The LGPS is funded by member contributions, employer pension contributions and earnings from investments.
Each employer’s funding position is individually tracked and monitored during its participation, with the aim of it being funded sufficiently to pay retirement benefits for all current and former members.
Where assets don’t meet the value required to cover the pensions rights which scheme members have built up, the employer’s funding position is in deficit. Alternatively, where assets outweigh the pension liabilities, it is in surplus.
Every 3 years, our actuary undertakes a valuation of each employer’s funding position, which may result in the initial employer contribution rate being adjusted.
The actuary report
Following the receipt and check of the transferring staff data from the previous and new employer, we provide information to our actuary to request a mandatory opening position report, which sets out:
- a valuation of pension liabilities of the transferred employees
- a recommendation for the employer’s contribution rate required to maintain the admission body's funding position
- for stand-alone arrangements, an assessment of risk reflected by the recommendations for the value of a bond or indemnity
The value of any bond or indemnity that is required to be put in place by the new admission body must be agreed by the outsourcing employer and the fund.
Preliminary report
Upon request, the actuary can prepare a preliminary report to provide an initial assessment of the employer contribution rate and bond or indemnity required, where a stand-alone arrangement is being considered. This enables the outsourcing employer to quote estimated pension related costs to tender applicants. This report incurs additional actuarial charges and is provided in addition to the mandatory report which will be prepared when the contract has been confirmed.