Local Government Pension Scheme Funding Summary and Recommendation James Parker 10/7/2014 © Bishop’s Stortford Town Council

Background BSTC closed the Local Government Pension scheme to new joiners wef June 2009 BSTC closed the Local Government Pension scheme to new joiners wef June 2009 # active employees in scheme steadily reducing # active employees in scheme steadily reducing Scheme was underfunded Scheme was underfunded Contribution rate for active employees increased – on average across scheme will eliminate underfunding over 20 years Contribution rate for active employees increased – on average across scheme will eliminate underfunding over 20 years BSTC not average – due to closure to new employees. Near-zero probability that we will make up underfunding based on current contribution rate BSTC not average – due to closure to new employees. Near-zero probability that we will make up underfunding based on current contribution rate BSTC underfunding: £K469 as at 31/3/2013, £K409 as at 31/3/2014 – Actuaries estimate (cost - £750) BSTC underfunding: £K469 as at 31/3/2013, £K409 as at 31/3/2014 – Actuaries estimate (cost - £750) Increased liabilities offset largely by increased value of underlying assets due presumably to stock market growth through recent recovery Increased liabilities offset largely by increased value of underlying assets due presumably to stock market growth through recent recovery Forward position likely to have deteriorated due to further reduction in active employees (8->5) Forward position likely to have deteriorated due to further reduction in active employees (8->5) Underfunding remains a liability due on withdrawal Underfunding remains a liability due on withdrawal Will become due when last of our 5 current members leaves Will become due when last of our 5 current members leaves © Bishop’s Stortford Town Council

Recommendation Having regard to Having regard to the current level of reserves the current level of reserves poor investment returns on BSTC cash deposits (due to current money market – best currently available approx. 1% ) poor investment returns on BSTC cash deposits (due to current money market – best currently available approx. 1% ) lack of expertise to invest directly in more risky investments with higher return lack of expertise to invest directly in more risky investments with higher return the fact that the pension fund is effectively a professionally managed balanced fund of higher return higher risk investments the fact that the pension fund is effectively a professionally managed balanced fund of higher return higher risk investments the debt will have to be paid eventually and relates to past employees the debt will have to be paid eventually and relates to past employees RECOMMENDATION RECOMMENDATION Make one off payment of (say) £350k to pension fund now – reduces debt to level manageable within on year without significant risk of overfunding Make one off payment of (say) £350k to pension fund now – reduces debt to level manageable within on year without significant risk of overfunding Revalue fund after 2 years, consider further payment depending on funding status at that point Revalue fund after 2 years, consider further payment depending on funding status at that point Note that this payment will appear as (unbudgeted) expenditure on the annual return => full Council approval required Note that this payment will appear as (unbudgeted) expenditure on the annual return => full Council approval required Recommendation subject to final confirmation that contributions remain ring-fenced and any overfunding (very unlikely) can be refunded Recommendation subject to final confirmation that contributions remain ring-fenced and any overfunding (very unlikely) can be refunded © Bishop’s Stortford Town Council