The Local Government Pension Scheme (LGPS) in England and Wales

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The Local Government Pension Scheme (LGPS) in England and Wales Powered By Docstoc
					The Local Government Pension Scheme (LGPS) in England and
Wales: Results of the 2007 Valuation

IMPROVED FUNDING LEVELS CLAW BACK THE DEFICIT POSITION

Local authority pension funding levels are revealed to-day in a survey
conducted by Bryan Robinson, County Treasurer of West Sussex County
Council and a member of the CIPFA Pensions Panel, carried out on behalf
of the Societies of County Treasurers, Metropolitan Treasurers, Welsh
Treasurers and London Councils.

The survey shows the results of the 2007 LGPS valuation for 62 English
and Welsh local authorities out of a total of 88. A summary is attached.
Scotland has its valuations to a different timetable.

The average local authority fund earned a healthy rate of return of 14.3%
pa over the three years to March 2007, compared to an assumed average
return of 6.35% pa at the time of the 2004 valuation. All other things
being equal, the average funding level would have risen by around 17%.

On the other hand, real gilt yields were around 0.5% pa less than they
were at March 2004, increasing liabilities, and as yields fall, so liabilities
increase. In addition, people continue to live longer putting a further
strain on funding levels.

The repayment of deficits shown up at the 2004 valuation and other
factors such as a continuing reduction in the number of ill health
retirements have combined with market movements to give an overall
improvement in funding levels.

Results from the 62 authorities suggest that nationwide the local
government pension scheme is now funded at 83.5% of its liabilities, up
from 74.9% at the last valuation.

The average rise in employer contributions for those in the survey has
been held at an average of just over 1% of payroll between now and
March 2010, compared with an average 4% increase three years ago.

On the one hand, there is a need to pay for people living longer in the
future, but on the other the phasing out of retirement before 65 and the
introduction of a ‘new look’ LGPS with a fairer basis for cost sharing
between taxpayers and recipients has mitigated this.

Employee contributions will rise from 6% to an average of 6.3% with the
introduction of tiered contributions and the Government is committed to
introduce guidance in respect of sharing costs between members and
employers by March 2009 to deal with future LGPS cost pressures.

The phasing out of retirement before 65 and the introduction of a more
affordable and sustainable LGPS point to the recognition of an issue that
needed to be addressed.
                                 ENDS


Notes to Editors:
   1. The LGPS is a public service final salary scheme. It is a funded
      scheme with assets of around £125 billion, circa £107bn of which
      relates to English and Welsh LGPS funds, which are covered by this
      survey. The LGPS is thus very different from other public service
      schemes, such as those for civil servants, teachers, firefighters and
      uniformed police forces, whose benefits are unfunded and are paid
      from current revenue.

   2. The LGPS is managed at a local level by administering authorities,
      including County Councils and London Boroughs. The main
      provisions of the scheme are made by the Department for
      Communities and Local Government (CLG) and are set out in
      secondary legislation.

   3. The regulations governing the scheme require the assets and
      liabilities of local government pension schemes to be valued every
      three years by professional actuaries.

   4. Authorities minimise the impact on council tax of rises in employer
      contributions by phasing in increases over three or six years (the
      average has come out at 3) and maintained their deficit recovery
      periods at an average of 20 years.

   5. To keep things in perspective, an actuarial valuation is just a
      snapshot at a point in time, and all figures will be re-assessed in
      three years.

New Look LGPS

The main elements of the new look LGPS which will be effective from 1st
April 2008 are as follows…

   1. The LGPS will remain a final salary scheme.

   2. The accrual rate will be 1/60th of final salary for every year you are
      a member rather than the current rate of 1/80ths .

   3. There will be no automatic lump sum for membership after 1st April
      2008. All cash will be by commutation. Members will be able to
      convert up to 25% of the capital value of their pension into a tax-
      free lump sum. For every £1 of pension given up, a lump sum of
      £12 will be received.

   4. Partners pensions will be unchanged at 1/160ths.

   5. Ill-health benefits will be assessed based on three tiers and
      targeted at those most in need.
6. The death in service grant has increased from two to three times
   annual salary.

7. Survivor benefits have been broadened and now apply to spouses,
   civil partners and cohabitees for life.

8. A seven tier employee contribution structure has been brought in
   which is predicted by the Government Actuary to produce an
   average employee contribution of 6.3% compared with the current
   flat rate of 6%.

