Lothian Pension Fund (LPF) has reduced contribution rates for the majority of employers, whilst also increasing the level of prudence in the valuation basis, after its latest triennial valuation revealed a “strong” funding level of 157 per cent.

The fund's latest triennial valuation revealed that the funding level had increased from 106 per cent as at 31 March 2020 to 157 per cent as at 31 March 2023, while the surplus increased from £408m in March 2020 to £3,525m at 31 March 2023.

The positive valuation results allowed the fund to build in additional prudence when setting employer contributions, including a minor change to investment strategy, building in allowance for a fall in investment markets and increasing the target likelihood of success of achieving full funding over the time horizon relevant to that employer.

However, LPF confirmed that, even after building in these additional prudent measures, it was able to reduce or freeze employer contribution rates for the three-year period from 1 April 2024.

The LPF attributed the funding improvements to a combination of strong investment returns achieved in 2023, as well as the impact of higher interest rates on the valuation date, which led to a higher discount rate and reduced the present value of future pension liabilities.

The financial accounts revealed that assets have also continued to grow since the 2023 valuation, revealing that total assets of Lothian Pension Fund stood at £10,178m at the end of March 2024, up from £9,701m at the end of March 2023.

Investment performance was key to this, as the fund revealed that it achieved an overall investment return of +5.5 per cent over the year to 31 March 2024, and also gave a three year and five-year annualised return of +5.5 per cent.

More broadly, the report revealed that, over the past year, LPF paid out £230m in pensions to 36,453 members, a further £53m in retirement lump sums and £9.3m in death grants, and welcomed 6,604 new members.

The annual report also provided an update on the fund's work to respond to the ‘McCloud judgement’, a court ruling which found that the transitional protections for older workers provided in 2015 were age discriminatory.

"We’ve made great progress gathering the required information and communicating with members and employers to enable the revised benefit calculations," LPF stated.

"Although the financial impact is generally small for individual members, it’s nevertheless critical that members receive the pension they’re entitled to."

Commenting on the update, LPF chief executive officer, David Vallery, said: “It’s been a busy and successful year for Lothian Pension Fund.

"We’ve made great progress focusing on continuous improvement from on-line service capabilities, to investing in risk management processes and technology, such as boosting cyber security measures.

“As important as strong benchmarking is, our core purpose is paying benefits to members and their dependents.

"We’re delighted our members reported a high level of customer satisfaction whilst we continue to invest in improvements, such as biometric facial technology and a payments portal to simplify and improve the process for overseas pensioners.

“I’d like to thank the LPF team who work so tirelessly for members and employers, and to the committees and boards, who together oversee the fund and operating entities, and for their counsel, guidance and encouragement.”

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