Contact: David Wilson (01962) 847407; [email protected]

1 Summary

1.1 The rules of the Local Government Pension Scheme require that an actuarial valuation be carried out every three years. Work has started on the actuarial valuation as at 31 March 2007.

1.2 This report:

· Reminds the Panel of the outcome of the last actuarial valuation as at 31 March 2004.

· Summarises the timetable for the current exercise.

· Sets out the Fund's actuary's preliminary projection of the possible outcome.

2 Recommendation

That this report be noted.

3 Actuarial valuation as at 31 March 2004

3.1 The 2004 valuation revealed a funding level of 68.6%, equivalent then to a `past service deficit' of £911m. The past service deficit is the difference between the market value of the fund's assets and the value of the Fund's liabilities accrued (expected benefits earned) by that date.

3.2 Stepped increases in employers' contribution rates as a percentage of payroll were required as shown in the table below. These rates have been shown as a percentage of payroll, rather than as a percentage of employees' contributions as has been the previous normal practice. This will enable easy comparison with projected rates from 1 April 2008, when the Government plans to introduce tiered contribution rates (see item 6 on this Agenda).

4 Timetable for the March 2007 actuarial valuation

4.1 The County Treasurer has agreed to supply all the data on the Fund's pensioners and contributors required by Hewitt Bacon & Woodrow (Hewitt) for the valuation by 31 August 2007. Hewitt will discuss an initial indication of the likely outcome for employers' rates with the County Treasurer in October 2006. The County Treasurer will keep Panel members and the Fund's employers informed as and when information becomes available. The final results are expected by December 2006, and the employers' contribution rates required for the three years commencing 1 April 2008 should be agreed during December 2007.

5 Prospects for the current valuation

5.1 The final assumptions to be used for the current valuation will be agreed with the County Treasurer in the autumn. Hewitt Bacon & Woodrow have suggested a number of alternative sets of assumptions, and deficit recovery periods. The recovery periods assumed in the 2004 valuation were 25 years for scheduled bodies and 40 years for admitted bodies.

5.2 The following table summarises a possible outcome based on updating the 2004 valuation assumptions for market conditions as at 31 March 2007 and making adjustments for the effect of the new-look Local Government Pension Scheme to be introduced in April 2008, changes in the commutation rules, and mortality improvements.

5.3 This projection shows a significant increase compared with the current employers' rate. The principal reason for the increase in the rate is an improved assumption about mortality, reflecting recent trends in longevity. However, it must be emphasised that this projection should be treated with extreme caution. Much work remains to be done. Further stepping could be applied over the three-year period, which would mean that the increased contribution rates could be introduced in smaller steps than over the last three years.

6 Conclusions

6.1 Preliminary projections by the actuary suggest that a further increase in employers' contribution rates may be necessary from April 2008. However, it is too early to draw any firm conclusions.

6.2 The County Treasurer will keep the Panel updated on progress on the valuation as necessary.

Section 100 D - Local Government Act 1972 - background papers

The following documents disclose facts or matters on which this report, or an important part of it, is based and has been relied upon to a material extent in the preparation of this report.

NB the list excludes:

1. Published works.

2. Documents which disclose exempt or confidential information as defined in the Act.

TITLE FILE

None.