UK - Local government pension schemes (LGPS) with actuarial valuations in 2007 saw the average retirement age increase by 12 months to 60.7 years, Hymans Robertson has revealed.
Figures from the firm's second benchmarking report of LGPS actuarial valuations - carried out in 2007 - showed while funding levels had improved the common contribution rate, based on future benefits costs and a deficit spread over a recovery period, remained steady at 19.5% of pay.
The report also revealed the investment strategy of the 40 LGPS schemes covered by the research was relatively unchanged between valuations in 2004 and 2007, although fund returns over the three years averaged 13.9% per year, which Hymans Robertson described as "considerably above the valuation assumptions".
Key findings from the report showed the average funding level of the LGPS was 85%, up from 76% in 2004, although it highlighted funding levels improved in all the funds within a range of 1-16 percentage points.
It attributed the increase to a "combination of higher average returns on assets relative to the returns anticipated in the discount rate and contributions above the cost of accruing benefits" although it said this was partially offset by a fall in real gilt yields.
Meanwhile, the average gearing ratio for the funds - which measures the sensitivity of employer contributions to changes in funding level so the higher the ratio the more it is influenced by the past service deficit or surplus - had increased to 537% from 454% in 2004.
Hymans Robertson suggested the increase "may be evidence of LGPS funds maturing as new entrant numbers reduce", although even with the increase it claimed the gearing ratios are still "considerably lower" than in the private sector, where many defined benefit (DB) schemes have already closed.
On the investment side, the average annual return for the three years between valuations was 13.9%, although the figures showed total returns over the period ranged from 11.8% a year to 16%, although most schemes achieved a yield of between 13.2% to 14.4%.
Of the schemes included in the research the average asset allocation at 31 March 2007 was 71% in equities, 19% in bonds and cash and 10% in property, while the report suggested "for most funds" there was little or no change to equity and bond allocations between valuations.
Hymans Robertson claimed "taken as a whole, financial experience between 2004 and 2007 improved the funding position for LGPS funds".
The report also noted the average age of retirement in the three-year period increased slightly from 59.7 years between 2001-2004 to 60.7 years, which the consulting firm claimed is "good news for funds as later retirements are less costly", although it admitted increasing life expectancy might erode any potential gains.
Alison Murray, partner at Hymans Robertson, said: "Our report takes the results of the 2007 actuarial valuations of LGPS funds to whom Hymans Robertson provides actuarial advice and not only paints a picture of the range of key results, but provides a unique insight into the principal factors influencing the results including intervaluation experience, underlying funding and investment strategy and membership data."
That said, the report only includes data available for the triennial valuations carried out at 31 March 2007, so Hymans Robertson recognised "market conditions have deteriorated and funding levels as at the date of this report are substantially below their 31 March 2007 levels".