lpfa Pensions Update In this Edition: March 2010 FRS17 balance sheet restatement for change in pensions increase index from RPI to CPI

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1 Pensions Update March 2010 FRS17 balance sheet restatement for change in pensions increase index from RPI to CPI If you are audited by the Audit Commission or Audit Scotland, you might well have been informed that following the Government announcement about changing the pension increase index from RPI to CPI, some further information is being sought for the 2009/10 accounts. In addition our actuaries are looking to offer a revised Balance sheet to any March 2010 employer who received an FRS17 report who would like to be aware of the effect of this change. The auditors believe that this change constitutes a nonadjusting post balance sheet event and apparently FRS 21 (events after the balance sheet date) requires audited bodies to disclose the nature of any material post balance sheet event and provide an estimate of its financial effect. In this Edition: change in PI index Pensions Admin Strategy Employer Visits Value of the Fund Technical Update U pcoming LPFA Events lpfa We understand that what is required is a revised deficit calculation rather than a complete rehash of all the FRS17 numbers assuming CPI rather than RPI. If we look at the historical difference between RPI and CPI then CPI has tended to lag RPI by around 0.5% per annum over the last 20 years and about 0.8% over the last 10 years. For most employers then depending on mix of liabilities this might reduce the value of liabilities by around 5% to 10% and for an employer who is say 50% funded on an FRS17 basis, this would reduce the deficit by about 10% to 15% good news for the balance sheet. Fortunately the cost of recalculating the numbers is only a very small proportion of the reduction in deficit the cost of preparing a short report with the revised numbers will be 175 plus VAT and will be produced within 10 days of request. Please confirm in writing if you would like to take advantage of this service. If you have already responded to our earlier e mail please disregard this request. Tony Williams Employer Services Manager Tel: tony.williams@lpfa.org.uk August Page

2 Pension Administration Strategy We now have 68 employers who have signed up to the Pensions Administration Strategy (PAS). Thank you again to all employers who have signed and returned the documentation or have been in contact with us confirming their current position. All of the PAS documentation can be found on our website James Wilday or ) or I will be more than happy to provide additional clarification regarding the Strategy, so please feel free to contact either of us. As mentioned in last months newsletter, we will begin monitoring each employer s performance against the PAS shortly and will contact the employer s who are falling down against areas outlined within the Service Level Agreement (SLA) Service%20Level%20Agreement.pdf. A summary of the areas being monitored are: Payments of monies due Monthly contributions should be paid on time, correct amount and an online LG221 form should be submitted and authorised in respect of each payment Any payroll recharges should be paid on time and be the correct amount Capital sums should be paid on time and be the correct amount End of year error rates Each employers error rate should be less than 10% of their active membership All year end queries should be answered within 3 months of notification by LPFA Response to other queries Any queries raised by the Pensions Services Team should be responded to within 10 working days On-line access Our online form submission facility should be used by all employers Timeliness of submissions Joiners, leavers, retirements, maternity leave notifications and any changes of hours should be notified to LPFA within the timeframes set out in the Service Level Agreement Please do not hesitate to contact us should you wish to discuss further. John Crowhurst Pensions Services Manager Tel: john.crowhurst@lpfa.org.uk

3 Did You Know Representatives of the LPFA are always willing to make on-site visits to employing authorities to hold presentations or seminars. These seminars are an effective means of providing information to members and potential members, as well as to policy contacts or HR members who do the pension administration. All such visits will be at the request of the employing authority, and can be tailored to their needs. The seminar can be organised within one month of the employer s request and may be subject to a charge under the Service Level Agreement of the Pension Administration Strategy. Many thanks for the extremely useful advice on LPFA pensions when you visited last week. I found it very helpful and thought the presentation was excellent and very clear. LPFA Employer Value of the Pension Fund at Month End The table below shows the value of the LPFA Pension Fund over the last few months. Month end Active Sub Fund Pensioner Sub Fund Total April bn 1.300bn 3.822bn May bn 1.298bn 3.729bn June bn 1.281bn 3.656bn We receive our reconciled fund valuations in the fourth week of the following month, so there is always likely to be a delay in the dissemination of the information. Roona Ellis Investment Manager Tel: roona.ellis@lpfa.org.uk

