LPFA fund close to full funding
An initial assessment of the £4.7bn ($7.3bn) London Pensions Fund Authority (LPFA) fund by Barnett Waddingham anticipates the funding level to be around 95%.
Refinement of the asset and liability strategy, good investment returns over the inter-valuation period and appropriate management of interest rate and inflation risks have all contributed to the fund’s improvement. These factors have compensated for an increase in future improvements in mortality.
“The positive indicative results of our 2013 valuation reflect the expertise and commitment of the entire team at LPFA. We have worked hard in recent months to refine our asset and liability strategy and are delighted to see that these efforts are already paying dividends,” says Mike Taylor, LPFA CEO.
The LPFA has had an active liability driven investment strategy to hedge its inflation and interest rate risk since 2006. This February, the authority undertook a large tactical switch to reduce its interest rate hedge and increase its inflation hedge, crystallising a book profit of some £200 million, and reducing the negative impact of any future potential inflation increases.
Opt-outs and job losses account a 12.5% decline in the LPFA’s active membership over the inter-valuation period. Deferred and pensioner members have increased by 2% and 3.5% respectively, leaving overall membership marginally down.
The expected impact of the 2014 scheme changes has been factored into the valuation results, resulting in an overall reduction in the costs of future service for employers.
However the impact varies across the 200-plus employers in the LPFA, which include charities, universities and schools, as well as the residual liabilities from the Greater London Council era. The final valuation results will be published in the autumn.
Found this useful?
Take a complimentary trial of the FOW Marketing Intelligence Platform – the comprehensive source of news and analysis across the buy- and sell- side.
Gain access to:
- A single source of in-depth news, insight and analysis across Asset Management, Securities Finance, Custody, Fund Services and Derivatives
- Our interactive database, optimized to enable you to summarise data and build graphs outlining market activity
- Exclusive whitepapers, supplements and industry analysis curated and published by Futures & Options World
- Breaking news, daily and weekly alerts on the markets most relevant to you
