Local Government Pension Scheme (LGPS) valuations have become far more sophisticated and are no longer simply exercises for setting employer contribution rates, according to Worcestershire County Council head of financial planning and pension investments, Sherief Loutfy.

Speaking at the Pensions UK Local Authority Conference, Loutfy stated that valuations were “becoming increasingly integrated in investment strategy and risk management, and wider financial planning”.

He explained that 'modern' actuarial valuations are now prevalent in the LGPS, "where actuaries provide much more information on some of the risks that are emerging, and we're seeing that at the 2025 valuation, such as the reporting on the gender pensions gap and reporting on climate risk that's been introduced at this valuation, which only goes to enhance the risk metrics available to LGPS funding”.

Fellow panellist, Hymans Robertson partner and actuary, Steven Scott, agreed that “if you're still looking at valuation as a traditional exercise, where you're simply measuring the funding level and using that to calculate contribution rates, those valuations are under threat".

He highlighted how recent research has found no direct link between the improvement in funding levels and the reductions applied to contribution rates.

“That's because that contribution rate setting process is moving away from traditional actuarial calculations to determine the contribution rate approach. Instead, many more qualitative factors are being brought into the contribution rate setting process,” he explained.

“I think that's a good thing. I think that will help improve the sustainability of the LGPS into the future,” Scott added.

Highlighting Worcestershire County Council’s LGPS valuation approach, Loutfy said that “rather than relying on a single forecast, we’ve assessed funding resilience across a wide range of economic outcomes”.

He added that “we don’t see the valuation exercise in isolation. For us, it is integrated with the investment strategy, governance, and employer engagement”.

“A key part of this approach for us has been scenario modelling, rather than relying on a single forecast. We've assessed the funding resilience across a wide range of economic outcomes,” he explained.

However, according to Loutfy, the challenge generally is ensuring valuations continue to evolve in ways that strengthen governance going forward: "Modern valuations are increasingly strategic, analytical, and forward-looking. But overall, the core objective remains unchanged: long-term stability, resilience, and affordability," he said.

He predicted that the LGPS valuation framework is “likely to be one of continued evolution rather than fundamental change” but that, ultimately, the goal of valuations should be “stable and sustainable contributions across economic cycles, rather than reacting to short-term market movements”.

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