Call for standardisation of the approach of LGPS actuaries
0The government has been urged to boost the resources available to councils by standardising the methodology used by Local Government Pension Scheme actuaries.
Paul Jones, executive director of finance and assets at Cheltenham Borough Council, has written to local government minister Rishi Sunak claiming that millions more could be freed up for hard-pressed authorities through the move.
His letter follows a meeting between the pair shortly before Christmas, where Jones lobbied on a number of issues affecting urban district councils.
Speaking to Room 151, Jones said: “The point I was trying to make to the minister is that the Fair Funding Review is looking at things like fees and charges and how much councils are generating from revenue sources.
“However, looking at ongoing liabilities could also help improve the situation for many councils.”
Jones said that his own council, in March 2017, had a net liability to the Gloucestershire Pension Fund, of £50.7m, which was assumed to be 66% funded, resulting in employer contributions of £4.4m, 30% of its net budget.
In contrast, another district council in the South West had a higher deficit of £81.1m, deemed to be 55% funded, yet their employer contributions amounted to £3.4m a year, 19% of its net budget.
He said: “In summary, this council has an additional £1m to spend on local services as a direct result of actuaries’ assumptions.”
Jones said that, as a minimum, pension liability payments should be factored into the Fair Funding Review to establish the needs analysis forming the basis of government grant allocations.
However, he also said that the government should consider requiring all actuaries to enforce assumptions made centrally by the Government Actuary’s Department (GAD).
In September, the GAD’s Review of the Actuarial Valuations of Funds as at 31 March 2016 said that pension funds which extend their deficit recovery end points are not necessarily in breach of their legal requirement to achieve long-term cost efficiencies.
In its report, GAD said: “We recommend that the Scheme Advisory Board should consider what steps should be taken to achieve greater clarity and consistency in actuarial assumptions, except where differences are justified by material local variations, with a view to making a recommendation to the MHCLG minister in advance of the next valuation.”
Consultant Chris West, former finance director at Coventry City Council, said: “There would be some merit in standardising the methodology used by all local government pension scheme actuaries.
“Some pension funds are currently trying to recover their deficits much more aggressively than others and putting a huge strain on councils just at the point that they can’t afford it.
“We need to make sure a longer-term view is taken in the coming valuation, with a stronger focus on affordability.”
During his meeting with the minister, Jones also pointed out that urban districts are disadvantaged by the New Homes Bonus, because they are unable to build the same number of homes as councils in rural areas with fewer constrictions on land supply.
