Okay, this is not the most exciting post I have ever done. But in its own way, the training on “Actuarial Valuation and Investment Strategy” I went on last Wednesday evening at the Tower Hamlets Town Hall was pretty important. To put it very simply (never an easy thing to do with pensions) the valuation is an educated guessimate on whether the pension fund will have enough money to pay its commitments to staff without undue risk or strain to the Council tax. The scheme advisers “Hymans Robertson” gave the presentation.
This is important stuff not only to staff in the pension scheme (LGPS) but also Council tax payers and service users. If the wrong investment strategy is followed then staff may find their jobs at risk if local services are slashed in order to pay for poor investment returns or unexpected financial “shocks”. Also, we may have a rerun of the industrial strafe of 2006 when patchy governance across the LGPS caused (in part) pressures on the Government to cut future pension benefits.
Firstly the usual “health warning” - this is my own interpretation of the meeting, not an official account, not the council, Hymans Robertson nor the Labour group position and the 2007 figures quoted are estimates at the moment.
I have been the Staffside “Observer” on the Councils (LGPS) investment panel for over 10 years. I also go to the Council “Pension and Accounts Committee” meetings on behalf of the joint trade unions. UNISON believes trade unions should play an active rule in the Governance arrangements of Council pension schemes and that we should have proper representation, not just observer status ,on our pension panels and committees. We prefer the term “Member Nominated Representative” (MNR). A consultation with the Government regulators on LGPS governance arrangements has recently finished.
All councillors had been invited but only about 12 turned up. I sat with Pension and Accounts Chair Cllr Bill Turner and Cllr Anwara Ali. Both good UNISON members of course.
The crucial bit about the triennial valuation is the” assumptions” made and “cash flow”. Some schemes (not my own!) deliberately fiddle the investment assumptions they make in order to keep Council tax low. They pretend that they do not have to put so much money into the scheme since they overestimate how fast their investments will grow or that the life expectancy of members will be lower than should be expected. This is just Gerrymandering by any other name.
Other schemes “plan” to pay off any deficit over unrealistically long periods of time. Tower Hamlets use a 20 year cash flow which is average for LGPS (unlike the private sector where I believe that the regulator expects 10 years or less). While some schemes use 40 years plan which is well "iffy". Another reason why we need trained independent trade union reps on all council pension schemes.
The “good news” for our pension scheme (I kid you not) is that more pensioners died than was expected. So less strain on the scheme.
There was a bit about Asset Liability modelling and generating “random” scenarios which just hurt my head. Don’t think many councillors got it in either.
Our scheme’s financial position had improved from 2004 and now stands at 77% funding (assets compared to liabilities) compared to 73%. At the moment there is some £706 million of assets investment in the UK and the rest of the world. A lot of money to you and me but the LGPS is nationally worth around £100 billion. It needs looking after.