   Employee Contributions from 1.4.08

          Band          Range                  Contribution Rate
          1             £0-£12,000             5.5%
          2             £12,001-£14,000        5.8%
          3             £14,001-£18,000        5.9%
          4             £18,001-30,000         6.5%
          5             £30,001-£40,000        6.8%
          6             £40,001-£75,000        7.2%
          7             More than £75,000      7.5%


9. Flexible retirement is being made easier, allowing for some or all
   pension, appropriately reduced when taken early, to be paid while a
   member continues to work.

10.A formula for cost sharing is to be in place by March 2009. The
   CLG has set up the LGPS Policy Review Group comprising all
   stakeholders in the scheme to discuss, amongst other things, the
   new cost sharing arrangements. The CLG has issued an informal
   discussion paper which will be followed by a statutory consultation
   towards the middle of 2008, with the intention of having
   Regulations in place well before 31st March 2009.
                                                                                                                                                                                                                                               Summary

                                                                         TOTAL FUND                                                                    ADMINISTERING AUTHORITY
                                                                                                Funding Level                                                                                       Deficit      Additional cost if Phased
                   Authority     Fund Market Value           Surplus/Deficit               Mean          Value Weighted                Funding Level    Rate paid     2007 Contribution Rate       Recovery       2007 cont rate implement
                                     2004       2007            2004        2007        2004      2007      2004      2007               2004      2007 2007/08   On-Going Past Serv. Total      Period for tax   used in 07/08      ation
                                  £'000     £'000           £'000      £'000           %         %                                      %         %         %        %          %          %         Years              £m           Years
Overall         Average           991,875 1,523,982         -331,758   -302,023        74.2%     82.6%     74.9%    83.5%               73.7%     82.5%     18.2%     13.8%       5.7%     19.5%              20               2.0         3
                Min.                                                                   57.0%     67.8%                                  55.8%     63.7%     10.0%      3.2%      -1.0%     13.4%
                Max.                                                                   93.0%    100.0%                                  95.0%    103.0%     27.0%     18.1%     15.3%      24.4%
62 Authorities  Total          61,496,238 94,486,903 -20,237,245 -18,423,404                                                                                                                                                  51.5
Counties        Average         1,061,367 1,662,309     -394,811    -357,661            73.3%       82.7%       72.9%       82.3%       72.1%     81.5%     17.6%     14.0%       5.4%     19.4%               0               0.2         3
                Min.                                                                    59.4%       67.8%                               55.8%     63.7%     10.0%      5.3%       1.2%     15.1%               0               0.2
                Max.                                                                    87.0%       95.0%                               86.0%     95.0%     23.1%     18.1%     14.2%      23.1%               0               0.2
34 Authorities  Total          36,086,491 56,518,521 -13,423,581 -12,160,480                                                                                                                                                  33.3
London Boroughs Average           414,419    561,953    -137,634    -142,996            77.2%       83.3%       75.1%       79.7%       75.3%     82.7%     19.7%     13.3%       7.8%     21.0%              19               2.2         3
                Min.                                                                    57.0%       68.0%                               57.0%     67.0%     14.9%      3.2%       2.4%     17.1%
                Max.                                                                    91.0%       94.0%                               88.0%     94.0%     27.0%     15.9%     15.3%      24.4%
15 Authorities  Total            5,801,868    7,867,344   -1,926,882   -2,001,942                                                                                                                                              8.6
Mets & Unitary  Average          2,966,500    4,521,303     -505,916     -356,373       82.0%      90.2%        85.4%       92.7%       91.3%    102.0%     13.0%     13.5%       1.8%     14.8%              21               4.6         3
                Min.                                                                    68.0%      80.0%                                87.5%    101.0%     11.8%     11.7%      -1.0%     13.4%
                Max.                                                                    93.0%     100.0%                                95.0%    103.0%     14.7%     14.7%       5.5%     17.2%
5 Authorities   Total          14,832,501 22,606,514      -2,529,582   -1,781,867                                                                                                                                              7.0
Wales           Average           596,922    936,816        -294,650     -309,889       67.9%       76.0%       67.0%       75.1%       72.3%     80.5%     21.1%     14.3%       6.1%     20.4%              21               0.1         3
                Min.                                                                    60.0%       70.0%                               63.0%     74.0%     14.4%     12.6%       3.1%     16.2%
                Max.                                                                    88.5%       92.0%                               86.0%     90.0%     25.0%     16.0%       9.7%     22.3%
8 Authorities   Total            4,775,378    7,494,524   -2,357,200   -2,479,115                                                                                                                                              0.3

The mean averages are based on the number of authorities who answered each individual question. At this stage, not all authorities have answered all questions. Therefore the average may not equal the total divided by the total number of authorities
responding to the whole questionnaire.
The Fund Market Value is based on the Actuaries' Valuation where available. If the Actuaries' Value is not available, the Market Value has been used.
The 'Actual' Funding Level is based on the mean average of the responses. The Value Weighted funding level is based on the mean average market value and mean average deficit.




