The initial Medium Term Financial Strategy (‘MTFS’) covered the five year period from 2017/18 to 2021/22. This report highlights progress against that MTFS and covers the MTFS period from 2018/19 to 2022/23.A summary presentation will be given to the PSJC on 31st January highlighting key matters, particularly in respect of the financial year 2018/19.
LCIV Employee Pension Scheme
In respect of the LCIV pension scheme, in 2015 the City of London (‘COL’) helpfully agreed to be the Scheme Employer to LCIV staff as LCIV could not offer an LGPS pension itself. However this was on the proviso that the City of London Pension Fund (‘COLPF’) would be afforded protection for any pension liabilities arising in consequence of LCIV’s admission to the COLPF. Eversheds have advised COL that the existing shareholder agreement does not provide sufficient protection against the pension liability. Consequently, Eversheds have opined that a separate agreement provided by all shareholders would be required. The agreement would take the form of a guarantee which would be the most cost effective solution compared to an insurance policy. It should be noted that the current exercise to formalise the pension arrangements does not represent a change to the agreed pension position in 2015.
As noted in previous PSJC meetings, FRS102 creates a pension deficit even though there is no actuarial deficit. The accounting deficit creates a reduction in LCIV’s capital adequacy. As detailed below a recharge agreement, which does not create any additional cost or liability to shareholders, looks to be, although not elegant, a way to achieve resolution and allow LCIV to address the capital impact of the FRS102 deficit. The recharge agreement will allow LCIV to reduce the DFC in line with MTFS and prevent capital adequacy fluctuations. This recharge agreement would need to be signed by all shareholders.
A key meeting with advisers is taking place on 24th January, following which a verbal update will be given to the PSJC including confirmation of the date that draft agreements will be circulated to LLAs.