Pension Fund
Introduction
1.Under Local Government Pension Scheme Regulations the County Council is required to maintain a Pension Fund for certain of its employees together with the majority of employees of District Councils and other bodies that were formerly under the control of Local Authorities.
In addition, certain other bodies are eligible to join if the County Council agrees, and a number of voluntary/charitable bodies have obtained membership in this way. Membership of the scheme is optional for all employees, although a written election not to join must be made if employees wish to remain outside the scheme. Teachers, Firefighters and Police Officers all have their own schemes.
Details of the other admitted and scheduled bodies in the Fund are shown in note 5.
There were 29,490 contributors to the Fund at 31st March 2005 and 14,123 of pensions were in payment.
2.Actuarial Position:
- Local Government Pension Funds, in common with other pension funds in both public and private sectors, have periodic valuations to assess the extent to which assets accumulated are adequate to meet future liabilities. To ensure that the fund remains financially sound to meet benefit payments, the actuary recommends the rate of employers’ contributions on an individual employer basis for each employing body in the fund on a triennial basis.The Council’s actuary, Hymans Robertson and Co. completed the latest valuation, as at 31st March2004. The change in contribution rates resulting from the actuarial valuation as at 31st March 2004 were effective from 1st April 2005. This review resulted in a requirement for the common contribution rate of employer’s contributions to increase from 215% to 250% of an employee’s contribution. This increase is being phased in over a period of up to 4 years commencing in 2005/06 and to be completed in the 2008/09 financial year, although the rate set as being payable in the final year (for those employers using a four year phasing period) will ultimately be superseded by the outcome of the 31st March 2007 valuation. This common rate for all employers is adjusted to reflect the individual circumstances of different employing bodies.
- The valuation method adopted by the actuary is the projected unit valuation method which is consistent with the aim of achieving a 100% funding level. This assesses the cost of benefits accruing to existing members during the year following the valuation, allowing for future salary increases.
- The 2004 valuation revealed that the Fund’s assets which at 31 March 2004 were valued at £1,391 million, were sufficient to meet approximately 87% of the liabilities accrued up to that date. Assets were valued at their market value.
- The key financial assumptions adopted for this valuation are as follows:
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Financial Assumptions
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Mar 2004
% p. a.
Nominal
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Mar 2004
% p. a.
Real
|
|
Minimum Risk rate of return
|
4.70%
|
1.80%
|
|
Investment Return:
|
|
|
|
Equities
|
6.70%
|
3.80%
|
|
Bonds (50% gilt 50% corporates)
|
4.90%
|
2.00%
|
|
Discount Rate (75% equities, 25% bonds)
|
6.30%
|
3.40%
|
|
Pay increases
|
4.40%
|
1.50%
|
|
Price Inflation/Pension Increases
|
2.90%
|
0.00%
|
The nominal rate is the actual return and the real return takes into account inflation.
- In order to value both those liabilities which have accrued at the valuation date and those accruing in respect of future service, it has been assumed that the Fund’s assets are invested in a portfolio consisting of 75% equities and 25% bonds.
3.The average total employers rate during 2004/05 was approximately 211% (201% 2003/04) of the employees’ rate. Thus for an employee paying 6% of earnings, the employer on average will pay 12.66% (12.06% 2003/04).
4.The County Council has delegated the management of the Fund to its Pension Fund Management Board, which consists of 9 voting members and 5 non-voting staff representatives. The voting members are split into five County Council members, two from Leicester City Council and one each representing the District Councils and De Montfort/Loughborough Universities. The Board receives investment advice from Hymans Robertson and meets quarterly to consider relevant issues.
5.List of admitted and scheduled bodies:
The Pension Fund contributors include Leicestershire County Council, Leicester City Council, Loughborough University, De Montfort University, Leicestershire Constabulary, Rutland County Council, Charnwood Borough Council, North West Leicestershire District Council, Leicestershire & Rutland Probation Board, Hinckley & Bosworth Borough Council, Blaby District Council, Harborough District Council, Connexions Leicester Shire, Leicestershire Magistrates’ Courts Committee, Oadby & Wigston Borough Council, Melton Borough Council, Leicester, Leicestershire and Rutland Combined Fire Authority, Colleges of Further Education and Sixth Form Colleges consisting of Brooksby Melton College, Gateway Sixth Form College, Leicester College, Loughborough College, Regent College, South Leicestershire College, Stephenson College, Wyggeston QE1 College, Parish and Town Councils consisting of Anstey, Ashby, Braunstone, Broughton Astley, Countesthorpe, Earl Shilton, Glen Parva, Kirby Muxloe, Lutterworth, Sileby, Syston, Thurmaston, other employers consisting of Apetito Ltd, Bradgate Park Trust, Collegia Care, East Midlands Regional Local Government Association, Leicester and County Mission for the Deaf, Leicester Money Advice, Leicestershire Promotions, National Youth Agency, Rushcliffe Care, VISTA, and Voluntary Action Leicester.
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