Preparing and Maintaining a Funding Strategy Statement in the LGPS (2016 Edition)

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Ensuring that, in the long term, an LGPS pension fund has sufficient assets to meet pensions liabilities is the primary responsibility of those charged with managing the fund, and getting the funding strategy right is critical to the achievement of this.

The purpose of the Funding Strategy Statement, as set out by the Department for Communities and Local Government in 2003, is to “establish a clear and transparent fund-specific funding strategy which would identify how employers’ pension liabilities are best met going forward.”

To support the requirement for a Funding Strategy Statement, CIPFA produced its 2004 guidance, Guidance on Preparing and Maintaining a Funding Strategy Statement, and whilst much of this guidance remains as relevant today as it was then, the context in which the LGPS operates has changed a great deal, in particular:

• introduction of the Public Service Pensions Act 2013
• the new 2014 scheme and associated regulations
• changes to the LGPS investment regulations
• the growth in number of admitted bodies and the evolving nature of the provision of public services.

Under Section 13 of the Public Service Pensions Act 2013, the Government Actuary’s Department (GAD) must, following an actuarial valuation, report on whether the rate of employer contributions to the pension fund are set at an appropriate level to ensure the solvency of the pension fund and long term cost efficiency of the Scheme so far as relating to the pension fund. This Guidance seeks to define these terms and outline the approach to be taken by GAD.

In this revised guidance, CIPFA has sought to reflect changes to the context in which the Local Government Pension Scheme (LGPS) operates. Changes have been made following the introduction of the Public Service Pensions Act 2013 and looking forward to the 2016 valuation.

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