The next Local Government Pension Scheme (LGPS) valuation takes place at the end of this month, 31 March 2022, with changes to employer contribution rates implemented from 1 April 2023.
The LGPS regulations and guidance apply to all Funds, but every Fund and their Fund actuary is different in the way they apply these. Where transparency and consistency are lacking, understanding these four key elements is crucial when it comes to understanding your risks and options:
The FSS is specific to the individual LGPS Fund and it focuses on how employer liabilities are measured and the pace at which these liabilities are funded i.e. the contributions that are ultimately payable. The FSS is revisited at each valuation and sometimes in between. Once the FSS is final, the Actuary is bound by it.
Each Fund should hold a formal employer consultation on changes to its funding approach proposed in the draft FSS, which should be “clear and transparent”. Housing associations should look to understand whether to engage before the consultation and whether the proposed approach by the Fund is meaningful.
Housing associations should seek to understand their current funding position, identify and quantify key risks, and understand how they can mitigate those risks and set their objectives.
Some Funds are more flexible than others. Funds might be open to negotiation. There are a range of parameters that determine the outcome, from guarantees, security, pooling, covenant strength and employer classification by Funds. Most housing associations offer a very strong covenant which may not be allowed for unless dialogue is entered into.
Isio has worked with the NHF and CIPFA to develop immediate actions for employers:
To help all stakeholders achieve the best outcome, Isio and CIPFA will be issuing a series of four bulletins together over the next eight months. Below is a link to the first in the series which covers the valuation process and the expected timeframe of events.