Jersey Teachers' Superannuation Fund (JTSF): Actuarial Valuation Report as at 31 December 2013

Information about the publication of Ministerial Decisions

A formal published “Ministerial Decision” is required as a record of the decision of a Minister (or an Assistant Minister where they have delegated authority) as they exercise their responsibilities and powers.

Ministers are elected by the States Assembly and have legal responsibilities and powers as “corporation sole” under the States of Jersey Law 2005 by virtue of their office and in their areas of responsibility, including entering into agreements, and under any legislation conferring on them powers.

An accurate record of “Ministerial Decisions” is vital to effective governance, including:

demonstrating that good governance, and clear lines of accountability and authority, are in place around decisions-making – including the reasons and basis on which a decision is made, and the action required to implement a decision
providing a record of decisions and actions that will be available for examination by States Members, and Panels and Committees of the States Assembly; the public, organisations, and the media; and as a historical record and point of reference for the conduct of public affairs

Ministers are individually accountable to the States Assembly, including for the actions of the departments and agencies which discharge their responsibilities.

The Freedom of Information Law (Jersey) Law 2011 is used as a guide when determining what information is be published. While there is a presumption toward publication to support of transparency and accountability, detailed information may not be published if, for example, it would constitute a breach of data protection, or disclosure would prejudice commercial interest.

A decision made 27 February 2015:

Ministerial decision reference MD-C-2015-0030
Decision summary title Jersey Teachers’ Superannuation Fund (JTSF)
Decision summary author	Project Director, Pensions	Is the decision summary public or exempt?		Public
Report title Jersey Teachers’ Superannuation Fund (JTSF) Actuarial Valuation Report as at 31 December 2013
Report author or name of person giving report	Project Director, Pensions	Is the report public or exempt?		Public
Decision and reason for the decision The Chief Minister decided to lay before the States the Jersey Teachers’ Superannuation Fund (JTSF) Actuarial Valuation at 31st December 2013. Under article 3 (12) of the Teachers’ Superannuation (Jersey) Law 1979, the Management Board of the Jersey Teachers’ Superannuation Fund (JTSF), the Scheme Actuary shall review the operation of the fund in respect of – a) each 5 year period beginning on the 1 September 1986; or b) each period, of less than 5 years, that the Minister may, after consultation with the Management Board, determine. Under Article 13 (3) of the Law, on each review under paragraph (12), the Actuary shall make a report to the Minister, the Minister for Treasury and Resources and the Management Board on – a) the financial condition of the Fund; and b) the adequacy or otherwise of the contributions payable under this Law to support the pensions and other benefits payable under this Law. A copy of every report produced under paragraph (13) shall be laid by the Minister before the States as soon as is practicable after it is made. The report was signed by the Scheme Actuary on 7th January 2015 and the Chief Minister is now able to lay the report before the States.
Resource implications There are no financial or staffing implications.
Action required The Project Director – Pensions is requested to arrange with the Greffier of the States the presentation of the Report to the States at the earliest possible date.
Signature			Position Senator I J Gorst Chief Minister

Date signed			Effective date of the decision

Jersey Teachers' Suerannuation Fund (JTSF): Actuarial Valuation Report as at 31 December 2013

Report of the Chief Minister

Article 3(12) of the Teachers’ Superannuation (Jersey) Law 1979 requires the appointment of an Actuary to review the operation of the Jersey Teachers’ Superannuation Fund (JTSF).

Under Article 3(13) of the Law, on each review under paragraph (12) the Actuary shall make a report to the Minister, the Minister for Treasury and Resources and the Management Board on –

the financial condition of the Fund; and
the adequacy or otherwise of the contributions payable under this Law to support the pensions and other benefits payable under this Law.

The Scheme’s Management Board and the States Employment Board have formally accepted the report, which was signed by the Scheme’s Actuary on 7 January 2015.