                                                                                                                                Page 1
                                                                                                                                                                                                                                               Summary

                                                                                                     TOTAL FUND                                           ADMINISTERING AUTHORITY
                                          34                                                                                                                                                           Deficit      Additional cost if Phased
Authority                                        Actuaries Value      Actuary           Suplus/Deficit           Funding Level            Funding Level    Rate paid     2007 Contribution Rate       Recovery       2007 cont rate implement
                                                   2004         2007 2004 2007            2004         2007        2004      2007           2004      2007 2007/08   On-Going Past Serv. Total      Period for tax   used in 07/08      ation
                                                £'000       £'000                     £'000       £'000           %         %              %         %         %        %          %          %         Years              £m           Years
Average                                        1,061,367 1,662,309                    -394,811    -357,661        73.3%     82.7%          72.1%     81.5%     17.6%     14.0%      5.4%      19.4%              21               2.0         3
Min                                                                                                               59.4%     67.8%          55.8%     63.7%     10.0%      5.3%      1.2%      15.1%
Max                                                                                                               87.0%     95.0%          86.0%     95.0%     23.1%     18.1%     14.2%      23.1%
Total                                        36,086,491 56,518,521                  -13,423,581 -12,160,480                                                                                                                      33.3
Bedfordshire County Council                     706,985 1,079,600 HR HR                -255,000      -274,300       73.0%       80.0%      70.0%     79.0%     21.9%     12.5%      9.4%      21.9%      20                0.8
Buckinghamshire County Council                  735,155 1,223,295 BW BW                -375,924      -278,000       66.0%       81.0%      59.0%     74.0%     21.9%     14.4%      7.7%      22.1%      20                0.2            2
Cambridgeshire County Council                   878,000 1,385,000 HR HR                -228,400      -218,900       79.0%       86.4%      79.0%     86.4%     14.7%     14.4%      4.6%      19.0%      20                               3
Cheshire County Council                       1,479,000 2,377,000 HR HR                -483,000      -426,000       75.0%       85.0%      74.0%     81.0%     19.5%      5.3%     14.2%      19.5%      20
Cornwall County Council                         617,000 1,012,000 HR HR                -178,900      -132,000       78.0%       88.0%      79.0%     90.0%     19.0%     16.0%      2.5%      18.5%      20            due to LGR         2
CUMBRIA COUNTY COUNCIL                          788,000 1,178,000 WM WM                -250,000      -268,000       76.0%       81.0%      73.0%     78.0%     16.4%     12.4%      6.2%      18.6%      25                1.5            2
Derbyshire County Council                     1,308,900 2,087,900 WM WM                -548,300      -514,500       70.5%       80.2%      70.0%     81.0%     17.2%     13.4%      4.8%      18.2%      22                2.3            3
Devon County Council                          1,363,200 2,190,000 HB HB                -864,100      -553,500       61.0%       80.0%      61.0%     79.0%     18.7%     15.5%      4.1%      19.6%      25                               3
Dorset County Council                           869,500 1,425,547 BW BW                -300,600      -115,041       74.0%       93.0%      75.0%     91.0%     16.9%     14.5%      2.4%      16.9%      20
Durham County Council                           931,700 1,459,200 HB HB                -589,100      -382,100       61.0%       79.0%      60.0%     80.0%     18.5%     14.0%      5.7%      19.7%      19                1.5            3
East Sussex County Council                    1,131,461 1,708,070 HR HR                -223,273      -212,280       84.0%       89.0%      83.0%     88.0%     17.1%     15.1%      4.0%      19.1%      20                               3
Essex County Council                          1,916,000 3,043,000 WM WM                -767,000      -782,000       71.4%       79.6%      70.7%     78.9%     18.6%     12.9%      6.7%      19.6%      20                               3
Gloucestershire County Council                  640,000      950,463 HR HR             -272,000      -332,634       70.0%       74.0%      69.7%     73.0%     18.9%     14.7%      7.7%      22.5%      20                2.9            3
Hampshire County Council                      1,990,000 2,917,000 HB HB                -911,000      -891,000       69.0%       77.0%      69.0%     77.0%     17.7%     14.5%      4.7%      19.2%      25                4.3            3
