancy programmes) Outlook –Expect larger deficits this year! –‘Real’ discount rates 3.7% (2009) 1.7% (Nov 2009) 5. FRS17 UPDATE

Local Government Pension Scheme LGPS Miscellaneous (Regulations) 2009 Pay Protection Additional Survivor Benefits Contributions (ASBC’s) 6. REGULATIONS CHANGES AND FINAL PAY PROTECTION

Local Government Pension Scheme Pay Protection Reduction in pay –Single Status –Job Evaluation 6. REGULATIONS CHANGES AND FINAL PAY PROTECTION

Local Government Pension Scheme Pay Protection* Member can elect to use average 3 consecutive year’s pay to the 31 st March in the last 13 years Member must make an election “no later than one month prior to the date that they cease membership of the scheme” *Currently the best year of the last 3 is provided to WPF 6. REGULATIONS CHANGES AND FINAL PAY PROTECTION

Local Government Pension Scheme Pay Protection - Challenges Getting notification from members before they leave/retire Pensionable Salary information for member to make decision Employers access to payroll/pension information for 13 years 6. REGULATIONS CHANGES AND FINAL PAY PROTECTION

Local Government Pension Scheme 6. REGULATIONS CHANGES AND FINAL PAY PROTECTION Additional Survivor Benefit Contributions (ASBC’s) LGPS Regulations 2008 –Co-habiting partners –Post 6 th April 1988 service

Local Government Pension Scheme 6. REGULATIONS CHANGES AND FINAL PAY PROTECTION Additional Survivor Benefit Contributions (ASBC’s) 2009 Regulations –Purchase service Pre 6 th April 1988 –Election to pay ASBC’s before 31 st March 2011 –Additional percentage of pay (GAD factors) –Medical clearance from member

Local Government Pension Scheme 6. REGULATIONS CHANGES AND FINAL PAY PROTECTION What will employers need to do? –Additional payroll set up –Pay AVC’s to Wiltshire Pension Fund each month with normal contributions –Notifications of members wishing to pay ASBC’s will be sent from Wiltshire Pension Fund

Local Government Pension Scheme 7. ANY OTHER BUSINESS Any Questions?

Local Government Pension Scheme 8. DATES OF FORTHCOMING MEETINGS Final Valuation Results Meeting: 2:30pm, Thursday 30 th September 2010 at County Hall, Trowbridge