Agenda item

Cabinet Member: Cabinet Member for Resources & Financial Governance, Councillor Callton Young

Officer: Interim Corporate Director of Resources (Section 151 Officer), Richard Ennis

Key decision: no

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

RESOLVED: To request that the Scheme Actuary certify the change in contribution rates via a revised Rates and Adjustments Certificate.

Cabinet considered a report which set out that changes to the Local Government Pension Scheme regulations to allow scheme employers, of which the Council is one, to request a review of the contribution rate set out by the most recent actuarial valuation. The Cabinet Member for Resources & Financial Governance (Councillor Callton Young) provided Cabinet with an introduction which set out:

• The report set out the changes to the Local Government Pension Scheme regulations. The Chief Executive had requested that the Pension Committee review the scheme actuary;
• The outcome of the review was that following strong investment performance there was scope for the council to temporarily reduce its contribution to 23.2% of pay per annum;
• Temporarily reducing the contribution rate would save £6.2m in 2022 and 2023;
• The cost of benefits to the pension member would remain the same; and
• It was noted that pensions was a very sensitive issue and that the actuaries provided independent professional advice in relation to this matter.

The Head of Pensions (Nigel Cook) advised Cabinet that:

• The option set out within the report was a new opportunity following changes to the regulations;
• The option was one of risk and prudence. The proposal to reduce contributions by 2.5% in 2021/22 and 2% in 2022/23 had been carefully assessed against a range of scenarios;
• The risk analysis had found that there was a 75% chance of achieving the pensions fund goal within a 20 year period;
• The next triennial valuation cycle was due to start in 2022 which would look at the council’s ability to meet its future liabilities; and
• It was felt the proposal was a measured risk and that the scheme actuaries had assessed the risk.

During the consideration of the recommendations, the following points were made:

• The Cabinet Member for Croydon Renewal (Councillor Stuart King) noted that at paragraph 3.1 of the report it was stated that the financial aspects, analysis and potential impact of the risks were commercially sensitive. Concerns were raised that a pension fund member may be concerned to see the detail restricted and queried why this information had been placed in Part B. A further question was asked as to the status of rescinding the decision in relation to property transfer proposal;
  • In response, the Head of Pensions advised that the actuaries requested that their reports be restricted but noted that the scheme was secured by regulation and it was felt that the local government pension scheme was one of the safest schemes in the UK; and
  • It had been felt that following carefully assessing the risk that the property transfer and reduction in contributions would tip the scale in terms of risk. Members were advised that the actuarial view was the combination of proposals was too risky and that the Pensions Committee had considered matter and deferred any further decision in relation to the property transfer until more information had been provided.

Councillor Patricia Hay-Justice left the meeting at 8.23pm.

• The Leader of the Council (Councillor Hamida Ali) noted that staff were concerned about the security of their pensions and queried whether any assurance could be provided to pension scheme members. Additionally, the Leader noted that some councillors had queried whether the contribution level could be dropped further to provide more savings for the council to protect frontline services.
  • The Head of Pensions advised that the Local Government Pension Scheme had evolved in the preceding 2/3 decades. The assurances officers could provide were that entitlements accrued to-date were protected and that the scheme would continue to evolve to ensure it was affordable for local authorities; and
  • In response to the query of reducing the contributions further, the Head of Pensions advised that the mid-cycle review had shown the scheme as being potentially overfunded in the future. However, the actuary had assessed and modelled different scenarios and had found that £6.2m gave the council a 75% certainty of reaching its targets within 20 years.

The Leader of the Council noted that it was important to ensure any decisions were prudent and that the council protected staff pensions.

Councillor Patricia Hay-Justice returned to the meeting at 8.29pm.

The Leader of the Council delegated authority to the Cabinet to make the following decisions:

RESOLVED: To request that the Scheme Actuary certify the change in contribution rates via a revised Rates and Adjustments Certificate.