Agenda item

The Head of Pensions, Governance & Investments presented the Members of the Teesside Pension Fund Committee with the 2023/24 draft unaudited accounts for the Teesside Pension Fund and to provide an update on the revised format required for the Pension Fund Annual Report.

The overall financial performance of the Fund for the year to 31 March 2024 was very positive. The Fund’s value rose to £5.477 billion, an increase over the year of approximately £413 million, over 8%. This increase in value was mainly a result of equity market performance, which was positive for the year as a whole. The Fund was two years into the current triennial valuation cycle. The Fund’s asset value as at 31 March 2025 would be used by the Fund actuary when calculating the three-yearly valuation of the Fund. The value of the Fund’s assets was currently increasing broadly in line with the actuary’s expectations at the last valuation. Although welcome news, it was important to recognise the long-term nature of the Fund and the volatility of many of its assets meant that the actuary would look beyond just the immediate value of the assets when carrying out the valuation. In addition, the size of the Fund’s liabilities (the cost of paying current and future benefits) was just as important when carrying out the valuation and setting employer contribution rates. Factors such as the actuary’s view of future inflation rates, future investment returns and life expectancy expectations would play a key part in the actuary’s valuation calculations.

Total membership of the Fund had increased, with total membership at the year-end standing at 82,213 an increase of 1,875 over last year. The number of active members had remained broadly similar, increasing by just 22 or 0.08% over the year, and increased by 11.9% over the past four years. The number of pensioners increased by 898 or 3.3% over the year and increased by 12.8% over the past four years. The number of deferred members had increased by 955 or 3.5% over the year and increased by 20% over the past four years.

Every three years the Fund actuary, carries out a full actuarial valuation of the Fund. The purpose was to calculate how much employers in the scheme need to contribute going forward to ensure that the Fund’s liabilities, the pensions due to current and future pensioners, would be covered. Unlike all the other major public sector schemes the Local Government Scheme was a funded scheme. That meant there was a pool of investments producing income which meet a significant part of the liabilities.

The latest actuarial valuation of the Fund was as at 31 March 2022, with the final report published at the end of March 2023. The actuary calculates to what extent the Fund’s assets meet its liabilities. This was presented as a funding level. The aim of the Fund was to be 100% funded, and at the latest valuation the actuary was able to declare a funding level of 116%. The next valuation is due to be carried out as at 31 March 2025 with the final report due to be published in March 2026 and any changes required to employer contribution rates due to come into force from April 2026.

It was noted that the Pension Fund Accounts were presented in draft form and, whilst the main numbers and outcomes were not expected to change, changes may be needed as further review takes place. In addition, the audit process was not complete and further changes may be required as a consequence of this.

The Pension Fund Annual Report is currently being prepared so as to comply as far as possible with the new guidance. A final draft will be presented to the 25 September Pension Fund Committee for approval and to the 25 November Teesside Pension Board for noting before publication by 1 December 2024.

A Member praised the current performance and queried the problems other bodies such as Cleveland Fire Brigade have had in terms of delays of audited accounts and the delay in the pension fund being given as a reason for this.

It was explained that currently, Middlesbrough Council’s accounts for 2021/22, 2022/23 and 2023/24 had not been signed off by the Auditor due to a number of reasons, including Auditor availability.  It was noted that the accounts had now moved from EY to Mazars and the Pension Fund and Council accounts should complete in early 2025 to ensure both audits can be signed -off within the year.

The previous government looked to address the issue of the audit backlog, which

had affected Local Authorities nationally, by implementing a cut-off date where a line

would be drawn and the accounts not completed would not require sign-off.  The

election being called had stopped that legislation being implemented, however it

was anticipated that the new government would consider this in the upcoming weeks. 

ORDERED: that the information provided was received and noted.