Berkshire Pension Fund deficit the ‘elephant in the room’

Berkshire Pension Fund is running at a significant shortfall that may force it to ask for more money from employers – which will ‘not go down well’.

The Fund is managed by the Royal Borough. It is responsible for managing the pension of thousands of public-sector workers across Berkshire.

At a Berkshire Pension Board meeting on Monday (October 13), Jo Thistlewood, head of the pension fund, outlined the current risks it faces.

Each is scored from green (low risk) to red (high) depending on their impact.

One of the highest risks was an inability to recruit and retain experienced staff within various pension fund teams despite their recruitment campaigns.

The fund still depends too much on a few officers who hold much of the important knowledge.

Another major concern is the need to effectively manage risks coming from climate change – and how the world’s response to it could affect the stability of the fund’s long-term investments.

Failure to do this could lead to lower profits and sharper or more frequent fluctuations in the value of its investments.

Previously, this was an amber risk – but has now become one of the highest red risk areas.

However, chair of the board, Alan Cross, said the real ‘elephant in the room’ was something else, not listed as one of the highest risks.

Specifically, it is the fund’s 86 per cent funding level – meaning it has only 86 per cent of the assets it needs to cover its future liabilities.

Mr Cross wondered why this gap was not being treated as one of the highest risks.

He said: “I find myself wondering, is that the right position to be in?”

The latest report notes that investment managers – hired to decide where to invest the fund’s money to turn a profit – did not make enough money for the fund over time.

This has reduced its overall value and forced employers to pay in more money.

Although this was marked as a red risk in the fund’s latest report, it was not marked as one of the highest ones.

Ms Thistlewood said her team is trying to find the right balance between the money paid into the fund by employers and employees, and the profits the fund makes from its investments.

She said the team are ‘very conscious’ the fund has been valued at 86 per cent, with a £540million deficit.

Ms Thistlewood added that there are no plans to ‘kick the problem down the [road]’ and said that the fund’s target for deficit recovery remains 2040.

Staff are reviewing how the fund’s money is spread across different types of investments.

Reviewing this helps the pension fund ensure its money is invested in a way that keeps it safe while still growing over time.

But board member Jeff Ford agreed with Mr Cross, saying the size of the fund’s deficit should be treated as one of the highest risks – and may require unpopular action.

“The only thing that we could do is actually increase employers’ contributions,” he said.

“I know that wouldn’t go down well.”

He said that is ‘not something we want to do’ but the ‘reality’ is that this is something proactive that could be done to fix the problem.