The Interim Director of Finance presented a report on the latest Worcestershire Pension Fund revaluation, which took place in 2022, and in doing so reported that this triannual revaluation resulted in a significant saving to the Council’s base budget for the next three years. The saving represented the largest item of saving in the Council’s Medium Term Financial Plan (MTFP) for 2023-24 to 2025-26.
It was estimated in the 2022 Actuarial Valuation that the Pension Fund’s assets stood at £126.9m and its liabilities at £132.0m, which represented a deficit of £5.1m. This was an improvement of £15.2m on the deficit position of £20.3m in 2019. Based on the employer’s future rate of payment into the fund of 19.6 per cent of salary levels, it was predicted that the present deficit would be cleared within twelve-year period and deficit contributions would cease in the 2035-36 financial year.
It was reported that for Redditch Borough Council there were 355 active members of the Pension Fund, a reduction of 34 from the 2019 figure, 677 deferred pensioners, a reduction of 19 from the 2019 figure, and 864 pensioners and dependents, an increase of 77 from the 2019 figure.
Concern remained about the number of active members of the Pension Fund within the Council as the average age of staff was forty-nine. There was a possibility that many current employees could leave before they reached retirement age which would increase the Council’s liability as Pension Fund payments were based on the number of active members.
Following the presentation of the report, Members made a number of observations and asked a number of questions, which were answered as follows:
· It was explained that active members were defined under the pension fund as those still employed by the Council and paying pension fund contributions, deferred members as those who were employees of the Council at some point and who had not yet drawn on their pension pot. A member of the scheme could access their pot from the age of 55, however, only 55 per cent of the full pension value as a lump sum.
· Officers provided reassurance that the figures provided took into account the possibility of deferred members over 55 accessing their pension pot at any time.
· The overall 19.6 per cent contribution of the Council to the Worcestershire Pension scheme represented a significantly greater contribution amount than those for pension funds in the private sector and meant that the Council as an organisation contributed 19.6 per cent and individual members up to 12 per cent to each member’s overall pension contribution.
· Some Members commented that the Funding Level of the Worcestershire Pension scheme of 96.1 per cent represented an impressive figure. The Members concerned queried whether each organisation’s assets and liabilities within the overall Pension Fund Scheme were demarcated.
· Officers responded that this was the case, and thus the Redditch Borough Council’s pension assets and liabilities were demarcated from those of other councils within the Worcestershire Pension Fund scheme.
· It was noted that currently the Worcestershire Pension Fund scheme was outperforming many other schemes.
the Background to the reductions in budget, and associated assumptions from the 31st March 2022 Actuarial Valuations be noted.