Archived decisions

Pensions

As part of the terms and conditions of employment of its staff, the County

Council provides retirement benefits. These will be paid only when

employees retire but the Council has a commitment to make the

payments that need to be disclosed (in accordance with Financial

Reporting Standard (FRS)17) at the time that employees

earn their future entitlement.

The County Council participates in two pension schemes:

a) The Teachers' Pension Scheme for teachers - this is a defined benefit

scheme that is unfunded, which means the pensions of past employees are paid

out of current revenues. Scheme liabilities cannot be attributed to individual local

authorities on a consistent reasonable basis. So, in accordance with FRS17,

pension costs are recorded as if the scheme was a defined contribution scheme.

b) The Local Government Pension Scheme (LGPS) for other employees - this

is a funded, defined benefit scheme, administered by the County Council.

Employers and employees pay contributions into a fund at a level

estimated to balance pension liabilities with investment assets.

Since 2003/04, pension costs have been charged to the Income and

Expenditure Account in accordance with FRS 17. In 2007/08, pension

assets and liabilities have been included in the Balance Sheet based

on a formal actuarial valuation for 31 March 2007. This valuation has

been rolled forward to 31 March 2008.

Teachers' Pension Scheme

This is a defined benefit scheme administered by the Department for Children, Schools

and Families (DCSF). The scheme is unfunded. The DCSF has established a

notional fund as the basis of calculating the employers' contribution. Contributions

were at the rate of 14.1% of pensionable pay for 2007/08 ( for 2006/07 it was 13.5%

until December 2006 and 14.1% for the period January to March 2007)

In 2007/08 total employer's contributions were £46.55 million (£43.4 million in 2006/07).

Local Government Pension Scheme Current service cost

The current service cost is an estimate, at today's prices, of the true economic cost of

employing people in a financial year, earning years of service that will eventually

entitle them to a lump sum and pension when they retire. This is

included in the net cost of services in the Income and Expenditure Account.

However, the charge met by taxpayers is based on employer's contributions

payable in the year. This is achieved by adjusting the Income and Expenduture

Account balance in the General Fund reconciliation on page 36.

The LGPS fund's actuary has advised that the current service cost of

pensions in 2007/08 is £60.35 million (£58.6 million in 2006/07).

In 2007/08 the County Council paid an employer's contribution of

£51.5 million into the Hampshire County Pension Fund (46.0 million in 2006/07).

This was 17.7% of pensionable pay (16.5% in 2006/07).

The contribution rate is determined by the Pension Fund's actuary

(Hewitt, Bacon & Woodrow), based on valuations every three years.

The actuarial valuation of the Fund as at 31 March 2007 resulted in the

actuary recommending a phased increase in the employers' rate.

The rate was 17.7% of pensionable pay in 2007/08, 18.1%

in 2008/09 rising to 18.6% in 2009/10, and 19.1% in 2010/11

Past service cost of pensions

Past service costs arise from decisions taken in the current year,

but whose financial effect is derived from years of service earned in earlier years.

This includes enhanced early retirements (formerly added years) for all staff including

teachers as the County Council is responsible for all pension payments relating to

added years awarded by the County Council and for meeting the additional cost

cost of early retirement. It also includes the effect of the new benefit structure

introduced in the LGPS from 1 April 2008 which affects the value of benefits

earned up to 31 March 2008 and benefits to be earned in the future.

The actuary has advised that the past service cost in 2007/08 is:

2006/07

2007/08

£'000

Early retirements:

Non-teachers

1,380

850

Teachers

600

430

Arising from April 2008 scheme

13,230

1,980

14,510

Past service costs are included in non-distributed costs in the Income and Expenditure

Account, in accordance with BVACOP, but a charge of £14.1m (£1.2m in 2006/07)

has been made after adjusting for the difference between actuarial assumptions and actual

cashflow in 2007/08.

The past service cost for early retirements in previous years is assessed by the actuary

at £36.28m in respect of teachers' pensions (£39.5m in 2006/07) and £26.77m

in respect of unfunded benefits to former employees in the LGPS (£29.1m in 2006/07)

This is added to the pension liability in the Balance Sheet. However, as for current service

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