LGPS: A-Z recap of 2018
2018 has been as eventful as ever in the LGPS. In the countdown to Christmas, Associate Melanie Durrant reflects back on the last 12 months, starting from A to Z.
Academy review – two working groups were started, the funding working group and the administration group to try and make it easier for academies participating in the LGPS a bit easier. GAD produced a report in September 2018 setting out the results of the review of the consistency in treatment of academies across different LGPS funds.
Budget 2018 – the 29 October 2018 budget held very little to get excited about in terms of the LGPS. However a decrease in the SCAPE discount rate was announced to reduce to 2.4% which will lead to significant increases in employer contributions across all the unfunded public sector schemes.
More information can be found in our blog: Budget 2018: pensions in the public sector
Cost cap management – the HMT cost cap was breached for public sector schemes leading to an increase in benefits across the public sector from 1 April 2019. The SAB cost cap process is still underway with a consultation due to take place in January 2019 for any benefit changes in the LGPS from April 2019.
Data, Data, Data – the focus of our annual seminar in September 2018. We are working with Funds in advance of the 2019 valuation to support improved data quality ahead of the 2019 valuation process particularly given the increased scrutiny from The Pensions Regulator.
More information can be found in our blog: Public sector pensions: progress, preparation and perspectives
Equalisation of Guaranteed Minimum Pensions (GMPs) – a recent development but at the moment HMT have confirmed that the GMP judgement “does not impact on the current method used to achieve equalisation and indexation in public service pension schemes”. So for the moment, we don’t think that we need to take any action as we have built full indexation into our valuation numbers.
Fair deal – nothing actually happened here this year despite rumblings from LGA, although we are assured this is still on the cards for the near future…
GDPR came into force from 14 May 2018. This means we have to be more careful about the data that we pass between each other and only ask for member data when we really need it. Be careful not to provide us with data unless it is necessary. It also means that if you want to read more of our blogs like this, you need to sign up on our website.
More information can be found in our blog: Life after GDPR in the public sector
High court ruling (Elmes versus Essex) decided that all public service pension schemes should make changes to provide surviving civil partners or same-sex spouses with benefits which are the same as those to which a widow of a male member would be entitled.
Investment issues – including the introduction of the code of transparency which most funds and half of the investment pools are signed up to now. DWP also issued a consultation on Responsible Investment Guidance which is likely to result in further statutory guidance for the LGPS.
Joint tPR and ministerial statement was issued on 13 September 2018 to clarify that all complaints and disputes about occupational and personal pension schemes go to The Pensions Ombudsman and general requests for information and guidance to The Pensions Advisory Service.
Knowledge and Skills requirements for Local Pension Boards under Code of Practice No 14 – Local Pension Boards have been established three years now and can provide a really useful resource and source of support to Pension Committees. With CIPFA, Barnett Waddingham’s Annemarie Allen ran a series of events specifically aimed at Local Pension Boards to help them to understand their role and provide them with support in their training requirements.
Longevity – there have been a number of recent interesting developments in mortality research including a widely reported slowdown of life expectancy improvements, which in itself would lead to a decrease in the average value of the liabilities and primary contribution rates. The “S3” tables have also been released which are based on a larger set of data which includes more public sector data. We would encourage Funds to do an in-depth review of their individual mortality experience to see how this can be incorporated into the 2019 valuation assumptions.
More information can be found in our blog: Choosing the right mortality table for your Fund
MHCLG – At the start of the year the Department for Communities and Local Government was replaced by the Ministry of Housing, Communities and Local Government (MHCLG) with Rishi Sunak appointed as the new Minister for Local Government who is still in post at the end of 2018.
New faces – we welcomed Barry McKay to join the Barnett Waddingham public sector team in September. He brings a huge breadth of LGPS experience and knowledge to the team.
Online Data Checker – this was launched at our 28 September 2018 annual seminar with and will be used to improve timescales and efficiencies for the 2019 valuation data checking process.
More information can be found in our blog: Public sector pensions: progress, preparation and perspectives
Pensions Regulator’s (tPR) corporate plan 2018-2021, sets out what tPR is doing to become a ‘clearer, quicker and tougher regulator’ noting that they will engage with the highest risk cohort of schemes. We know that they have “deep dived” into around 10 LGPS Funds in England and Wales so we await the outcome of that analysis. All Funds have been required to submit data scores to the Regulator for the first time this year. Scores have been high but there is a concern that the scores are masking a bigger issue around the reliability of data but this should all be set out in each Fund’s data improvement plan.
Quadrennial or triennial valuations? In September 2018 it was announced that the Scheme valuation would take place on a quadrennial basis (i.e. every four years). Local Fund valuations will continue to be triennial, with the next valuation for England and Wales taking place as at 31 March 2019 but watch this space for future developments…
Restructure of the Scottish LGPS. The Scottish LGPS Advisory Board has been considering structural changes to the Scottish LGPS and consulted on various options earlier this year. The Consultation closed on 7 December and responses will be discussed in 2019 so it will be interesting to see what the outcome is.
More information can be found in our blog: Scottish LGPS structure review: considerations and consequences
Section 13 – GAD performed a review of the 2016 valuation and published their results in September 2018. They were looking for consistency, compliance, long-term cost efficiency and solvency of Funds and overall the evidence showed that this was being achieved. GAD held discussions with individual Funds where concern was raised and we will continue to have discussions with GAD about how the Section 13 review of the 2019 valuations could be improved.
Tier 3 employers – more focus has been given to these employers (includes colleges, housing associations and charities) as the Funds try to quantify how much risk they pose to each Fund.
More information can be found in our blog: Tier 3 employers in the LGPS: 102 pages in two minutes!
Updated factors – as a result of the change to the SCAPE rate announced in the Budget, GAD revised the CETV factors to be used when calculating non-club transfer values and pensioner CETV’s for divorce purposes. This revised factors are effective from 19th November 2018.
Valuation (2019) – we are doing lots of work with our Funds in the lead up to the 2019 actuarial valuation in terms of planning, data cleansing and systems developments to make the process more efficient. There will be a lot of communication around this in the New Year so look out for these.
What about pooling? Although there has been a significant amount of work going on to establish the pools, and we have been very interested in how this has progressed over the year, for the actuarial valuations we are still mainly interested in the local fund’s investment strategy rather than each pool.
Xit credits – new Regulations from 14 May brought in the ability for Funds to pay exit credits to employers leaving the Fund in a surplus position.
More information can be found in our blog: Returning surpluses - employer exit credits arrive in the LGPS
Yields are falling (all around me)– gilt yields continued to fall at the start of 2018 although we have seen a bit of a recovery in recent months and yields have returned to similar levels by the end of the year. Corporate bond yields have also started to creep up and inflation has stayed relatively stable. Due to the current political uncertainties we may see more volatile movements in yields in the next few months... but with our funding model, we do smooth out some of the volatility by using assumptions spanning a six month period.
and finally...
Zero mention of the B-word… it’s not often you read an article at the moment that does that!