Valuation result

The main conclusions from the valuation are that:

a) There is a surplus of £7.4 million as at 31 December 2013 (equivalent to a funding level of 101%), using best estimate assumptions and after taking account of the States of Jersey’s expected future payments to cover the pension increase debt.

b) The pension increase debt which the States of Jersey is required to repay is £101.1 million as at 31st December 2013.

c) The employer contribution rate is 16.4% of pensionable salaries, of which 5.6% is being used to repay the pension increase debt and 10.8% to fund benefits.

d) Using best estimate assumptions, the future employer contributions (10.8% of pensionable earnings) are insufficient to fund the benefits being promised (13.4% of pensionable salaries).

Dealing with a surplus

The surplus of £7.4 million as at 31 December 2013 is based on the provisions of the Scheme at that date.

Where a surplus is disclosed at a valuation, the Regulations 18(4) of the Teachers’ Superannuation (Administration) (Jersey) Order 2007 requires proposals to be submitted to the States to dispose of any surplus. Given the size of the surplus is not material, the Scheme Actuary has recommended that no additional action should be taken to dispose of the surplus.

The Scheme Actuary therefore recommends the remaining surplus is retained as a buffer against future adverse experience.

Notes on the Valuation

The overall approach adopted for the 2013 valuation is the same as for the 2010 valuation. In particular, the Actuary continued to use best estimate assumptions whereby the future outcome is just as likely to be better or worse than assumed.

At each valuation the Scheme Actuary reviews the assumptions to be used to ensure that financial assumptions are based on market conditions at the valuation date and that the demographic assumptions take into account Scheme experience over the three year valuation period and any industry developments, for example on mortality expectations. The assumptions adopted for the valuation are described in detail in Appendices G and H of the Valuation Report.

At the 2010 valuation the Scheme Actuary determined that the Scheme was in a balanced position. The funding position has improved to a £7.4 million surplus over the last 3 years due to;-

higher investment returns than expected, and
general pay awards and pension increases being lower than expected

Pension Increase Debt

At its meeting on 24 October 2005 the ESC Committee agreed in principle to provide for a Teachers’ Scheme similar to the Public Employees Contributory Retirement Scheme (PECRS). Changes to the Teachers’ Scheme came into force 1 April 2007 and in the main aligned teachers’ benefits to Jersey public sector pension benefits available under the PECRS. A Report and Proposition was given effect through the passing of Teachers’ Superannuation (New Members) (Jersey) Order 2007.

As a result of the amendment the funding of pension increases moved from the ESC Revenue budget to the Fund and the Scheme Actuary calculated a past service liability (the pension increase debt).

The Scheme Actuary has completed the 2010 and 2013 actuarial valuations on the basis that agreement is reached on the terms of repayment. The States has recognised the debt in its balance sheet since 2007 and a commitment to terms of repayment will have no additional balance sheet implications.

The actuarial report has been completed on the understanding that the States of Jersey will formally sign up to a repayment schedule within Orders for the repayment of the pension increase debt.

A formal repayment schedule has not as yet been incorporated into Orders. The JTSF Management Board and the Scheme Actuary are now requesting that this is formalised as soon as possible. The States Employment Board agreed at its meeting on 30th January 2015 that the drafting of Orders to formalise the terms of the debt should be progressed.

Summary

The 2013 actuarial valuation has identified that using best estimate assumptions the cost of the benefit package for new entrants has increased from 12.8% to 13.4% of pensionable salaries since the last valuation in 2010. The current employer contribution available to fund scheme benefits is 10.8% of pensionable salaries. There is insufficient on-going funding to pay for the benefits being promised and the situation has worsened over the valuation period. The Actuary has recommended the Management Board work with the States to establish a sound funding strategy for the Scheme. The States Employment Board will need to consider how it is to address the sustainability of the JTSF in the future.

A repayment schedule and basis for repayment needs to be incorporated into Orders for agreement and it is proposed that Law Drafting are requested to produce the draft Orders for signing.

Actuarial Report

The 2013 actuarial valuation was signed by the Scheme Actuary on 7 January 2015. A copy of every report, signed by the Scheme Actuary, shall be laid by the Minister before the States as soon as is practicable after it is made.