Agenda item

To consider a report from the Director of Corporate Resources seeking the Panel and Board’s approval for the approach to be taken to address two administration issues.

The Panel and Board considered and noted a report of the Director of Corporate Resources (item 8 in the Minute Book) on the implication of the McCloud judgement on the Pension Fund’s 2019 triennial valuation and the proposed transfer from one of the Pension Fund’s Additional Voluntary Contribution (AVC) providers Equitable Life.

Following the Treasury announcement in July that remedies relating to the McCloud judgement will need to be made in relation to all public service pension schemes, LGPS funds have to consider whether to include an amount for the cost of implementing the remedy in calculation of employer contributions at the 2019 valuation. The Fund Actuary has advised that in advance of the valuation, an amount for both McCloud and GMP equalisation should be taken into consideration in the calculation of the exit position for any employers who leave the Fund.  Until a remedy is agreed, this amount will need to reflect a prudent estimate of the likely additional costs as once an employer has left the Fund, no further contributions can be certified for them. 

The Funding Strategy Statement (FSS) will be updated to reflect the inclusion of an amount to cover both the McCloud remedy and the likely costs of GMP equalisation in the calculation of employer exits.  However as the FSS will not be finalised until December (in line with the valuation timetable) in the interim, the Pension Fund Panel and Board are asked to approve the inclusion of an amount to cover the McCloud remedy and GMP equalisation for any employer exit calculated from 27 September 2019.

Equitable Life is one of the Fund’s AVC providers, and has proposed a transfer of its business to Utmost Life and Pensions Ltd. As part of the proposal, with-profits AVC funds will receive a one off uplift but will lose their guaranteed amount. The transfer will only go ahead if a majority of policy holders vote in favour of the transfer, and the administering authority needs to cast its vote on behalf of its scheme members. 

Based on information provided by Equitable Life scheme members holding with-profits policies could be better or worse off depending on investment returns. Scheme members without a with-profits policy would not be better or worse off under the proposal, and would simply see a change in provider. It is proposed that the Fund splits its vote in proportion to the preferences of scheme members who hold a with-profits AVC with Equitable Life.

RESOLVED:

a)    That approval is given to include an amount to cover the expected costs of the McCloud remedy and impact of GMP equalisation in the calculation of exit positions for employers leaving the Fund, as outlined in paragraph 12 of the report.

b)    That approval is given to the approach taken to determining the administering authority's vote on the proposed Equitable Life transfer.

c)    Authority is delegated to the Director of Corporate Resources to vote on the proposed Equitable Life transfer in accordance with the preferences indicated by scheme members.