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L'înformâtion et les sèrvices publyis pouor I'Île dé Jèrri

Public Employees Pension Fund Strategy Statement

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A decision made on 6 September 2019

Decision Reference:  MD-TR-2019-0080

Decision Summary Title:

PEPF Funding Strategy Statement

Date of Decision Summary:

30th August 2019

Decision Summary Author:

Head of Shared Services

Decision Summary:

Public or Exempt?

Public

Type of Report:

Oral or Written?

Written

Person Giving

Oral Report:

N/A

Written Report

Title:

Public Employees Pension Fund (PEPF) Funding Strategy Statement

Date of Written Report:

30th August 2019

Written Report Author:

Head of Shared Services

Written Report :

Public or Exempt?

Public

Subject: Approval of updates to the Public Employees Pension Fund (PEPF) Funding Strategy Statement

Decision(s): The Minister decided to approve the Funding Strategy Statement

Reason(s) for Decision: Under the Public Employees (Pension Scheme)(Funding and Valuation) (Jersey) Regulations 2015, regulation 2, the PEPF Committee of Management is required to keep the Funding Strategy Statement under review and agree updates with the Minister for Treasury and Resources.

 

Updates to the Funding Strategy Statement have been prepared by the Scheme Actuary and been reviewed by the Employers Actuary who has confirmed the changes are not unreasonable. The Minister is asked to agree the Funding Strategy Statement.

Resource Implications: There are no staffing or financial implications.

 

Action required: The Head of Financial Governance to notify the Head of Shared Services who will   send a copy of the approved Ministerial Decision to the PEPF Committee of Management to show the agreement of the Funding Strategy Statement.

 

Signature:

 

 

 

 

Position: Deputy S J Pinel,

Minister for Treasury and Resources

                

 

Date Signed:

Date of Decision:

 

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Public Employees Pension Fund Strategy Statement

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Ministerial Decision Report 

 

 

 

Public Employees Pension Fund (PEPF) Funding Strategy Statement

 

 

  1. Purpose of Report

To enable the Minister for Treasury and Resources to agree an updated PEPF Funding Strategy Statement.

 

  1. Background

Production and publication of a Funding Strategy Statement prior to the completion of an actuarial valuation is a requirement under the Public Employees (Pension Scheme) (Funding and Valuation) (Jersey) Regulations 2015.

 

It is best-practice for funded pension schemes to produce a Funding Strategy Statement prior to the completion of an actuarial valuation. The Statement outlines the approach and principles to be adopted in the actuarial valuation.

 

A Funding Strategy Statement was first produced by the Committee of Management ahead of the 2016 actuarial valuation. Following review by the Employers Actuary the Statement was agreed by the Minister for Treasury and Resources in September 2017.

 

Under the Regulations the Funding Strategy Statement must be kept under review by the Committee of Management and, following changes to any of the matters contained in the statement, the Scheme Actuary must make revisions and obtain the agreement of the Committee and the Minister for Treasury and Resources.

 

In advance of completing the 2018 Actuarial Valuation the Committee of Management have reviewed and updated the Funding Strategy Statement. The changes to the Statement are mainly administrative in nature. References to the 2016 actuarial valuation have been removed to reflect the passage of time and naming conventions updated.

 

The Funding Strategy Statement with tracked changes is attached at Appendix A  

 

  1. Content of the Funding Strategy Statement

The Funding Strategy Statement (Appendix A) sets out the high-level principles in relation to the funding of the scheme liabilities subject to the overall requirements of the Regulations. These include;-

 

  • Assumptions for actuarial valuations

The principles for setting assumptions to be applied to the actuarial valuation of the fund including the level of prudence to be used for the valuation of the Career Average Scheme and the actuarial method to be used for calculating liabilities.

 

 

 

 

  • Methodology for adjusting benefits and contributions

The methodology for maintaining employer and member contributions within the cost caps outlined in the Regulations and adjusting the annual pension increase, contribution rates, rate of future accrual and revaluation rate.

 

  • Allocation of contributions and costs

The methodology for allocation of contributions, investment/administration costs and benefit transfers in/out values between the respective schemes.

 

  • Principles for determining benefit options

The principles to be adopted for setting assumptions for the calculation of transfers in and out of the scheme, amounts payable by members to purchase additional pension and the amount by which benefits are actuarially reduced for early payment. 

 

  • Funding risks

The identification of risks to the solvency of the Fund and the actions taken to mitigate these risks.

 

  1. Key Points

The Funding Strategy Statement sets out a range of principles and methodologies that will be used in the 2018 actuarial valuation. Some of the key points of note are;-

 

  • The employer contribution cap is set at 16.5% of pensionable earnings in the Public Employees (Pension Scheme) Law 2015 and this is reiterated in the Funding Strategy Statement.

 

  • The minimum level of prudence for the actuarial valuation of the Career Average Scheme is set as a discount rate such that there is at least a 60% probability of the actual investment return on Career Average Scheme assets being higher than the discount rate over a 30 year period.

 

  • Any increase in employer contributions from within the employer contribution cap (i.e. up to a maximum of 16.5% of pensionable earnings) to fund a past service deficit would require the agreement of the Chief Minister. The employer contribution rate cannot be increased above 16% until 1st January 2024 at the earliest under the Regulations.

 

  • The employer contribution to fund the future service cost of benefits cannot increase above 16.5% of pensionable earnings. Under the Regulations any increase in employer contributions above 16% of pensionable earnings to fund future service costs could not occur until 1st January 2024 at the earliest.

 

  1. Review process

The Funding Strategy Statement is a technical document and has been shared with the Employers Actuary for review. The Employers Actuary commented and contributed to the development of the original document in 2016 and has now reviewed the changes being proposed.

 

The Employers Actuary has confirmed that the proposed changes to the Funding Strategy Statement do not appear unreasonable.

 

  1. Recommendation

To approve the updates to the Funding Strategy Statement.

 

  1. Reason for Decision

Under the Public Employees (Pension Scheme) (Funding and Valuation) (Jersey) Regulations 2015 changes to the Funding Strategy Statement must have the agreement of the Minister for Treasury and Resources.

 

Accordingly the Minister is asked to agree the updates to the Funding Strategy Statement so that it can be published.

 

  1. Resource Implications

There are no financial implications resulting from agreeing the Funding Strategy Statement. There are also no staffing implications. 

 

 

 

Report author : Head of Shared Services

Document date: 30th August 2019

Quality Assurance / Review :Head of Financial Governance

File name and path: L:\Treasury\Sections\Corporate Finance\Ministerial Decisions\DS, WR and SD\2019-0080 - PEPF Funding Strategy Statement

MD Sponsor: Treasurer of the States

 

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