1. Claire Connelly Employer Services & Funding LGSS Pensions Monitoring Employer Strength

2. Background  LGPS - Funded Scheme  Employer Contributions = Members Benefits  Hot topics:  Grant reductions / cuts  General economic downturn / restriction of credit  Organisations cease trading  Consider Impact on:  Employers to pay contributions now/ future  Funding strategy  Employer specific contribution rates.  Shortfall in funding = strain on the Fund

3. Changing Employers LAs, POLICE, PROBATION, HIGHER EDUC TOWN & PARISH COUNCILS, INTERNAL DRAINAGE BOARDS COMMUNITY ADMISSION BODIES TRANSFEREE ADMISSION BODIES ACADEMIES

4. Source – CLG SF3 data for English LGPS Funds Growing Scheme Membership

5. Increasing Pensions & Assets Source – CLG SF3 data for English LGPS Funds

6. What the papers say... Pension liabilities are devastating charities, umbrella groups tell minister Analysis: Facing up to the sector's pensions crisis Pension Liabilities scupper merger Devastating EU rules will force most UK traditional company pensions to close

7. Reasons for Employer Covenant Monitoring  Current climate  It's Valuation Year  Health Check for Employers  Agree exit strategy  Manages Risk

8. Approach Needs to be fair:  predetermined rules / factors  objective and justified  consistent  establish the level of risk for each employer  criteria  work together

9. Approach Outcomes:  inform  strength of employer covenant  deficit recovery periods  targeted funding levels  discuss / reassessment / mitigation

10. Risk Assessment Process Identify the risk of the employer to the fund Criteria / rules used to determine risk levels consulted on with Scheme Actuary Other factors – employer information Consider factors when assessing contribution rates Implications / Mitigations……

11. Criteria PriorityItem HighSponsor / Guarantor / Tax Raising Powers Credit Rating Gearing Ratio Cashflow Funding Level Admission Agreement Bond MediumIll Health Insurance Theoretical vs actual cont rate Type of Employer TAB agreements LowOpen or Closed Cessation date Number of actives Actives Future Working Life InformationStabilisation Pass-through Arrangement Actual salaries Pension payroll 2010 theoretical cont rate / liabilities / assets Actual cont rate 2013/14

12. Criteria High Low Gearing Ratio Funding Level Credit Rating Proximity Impending Ongoing Cessation Date Risk Implications

13. Employer Information Changes in financing arrangements, expansion plans etc What is your credit rating What are your sponsoring arrangements What are your bond arrangements What is your AE policy – LGPS or comparable? Admitted bodies – how strong is your admission agreement, what is your cessation date

14. Employer Risk Puzzle Type of body Family Tree Funding Level Cashflow

15. Communication Direct Communications Individual meeting offered to each fund employer Website Updates on the valuation process on the Pension Service Website http://pensions.cambridgeshire.gov.ukhttp://pensions.cambridgeshire.gov.uk http://pensions.northamptonshire.gov.uk Confidentiality Results are confidential and will not be released

16. Sum up – our overall expectation Joined up funding / investment / covenant Planning Parental support / wider group support Monitoring covenant / reviews Flexibility Identify best practice Get ahead of issues Pro-active engagement

17. Questions? Further information: http://pensions.cambridgeshire.gov.uk http://pensions.northamptonshire.gov.uk Contact: Mark Whitby mark.whitby@cambridgeshire.gov.uk Claire Connelly cconnelly@northamptonshire.gov.uk cconnelly@northamptonshire.gov.uk