The Northern Ireland Local Government Officers’ Superannuation Committee (NILGOSC) pension fund should look at what can be done to protect against future risks, particularly in terms of how surpluses can be used, the Government Actuary's Department (GAD) has said.

The GAD's assessment of the 2022 valuation of the Local Government Pension Scheme (LGPS) in Northern Ireland showed that overall, the fund was in good health, as its funding position has remained broadly stable since 31 March 2019.

In total, the section 13 report revealed that the fund's total assets have grown from £8bn in 2019 to £10.2bn in 2022.

In fact, the GAD pointed out that only seven fund employers were in deficit at the valuation date, with only three of these employers’ having stable, or potentially slightly reducing, contributions (in terms of percentage of pay).

In addition to this, the maximum deficit recovery end point has been extended from 2037 to 2043.

However, the GAD warned that there are a number of risks and issues which have the potential to affect the NILGOSC pension fund in future, arguing that whilst a continued surplus could present opportunities, there are also risks that require consideration from the fund and their advisors as they emerge.

In particular, the GAD said that where at a future valuations employers remain in deficit and it was possible for the employer contributions to be reduced, it would expect that NILGOSC would again either maintain the deficit recovery end point or move it forwards, and not move it backwards unless new deficit emerges as a result of fund experience and it is appropriate to extend the recovery period.

The GAD said that a particular consideration for the fund will be the use or holding of a surplus too, highlighting particular issues around intergenerational fairness, as there is a need to balance the interests of current and future taxpayers.

Whilst the GAD acknowledged that different approaches may be taken when determining how surplus is utilised, it said that the NILGOSC should consider whether a consistent approach to LGPS England and Wales is appropriate, pointing out that the England and Wales Scheme Advisory Board have published Guidance for Preparing and maintaining a Funding Strategy Statement (FSS) ahead of the 2025 valuations of that scheme.

"We recommend that DfC consider whether equivalent guidance should be implemented for LGPS NI," the report stated, suggesting that this could help balance different considerations.

The GAD also encouraged the DfC to consider, where deficits do exist, how the LGPS NI can ensure that the deficit recovery plan can be demonstrated to be a continuation of the previous plan.

GAD actuary and co-author of the report, Garth Foster, commented: “The section 13 report provides an overview of the valuation, and the general health, of the LGPS NI scheme.

"GAD’s analysis has identified areas of success, but also recognises the importance of continuing vigilance around the general risks affecting the scheme.”

---