Hertfordshire County Council                  1,360,000 2,152,200 HR HR                -435,000      -388,000       76.0%       84.7%      75.0%     85.0%     18.7%     16.2%      4.4%      20.6%      20                4.1
Isle of Wight
Kent County Council                           1,589,000 2,580,300 HR HR                -940,600      -977,800       63.0%       73.0%       61.0%     70.0%      23.1%       15.0%       8.1%       23.1%           20
Lancashire County Council                     2,449,200 3,688,800 WM WM                -628,300      -709,800       79.6%       83.9%       80.9%     84.6%      15.4%       13.8%       4.4%       18.2%           22                                   3
Leicestershire County Council                 1,391,000 2,182,000 HR HR                -209,000      -161,000       87.0%       93.0%       86.0%     91.0%      15.0%       14.2%       3.0%       17.2%           17                 3.8               2
Lincolnshire CC                                 746,700 1,145,500 HR HR                -196,500      -182,200       79.2%       86.3%       78.4%     85.6%      18.3%       14.9%       3.9%       18.8%           20                 0.6
Norfolk County Council                        1,164,000 1,891,000 HR HR                -255,000      -150,000       82.0%       93.0%       82.0%     92.0%      15.8%       15.5%       2.5%       18.0%           20                 3.3               3
North Yorkshire County Council                  765,800 1,265,700 WM WM                -524,500      -601,900       59.4%       67.8%       55.8%     63.7%      18.8%       12.5%       7.3%       19.8%           27                 1.5
Northamptonshire County Council                 715,800 1,107,900 WM WM                -295,200      -341,100       71.0%       76.0%       71.0%     76.0%      10.0%       12.7%       7.5%       20.2%
Northumberland County Council                   440,600      669,000 HB HB             -259,900      -269,700       62.9%       71.3%                            20.0%       18.1%       3.5%       21.6%           25                 1.0
Nottinghamshire County Council                1,502,800 2,417,700 WM WM                -553,200      -483,400       73.1%       83.3%                 83.3%                  12.7%       4.5%       17.2%           20
Oxfordshire County Council                      638,292 1,048,951 HB HB                -366,500      -299,400       65.0%       78.0%                 76.0%      18.1%       14.6%       4.7%       19.3%           25                 1.0               1
Shropshire County Council                       621,700      906,500 WM WM             -123,500      -155,500       83.0%       85.0%                            14.2%       12.5%       3.9%       16.4%           22
Somerset County Council                         713,400 1,126,142 HB BW                -246,900       -65,540       74.0%       95.0%                 95.0%      14.0%       13.9%       1.2%       15.1%           20                                   3
Staffordshire County Council                  1,512,900 2,312,800 HR HR                -269,000      -299,100       85.0%       89.0%       83.8%     87.0%      15.5%       14.4%       3.6%       18.0%           20                 3.4
SUFFOLK COUNTY COUNCIL                          775,800 1,301,200 HR HR                -260,100      -159,600       75.0%       89.0%       72.4%     87.0%                  14.9%       7.6%       22.5%           15
Surrey County Council                         1,107,000 1,759,000 HR HR                -516,000      -460,000       68.2%       79.3%       63.0%     74.0%      21.4%       14.8%       7.4%       22.2%           20                £4m
Warwickshire County Council                     670,000 1,001,000 WM WM                -152,000      -163,000       82.0%       86.0%       81.0%     84.0%      12.7%       12.5%       3.5%       16.0%           22                                   6
West Sussex County Council                      968,000 1,549,300 HR HR                -305,000      -214,200       76.0%       88.0%       74.0%     83.0%      19.0%       15.1%       4.8%       19.9%           20                 1.1               3
Wiltshire County Council                        711,198 1,131,253 HR HR                -240,684      -203,785       75.0%       85.0%       68.9%     83.1%      19.7%       15.2%       4.6%       19.8%           20                 0.1
Worcestershire County Council                   888,400 1,246,200 WM WM                -400,100      -495,200       68.9%       71.6%       66.7%     72.0%                  12.9%       7.9%       20.8%           22                                   6
The mean averages are based on the number of authorities who answered each individual question. At this stage, not all authorities have answered all questions. Therefore the average may not equal the total divided by the total number of authorities
responding to the whole questionnaire.
The Fund Market Value is based on the Actuaries' Valuation where available. If the Actuaries' Value is not available, the Market Value has been used.
The 'Actual' Funding Level is based on the mean average of the responses. The Value Weighted funding level is based on the mean average market value and mean average deficit.

				
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Description: The Local Government Pension Scheme (LGPS) in England and Wales