Valuation

The Valuation section of the website contains information on the 2019 triennial valuation carried out by the actuary, Barnett Waddingham. The report can be found here

What is a triennial valuation?

Every three years, a formal valuation of the whole Fund is carried out under Regulation 62 (1) of the LGPS Regulations 2013 to assess and examine the ongoing financial position of the Fund.

Its purpose is to value the assets and liabilities of each individual employer and the Fund as a whole. This is with a view to setting employer contribution rates which will result in each employer’s liabilities becoming fully funded over the agreed recovery period.

The valuation results are calculated in the following way: 

  1. LPP, on behalf of the Fund, provide finance and membership data to our actuary, Barnett Waddingham. They use this data to carry out the valuation.
  2. This data is used to estimate the future benefit payments from the Fund and  the total value of those payments, based on assumptions about the future. The valuation assumptions are set to be consistent with LPFA’s Funding Strategy Statement.
  3. The contribution rate for each employer is calculated taking into account its membership profile, past service deficit and funding category.

On the whole fund assumptions, the LPFA Pension Fund was around 109% funded at 31 March 2019, an improvement from 96% at 31 March 2016. At the 2016 valuation, the maximum recovery period was 14 years. At the 2019 valuation, the maximum recovery period is 11 years.

The funding category for each employer uses the same framework as the 2016 valuation. Employers are divided into category A, category B and category C. The breakdown of these categories is as follows:

Funding Category

Description

Open

Closed

A

A1

Employers with Tax raising powers

x

N/A

A2

Employers with government guarantee or transferee admitted body whereby scheme employer is rated as A1 or A3

x

N/A

A3

Employers that provide security with a value of at least 70% of the cessation deficit

x

N/A

A4

Schools/Academies

x

N/A

B

B1

Employers that provide LPFA with security with a value of between 40% to 69% of the cessation deficit

x

x

B2

Employers that provide a legally valid parent company guarantee where the parent is rated as category B

x

x

B3

Employers that receive implicit support from the government with strong financial statements

x

x

B4

Further Education, Higher Education, or Social Housing, with strong financial statements

x

x

C

C1

Employers that financially stable and do not meet the criteria for category A or B

x

C2

Employers with identified risk

x

C3

Employers that financially stable and do not meet the criteria for category A or B

x

C4

Employers with identified risk

x

The assumptions adopted for the valuation, and therefore the employer contribution rate, depend on the employer’s funding category. Full details of the assumptions are set out in the valuation report.

Employers wishing to improve their categorisation can do so by implementing security. By implementing security employers will be able to move to category A or category B and benefit from lower contribution rates due to the lower risk posed to the Fund.

All employers have received a Rates & Adjustments certificate from the actuary, which confirms the minimum employer contributions required for the three-year period commencing from 1 April 2020. Any employer is welcome to pay a higher contribution rate than required if they so wish, or to make any one-off payment at any point in time. The effect of this can be modelled for Fund employers on request.
 

The 2019 Valuation Report has been finalised and approved by LPFA’s board. This document provides details on the funding position across LPFA’s fund and outlines the assumptions used in the valuation process. The report can be found here