Agenda Item No. 4
The Vale of Glamorgan Council
Shared Regulatory Services Joint Committee: 20 December 2016
Report of the Head of Finance / S151 Officer
Proposal to Establish the Shared Regulatory Service as a Separate Employer under the Cardiff and Vale Pension Fund
Purpose of the Report
To outline to Elected Members the benefits of moving to a separate employer under the Cardiff and Vale Pension Fund for Shared Regulatory Service (SRS) staff.
The Committee approves the proposal to set up a separate SRS Joint Committee employer under the Cardiff and Vale Pension Fund at an estimated cost of £37k-£46k for the SRS Joint Committee Staff.
Reason for the Recommendation
To minimise the risks set out in the report relating to cross subsidisation and participant withdrawal and ensure accurate accounting in accordance with IAS19.
Prior to the establishment of the SRS Joint Committee Bridgend staff were accounted for under the Bridgend employer as part of the Rhondda Cynon Taff Pension Fund and the Cardiff and Vale of Glamorgan Staff were accounted for under their respective employers as part of the Cardiff and Vale Pension Fund.
Upon transfer of the Shared Regulatory Staff to the Vale of Glamorgan Council they became part of the Cardiff and Vale Pension fund under the Vale of Glamorgan Council employer. This exposes both the Council and the SRS to risks regarding cross subsidisation and early withdrawal of participants.
For the 2015/16 Statement of Accounts the Cardiff and Vale Pension Fund Actuary was employed to carry out a separate valuation for the SRS to ensure that the annual Statement of Accounts reflected the Joint Committee's pension costs. This work incurred a cost of £4,325.
Relevant Issues and Options
The Cardiff and Vale Pension Fund Actuary (Aon Hewitt) has advised that in order to fully account for the SRS's Pension Costs it is necessary to ring fence the assets and liabilities of the SRS as if it is a separate employer in the Cardiff and Vale Pension Fund.
The benefits of this approach would be that it would minimise risks of cross subsidisation.
It allows the deficit of the Service to be monitored separately from the Vale of Glamorgan Council's deficit, enabling an appropriate allocation of costs to the Service. It would otherwise be difficult to ensure that the Service was funding the deficit it inherited, without either transferring part of it to the Vale of Glamorgan or instead subsidising the Vale of Glamorgan's deficit
This would also mitigate the risk that decisions taken by the Vale of Glamorgan Council could adversely impact on the Pensions Liability or contribution rate of the Shared Regulatory Service and vice versa.
It allows assets to be appropriately allocated to the service for IAS19 accounting purposes. The service's current IAS19 balance sheet has been prepared by estimating the bulk transfers for participants. It is not currently possible to correctly identify benefit cashflows because the employees are coded as Vale of Glamorgan employees on the administration system.
It would ensure the deficit could be measured on the withdrawal of one or more participants ensuring that the participants can be responsible for the appropriate share of the deficit on withdrawal or termination.
The proposed project process would be as follows:
Instruct the Cardiff and Vale Pension Fund to monitor the SRS Staff independently of the Vale of Glamorgan and this should be ideally backdated to the commencement of the service.
Request results for the Shared Regulatory service as part of the Actuary's 2016 valuation of the Fund which may need to be on estimated bulk transfers for 2016/17.
Agree with participants policies with regards to share of funds and allocation of long term risks once the new fund has been established.
Contact administering authorities, Cardiff Council and Rhondda Cynon Taff Council, to instruct them with regards to the asset transfer agreements.
Participants work with the relevant funds to agree data for asset transfers is accurate.
The proposed project would require a dedicated project team from Aon Hewitt, all of whom are independent of the Rhondda Cynon Taff and Cardiff and Vale Pension Funds, in addition to input from Cardiff and Vale Pension Fund Actuary, Rhondda Cynon Taff Pension Fund Actuary and legal advice as required. There is the possibility that Cardiff Council may levy admin costs as the Cardiff and Vale Pension Fund Administering Authority.
Resource Implications (Financial and Employment)
The Council is host Authority for two Joint Committees, namely the SRS and Vale, Valleys and Cardiff Regional Adoption Service and the work to separate out the employer is required across both Joint Committees. The actuary has estimated that the project could cost between £40k to £50k for both Joint Committees, if the total project costs are apportioned by number of Local Government Pension Fund participants (213 of 231) then the Shared Regulatory Service share of the cost (92%) would be approximately £37k to £46k. These costs can be met within the implementation budget for the service.
Sustainability and Climate Change Implications
There are no immediate sustainability or climate change implications associated with this report.
Legal Implications (to Include Human Rights Implications)
A revised Joint Working Agreement may be required to reflect the proposed changes.
Crime and Disorder Implications
No specific crime and disorder implications.
Equal Opportunities Implications (to include Welsh Language issues)
No specific Equalities implications.
The key service and improvement objectives contained in the SRS Business Plan identify and link to the Corporate Plans of each Council.
Policy Framework and Budget
The adopted Scrutiny regime will engage in the review and developments of plans, policies and strategies that support the corporate objectives of each Council.
Consultation (including Ward Member Consultation)
No specific consultation has been undertaken in relation to this report.
Relevant Scrutiny Committee
The SRS is currently scrutinised through the arrangements in place at each partner Council.
Principal Accountant, Vale of Glamorgan Council
Assistant Chief Executive, Bridgend County Borough Council
Director of Environment, City of Cardiff Council
Director of Environment & Housing Services, Vale of Glamorgan Council
Legal Services, Vale of Glamorgan Council
Accountant, Vale of Glamorgan Council
Dave Holland, Head of Shared Regulatory Services