4 Technical Update LGPC Bulletin 72S We are living through an extremely busy time in relation to developments in the world of pensions and not just in respect of the scrutiny of Public Sector pension provision by the Government, pension professionals and the pundits of the popular press. Local Government Pensions Committee (LGPC) Bulletin 72 reflects this abundance of activity in its review of current events in the world of public sector pension provision, the State pension provisions, tax rules and the intention to abolish the default retirement age. There are links in the Bulletin to associated reports, reviews and consultation documents that run to hundreds of pages. As the circular consists of brief features on many topics I will not summarise the Bulletins content as I normally do but, other than the two items I highlight below, I will leave those interested to explore the large amount of associated documentation. The most significant of the current events reported on are the HMRC consultation on taxation of pensions and The Hutton Commission whose findings may well determine the future of the LGPS. The original HMRC discussion document and responses to these two consultations by Local Government Employers organisation and by LPFA accompany this issue of Pensions Update. The HMRC consultation document on taxation of pensions outlines their proposed alternatives to the restriction on tax relief for high earners due to take effect from April The Hutton Commission is currently gathering evidence and accepting submissions in order to make recommendations on how public service pensions can be made sustainable and affordable in the long-term, fair to both the public service workforce and the taxpayer, and ensure that they are consistent with the financial challenges which the Government faces. LGPS (Miscellaneous) Regulations 2010 The LGPS (Miscellaneous) Regulations 2010 were laid before Parliament on 25 th and will come into effect from 30 th September The majority of the consent was anticipated from the draft but a full assessment will be published in the September edition of Pensions Update. Alan Piper Pensions Specialist Manager Tel: ala.piper@lpfa.org.uk Future of the LGPS You will no doubt be aware of the debate around the future of the Local Government Pension Scheme and the commission headed by John Hutton. We have been asked to obtain the views of our employers in order to feed into the decsion making process and have therefore set up a short survey at: Please take a couple of minutes to complete the survey and have your say on the future of the scheme.

5 Upcoming LPFA Events LPFA Fund Member Forum - 7 th September 2010 Over 800 fund members have already registered to attend this year s LPFA Fund Member Forum, which will be taking place on Tuesday 7 th September 2010, at the Southbank Centre, SE1. The day will include a review of the year and performance of the fund by LPFA Chief Executive, Mike Taylor, and fund members will be able to put questions to the LPFA Board and Corporate Management Team. There will also be a presentation from guest speaker Mickey Clark, a stock market expert on BBC Radio Five Live. He copresents the daily radio show Wake Up to Money. Fund members will also have access to 16 different exhibitors, including the TPAS, English Heritage and Age Concern, in the Information Centre throughout the day. LPFA Employer Forum - 5 th November 2010 Please be advised that the LPFA Employer Forum 2010 will be taking place at City Hall (the home of the GLA) on Friday 5 th November. The arrival time is 10am for Registration / Tea / Coffee, and we will make a prompt start at and finish at for a complimentary lunch. This is a free forum and there is no restriction in the number of delegates that can attend from each employer, but names must be on the delegate list in order to gain entry. The programme will include presentations from Mike Taylor, the LPFA s Chief Executive, LPFA s actuary and the senior management team, and these will cover a wide range of issues. There will also be a Question & Answer session, where delegates can put questions to the LPFA Chairman and senior management. If you would like to register to attend, please communications@lpfa.org.uk with your full contact details and you will be placed on the delegate list and sent written confirmation. Please note that places will be reserved on a first come first serve basis until we have reached our 250 capacity. Erica Wright Communications Advisor Tel: communications@lpfa.org.uk