Scottish Borders Council Pension Fund, with total assets in excess of £860m (€1bn), is looking to reduce its contribution levels from 2024 as its funding ratio increased to 134% for the year ending 31 March 2023 from from 110% in its 31 March 2020 valuation.
The current contribution rate for the Scottish Borders Council is 18.5%. Based on the results of its latest triennial valuation, contribution rates now need to be reviewed for the three financial years from 2024/25.
Scottish Borders said that with a “very high level of success measures” confirmed by the current funding level of 134%, there may be room for further reductions in contribution rates. This, it said, is due to the expectation that investment returns in the future will be higher than at the previous valuation.
It said that the modelling of contribution rates from 1 April 2024 has been undertaken utilising four scenarios. Under the first scenario, the fund would maintain a rate of 18% until 2027; it is also considered either a 0.5% or 1% reduction until 2027. The last scenario proposed an immediate reduction to 15% until 2027.
Scottish Borders said that any of the contribution scenarios modelled for the next three years are appropriate with a likelihood of success of over 80%.
It added that the proposal to reduce the contribution also confirms that maintaining the contribution stability mechanism remains appropriate in the long-term.
The fund suggested that in order to recognise the positive results from the triennial revaluation but to maintain an appropriate level of prudence, the Scottish Borders Council contribution rate moves to 17% from 2024/25 through to 2027/28 instead of moving straight to 15%.
It added that the position will be kept under review annually.
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