Statement of Accounts 2011/2012 - Blackburn with Darwen Borough ...

NOTES TO THE FINANCIAL STATEMENTS
Mortality assumptions:
Longevity at 65 for current pensioners:
- Male 21.7 21.6
- Female 24.3 24.2
Longevity at 65 for future pensioners
- Male 23.1 23.0
- Female 25.9 25.8
Financial assumptions:
Rate of RPI inflation 3.4% 3.4%
Rate of CPI inflation 2.5% 2.9% 2.5% 2.9%
Rate of increase in salaries 4.5% 4.9%
Rate of increase in pensions 2.5% 2.9% 2.5% 2.9%
Rate for discounting scheme liabilities 4.9% 5.5% 4.9% 5.5%
Take up of option to convert annual
pension into retirement lump sum
50% 50%
The Discretionary Benefits arrangements have no assets to cover its liabilities. The Local Government Pension
Scheme’s assets consist of the following categories, by proportion of the total assets held:
31 March
2012
31 March
2011
% %
Equities 58 64
Government Bonds 5 7
Bonds 15 14
Property 10 8
Cash/Liquidity 5 1
Other 7 6
100 100
History of experience gains and losses
The actuarial gains identified as movements on the Pensions Reserve in 2010/11 and previous years can be
analysed into the following categories, measured as a percentage of assets or liabilities at 31 March:
31 March
2012
31 March
2011
31 March
2010
31 March
2009
31 March
2008
% % % % %
Differences between the expected and
actual return on assets ( 4.82 ) 1.56 19.87 ( 33.9 ) ( 3.0 )
Experience gains/(losses) on liabilities 0 7.30 0 0 ( 0.4 )
42 Contingent liabilities and contingent assets
Contingent liabilities
As at 31 March 2012, the Council had two material contingent liabilities:
(a) Following the liquidation of Municipal Mutual Insurance (MMI) in 1992/93 there are a number of claims
outstanding which may not be resolved for many years. Due to some clarification obtained from a recent
court judgement, there is a risk of an increasing number of claims arising, and the risk of an insolvent run-off
is increasing. In such a situation the “Scheme of Arrangement “ (which all councils have entered into with the
administrators of MMI) may be invoked requiring the Council to make a contribution towards any deficits
incurred by MMI Limited both in relation to the former Blackburn Borough Council and Lancashire County
Council (in relation to transferred services). The maximum potential liability in relation the former Blackburn
Borough Council claims as at 31 st March 2012 was around £2M, and a reserve has been created equivalent
to half this sum.
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