1 July 2021, 10.30am
Advisory Board

Full details of the meeting and agenda papers can be found on the board meetings page.

Background – The Board held a special single issue meeting on 1st July 2021 following a discussion on the SAB cost management process and McCloud at the Board meeting on 10th May.

When it met earlier on 10th May the Board had requested further information from GAD in respect of both the spreading and the ‘decay’ of McCloud costs.

The Board was advised that GAD had been asked to provide a range of costs against a scale of spreading periods. This was completed for periods from 4 years (the HM Treasury proposed spread period) to 20 years (LGPS funds must report the % of liabilities spread over longer than 20 years in the Section 13 dashboard section of their valuation reports). The results forecast that any spread over 8 years would result in a total cost below the 19.5% target.

GAD was also asked to identify the ‘decay’ of McCloud costs over time. This was difficult to achieve given the uncertainty on future pay movements which drive such costs, therefore a proxy of a forecast of when qualifying members would leave the scheme had been used. The results forecast that on taking an average by group all* qualifying members would have left within 16 years with the majority (60%) leaving within 10 years.

Next steps – The Board then agreed the following matters:

• The time-period to be used, taking into account the GAD modelling on spread and decay as provided
• Requesting that GAD finalise figures based on the above spread period
• The approach to government assuming a small shortfall in the scheme costs which would require the consideration of changes to benefits on a ‘may’ basis i.e. the Board could recommend changes but is under no obligation to do so

Recommendations – The Board further agreed the following based on recommendations made in the report which was taken on the day:

• A spread period of 10 years, this being the point at which 60% of qualifying members are expected to have left the scheme
• Inform government that the Board intends to revisit third tier ill health and contributions of the lowest paid via a separate process, with the objective of bringing forward recommendations in these areas for future scheme changes

Date of next meeting – 27th September 2021