Here's the Executive Summary:
The results are presented in this report and summarised below.The actuary makes various assumptions. One is that mortality rates will probably improve - there'll be nae bevvying in the new Scotland. But on the other hand, "the increase in childhood obesity may result in a decline in longevity in future generations." Lose some; win some, as the actuary would put it.
The Fund’s objective of holding sufficient assets to meet the estimated current cost of providing members’ past service benefits) was not met at the valuation date. The funding level was 85% (compared to 85% at 31 March 2005) and there was a funding shortfall of £524m.
Without anticipating an element of future equity out-performance, the ‘gilt-based’ funding level would be 65% at the valuation date, and there would be a shortfall of £1,579m. The Fund’s financial position at the valuation date is illustrated graphically in the chart below.
The employers’ average future service contribution rate as at 31 March 2008 (ignoring the past service shortfall) is 17.1% of pensionable pay. Assuming that a funding level of 100% is to be targeted over a period of 20 years, the common employers’ contribution rate is 22.5% of pensionable pay. These figures take advance credit from outperformance of the Fund’s assets relative to gilt yields on the valuation basis, as set out in the Funding Strategy Statement. Ignoring this credit for outperformance the funding position would be 64%, and the common contribution rate would be 42.0% of pay.
So all of those local authority "non-jobs" that we read about in the press a week or so will ago actually cost the Lothian taxpayer 22.5% on top of the quoted salary. Plus employers' NI of course. The rate was 19% at the last valuation three years ago. But note also that the actuary assumes that the fund will make a future "outperformance" over the returns available from gilts. But should that not be achieved:
the common contribution rate would be 42.0% of pay. !!!And this is all based on the fund valuation as at 31 March 2008. I see that the actuary says that employers' contribution rates would have to be 25.3% were he to use market data as at 13th February this year.
I conclude that the Lothian council taxpayer is screwed. Like the rest of the UK.