Agenda item

To consider and confirm the Funding Strategy Statement and associated policies. 

In presenting the report, the Investment Manager noted that it was a statutory requirement to review the Funding Strategy Statement every three years, usually after the triennial valuation (unless there had been a significant change in market conditions). It was explained that the purpose of the document was to reflect valuation factors, balancing employer affordability with the fund's long-term liquidity objectives.

It was reported that the basis of the document was the actuarial valuation which had been prepared using assumptions agreed with the actuary. These assumptions had been submitted to the Pensions Committee for approval in September 2025, with the employers having received a presentation from the actuary in October 2025. It was noted that the results were extremely positive, with the level of funding for the whole Fund at 166%, with employers seeing a reduction in their contributions from April 2026 onwards.

It was noted that the draft document was being shared with all the Fund's employers for consultation before being formally adopted in the March 2026 Pensions Committee. While accepting that the statement was lengthy and technical, it had been prepared in detailed consultation with Hymans, with input from the Fund's officers. Reference was made to the individual policies that informed the document, meaning that if one of the policies needed amending in future, only the individual policy would have to be amended, and not the Strategy as a whole.

It was reiterated that the Strategy was consistent with the previous Strategies, although there was one change to the 'Policy on Cessations'. Historically, if the employer chose to leave the Fund, it would be necessary to calculate cessation credit, namely the amount owed either to the Fund, or from the Fund, with this calculation based on gilts returns and therefore open to market movements – the figure could vary significantly depending on market conditions at the time. With the calculation also based on a single figure at a point in time, this meant that the results could be volatile, and the basis of the gilts did not reflect the true situation as the Gwynedd Pension Fund had invested in a variety of assets. Consequently, the actuary had suggested that the valuation should be changed to a risk basis of using a discount rate based on the Fund's asset allocation, but which also included a 'corridor' to ensure that the valuation was not affected by significant single-day market factors. It was considered that this would give employers a better idea of the cost of exiting the Fund, while also giving the Fund assurance that employers would not leave at a disadvantageous time – the adjustment was therefore fairer for all.

Thanks were expressed for the report

In response to a question about whether consideration should be given to setting an employer contribution target, seeing that the funding level for the entire Fund was 166%, it was noted that a target had not been set because the size of employers varied and therefore set limitations. It was noted, however, that the Fund's large employers had a stabilisation mechanism, namely a financial facility, usually temporary, to restore balance to a system in the event of instability.

In the context of the contribution rate and whether some of the employers were challenging for reduced rates or were prepared to accept the actuary's opinion, it was noted that discussion forums were being held with the actuary along with engagement work where the rate was discussed. It was reiterated that the level was usually determined on a legal basis by what the actuary set, but that officers were open to being challenged, behaved proactively and were willing to explain the rates.

The information was accepted