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What are the key considerations?
Unlike the Euros, the 2022 valuations of England and Wales LGPS funds will kick-off on time and not even Covid can delay their imminent arrival. This blog sets out the key dates, data requirements and considerations for funds to be aware of for the 2022 valuation exercise.
Season fixtures
The 2022 valuation project can be broken down into seven main stages:
|
Stage |
Typical target dates |
|---|---|
| Data production and cleansing | June/July 2022 |
| Calculation and reporting of preliminary results including major employers | August/September 2022 |
| Agreeing assumptions | September 2022 |
| Calculation and reporting of individual employer results | October/November 2022 |
| Communicating results to employers and associated discussions | October 2022 – February 2023 |
| Draft and sign off valuation report | January – March 2023 |
| Revised contribution schedule commences | April 2023 |
Some funds may need the timetable to move faster than this and others may have scope to allow for a slightly more relaxed process. We will be holding a pre-valuation meeting with each of our funds over the coming months to firm up the timetable according to their own specific needs and circumstances.
The warm up
There are five main areas where we will need to ask for data from funds before we can carry out our calculations. These are summarised below.
Membership data
|
Data needed |
Why do we need it? |
|---|---|
| Universal Data Capture extracts (UDCs) | To inform us of benefits accrued to date and current salary information. We then place a value on all of this and set appropriate contribution rates. |
Whole Fund cashflow and investment data
|
Data needed |
Why do we need it? |
|---|---|
| Net asset statements of the Fund | By deducting the value of liabilities from the value of the assets we can determine the Fund’s (and ultimately each employer’s) surplus or deficit. |
| Fund income, expenditure and investment returns | To help reconcile movements in the Fund’s asset position over the period. |
Individual employer cashflow data
|
Data needed |
Why do we need it? |
|---|---|
| Details of contributions and benefits paid in respect of each employer |
To calculate each employer’s notional share of the Fund’s assets and hence deficit or surplus. This in turn feeds into the calculation of employer secondary contribution rates. |
Details of the long-term investment strategy
|
Data needed |
Why do we need it? |
|---|---|
| Long-term strategic asset allocation | To determine the discount rate assumption i.e. the assumed future investment return on the Fund’s assets. |
Review of employer details and events
|
Data needed |
Why do we need it? |
|---|---|
| Employer details | Details such as the type of body, whether an employer is open or closed to new members, their remaining contract lengths (where relevant) and the availability of any securities or guarantees all feed into our calculations. |
| Details of new employers and member movements | Such events often lead to a re-allocation of liabilities between employers and so we need to ensure there is also a corresponding notional re-allocation of assets. |
All of the information above can be prepared in advance of the valuation project commencing and indeed some of our funds regularly send through data during the inter-valuation period, using our online data checker and cashflow checker, to get regular feedback on the quality of the fund's data. This means that any issues can be ironed out well ahead of time, reducing costs and streamlining the valuation process.
Throw-ins
There are some natural offshoots of the valuation process where we often provide further support to funds. We embark on a whistle-stop tour of these below but much more detail will be given in our valuation preparation packs that will be sent out over the coming months.
Pre-match preparation
- Covenant analysis. We can help you to review your participating employers with regard to any guarantees or security in place and the level of risk. In addition to demonstrating good governance and risk management, this can be used to develop a funding framework and be fed into more tailored funding strategies for particular employers as part of the valuation.
- Self-insurance. The costs of ill-health retirement and/or death in service events can be very significant, particularly for small and medium-sized employers. We can help you to formulate and put in place a self-insurance policy, ensuring you can continue to manage these costs in an affordable manner for your employers.
- Data quality reports. Our online data cleansing portal can provide you with a downloadable report showing the progress that has been made on your data quality since your last submission, at either whole Fund level or individual employer level.
- Bespoke longevity analysis. Our specialist longevity team can provide a more in-depth review of longevity experience to help inform the setting of mortality assumptions to be used in the valuation, particularly in light of the Covid-19 pandemic.
- Training and presentations. We are always on hand to present results or provide training as required, for example at committee meetings. We are also happy to attend employer forums to assist with the communication of results.
Live commentary
- Shared overview of progress. We will be keeping a close eye on the progress of the valuations at our end and with new live sharing capabilities, we can now share this with you so you know where we are every step of the way.
Getting those goals
- Illuminate ME. Our online results portal will advise you of the valuation outcomes for each employer, giving you the ability to download reports at the click of a button for onward distribution. Advanced modelling functionality is also available for funds that wish to take more control of the valuation process.
- LGPS Monitor. Our innovative online tracking tool allows you to track over time the assets, liabilities and funding position of individual employers, pools and the whole Fund on a number of bases (for example, ongoing, or cessation). This can be set up as part of the valuation process, following which full funding update reports will be available to download on demand. These can be included in committee meeting papers or for discussions with particular employers.
Team selection
The 2022 valuation will be a major project and there is no substitute for being well prepared. We will shortly be in touch with our funds to arrange a pre-valuation meeting to discuss in more detail how we will work together, so please keep an eye out for further communications from us. Rest assured that your usual Barnett Waddingham team will be on hand to support you throughout the entire valuation process - from kick-off to the final whistle.
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