LGPS deficits rise

Total deficits across the Local Government Pension Scheme rose more than a quarter to £47bn over the past three years, according to new figures.
The LGPS shadow advisory board this week released data from its triennial review of valuations across LGPS funds in England and Wales.
The cash deficit has risen 27% from the figure of £37bn reported in the last review carried out in 2010.
However, the report said that 2013 funding levels for funds are broadly similar to those from 2010, with the average funding level standing at 79%
The report said: “The results of the 2013 LGPS valuations show that LGPS funds generally have broadly similar funding levels to those in 2010, but with increased deficits in cash terms.
“However, this overall picture is not reflected at individual employer level, where there have been significant variations in funding levels and contribution requirements.”
The board qualified its data by pointing out that funding levels and cash deficits for each fund are not directly comparable across funds as they use different funding approaches and actuarial assumptions.
The report continued: “Neither are funding levels the only relevant ‘health’ indicator for funds.
“Others include deficit recovery periods, employer contribution rates, funding strategy statements and perhaps most importantly the long term availability of cash flows .”
The major upward cost pressures for funds during the valuation period were identified as increases in life expectancy, decreases in gilt yields due to quantitative easing.
Downward pressures included asset performance in investment markets, new schemes, pay restrictions and actual contributions paid.
The report said that a much wider range of difference in funding levels at the employer level is starting to emerge.
It said: “Differences in membership profiles and experience can cause fluctuations, while funds may choose to vary factors such as deficit recovery periods between employers based on indicators such as perceived risk.”
A new process is being introduced from March 2016 which will see extra valuations carried out at a national level every three years.
If this process shows the cost of the LGPS has changed then benefits and contribution levels could be changed for all employees in the LGPS.