Nottinghamshire approves pension merger
UK - Nottinghamshire County Council has approved the merger of its two local government pension funds (LGPS) following an additional report into the impact on contribution rates.
Barnett Waddingham, scheme actuaries, produced an initial report outlining the rationale for the proposed merger of the £65m Admission Body Fund into the £2.05bn (€2.23bn) Main Fund, but highlighted a potential issue surrounding employer contribution rates. (See earlier IPE article: Nottingham considers pension merger)
Of the 60 employers in the admitted bodies fund, four employers have individual contribution rates that would not be affected by the merger, while the remainder are part of “pooled” arrangements, which have a set contribution rate.
The Main Fund comprises 26 employers with individual rates, but also 30 Small Scheduled Bodies, that operate a pooled arrangement. However, the pooled rate in the Admitted Bodies fund for 2010-11 is 15.5%, while for the main fund’s Small Scheduled Bodies pool the rate is 18.2% of payroll.
If the two pooled funds were merged, the combined rate would likely be lower for the schemes originally in the main fund, and higher for those transferring from the admitted bodies fund.
Therefore Barnett Waddingham offered the pensions committee three options:
Retain the existing pooling arrangements in the Admission Body Fund once in the Main Fund; Continue with separate contribution rates for the four Admission Body employers on individual rates and merge the Admission Body pooled employers with the Small Scheduled Body employer pool; Pool all Admission Body employers - including the four separate schemes - with the Small Scheduled Body employer pool.
Of these the favoured option by the pension investment and administration sub-committees was to merge the funds and keep the two separate pooled rates to maintain the status quo.
A spokesperson for Nottingham County Council confirmed that a pension committee meeting held yesterday approved the merger of the funds, and the recommendations of the sub-committees to “retain the existing pooling arrangements in the Admitted Bodies Fund once in the Main Fund”.
It is now expected that the merger of the two funds will proceed from 1 April 2010, after the next triennial actuarial valuation of the funds on 31 March 2010, and from 2010-11 only one set of accounts will be produced, and the investment portfolio structures will be simplified, reducing the need for duplicate holdings and pooled vehicles.
Elsewhere Staffordshire County Council is seeking an actuary to provide services to its £1.7bn pension fund, as well as the provision of performance measurement services in relation to the administration of the scheme.
Currently the scheme employs Hymans Robertson to provide its actuarial services, but it is now re-tendering the four-year contract, valued at between £300,000 and 400,000. Performance measurement service are also being offered as a four-year contract.
The closing date for both tenders is 20 November 2009 and further information can be obtained from Staffordshire County Council.
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