Agenda item

Report of the Executive Director Corporate Services

This report updated the Pension Committee on an interim valuation of the Fund by the Fund’s Actuary, Hymans Robertson.

The Pension Committee noted the report

Consideration was given to a report of the Executive Director Corporate Services.

This report updated the Pension Committee on an interim valuation of the Fund by the Fund’s Actuary, Hymans Robertson. The Pension Committee noted the report at its meeting on 30^th November 2021.

The Pension Board noted that every three years the Fund’s assets and liabilities must be valued by the Actuary in order to determine whether the Pension Fund had sufficient assets to meet its long-term pension liabilities and who was required to certify the appropriate contribution rates each employer in the Fund must make over the next three years

It was noted that the next formal Triennial Valuation would occur during 2022 with the results based on March 2022 asset values and liability data. The Pension Committee would be taking some decisions in July 2022 on assumptions that would underpin the valuation. The actual Triennial Valuation would be reported to the Pension Committee in September 2022 and to the Pension Board in October 2022. The Pension Committee would receive the detailed employer valuations in November 2022.

This report presented an interim position based on 30 September 2021 data and was indicative but was not as detailed and accurate as the actual Triennial Valuation. Hymans’ work was presented in Appendix A and the results were set out in section 2 of the report, which were summarised as follows:

-       As at the last valuation the assets of the Fund were £1.6bn and as at the end of September 2021 stood at £2.2bn which was an annualised return of 31% and much higher than expectations.

-       Liabilities were estimated to have risen from £1.6bn to £1.7bn.

-       The overall funding level had risen from 103% funded as at March 2019 to an estimated 130% funded as at September 2021.

-       Hymans had warned, however, that the actual Triennial Valuation could be subject to high levels of inflation and market instability due to the situation in Ukraine.

Board Members were concerned about the implications of the market instability due to the situation in Ukraine.

The Chair asked that if the final valuation showed a significant increase in the value of the Fund would that increase be realised to avoid losing it if there was a dramatic downturn. The Head of Treasury and Financial Services replied that if there was an overweight in some asset classes there would be a need to consider bringing it back to safer asset allocation. Some would be banked, but it was important to ensure the asset value moves in the Fund were not so volatile

It was noted that it would be known in September 2022 as to whether or not any surplus would be fed into the secondary contributions the Council and other employers had to pay. The Council had 84% of the Fund and the Pension Committee would need to agree the strategy. Contributions could only go up or down by + or – 1%. The Council had to decide as an employer to asked for any discretions on that basis. Part of the would be to look at assets to make sure they were not volatile and to also look at investment strategy. The average age of active members was 50-55 and the average age of deferrals was 60. Many other London Councils had more mature Funds than Camden so they were paying out more than they were receiving in contributions and were, therefore, reducing their asset base. Camden’s cashflow was broadly flat and as the fund matured liabilities would be monitored and hedged away from inflation risk. Pensions received an increase in April based on the October CBI figure, and inflation would cause an increase in liabilities. Inflation was a key risk on the risk register and would be significant for the Fund. Revenue spending was around £70m so if inflation was 5% an extra £3m-£4m would be incurred. The Fund had inflation linked assets, including long lease property funds, equities and index linked gilts.

RESOLVED –

THAT the content of the report be noted.