Herefordshire Council, together with Worcestershire County Council, Telford & Wrekin Council and Shropshire Council, is one of the member authorities (the ‘Owning Authorities’) of West Mercia Energy (WME) Joint Committee, formerly known as West Mercia Supplies. At the point of sale of the West Mercia Supplies stationery division (WMS) in 2012, the existing pension deficit relating to the former WMS staff was retained within the continuing WME business and is overseen by the WME Joint Committee.

The West Mercia Energy Joint Committee formally approved a request to the Owning Authorities to take direct responsibility for this pension deficit liability on the 24 September 2019. Having undertaken discussions via their respective senior Finance Officers, the Owning Authorities are each seeking approval to take on this liability, which is proposed to be achieved by the transfer of this pension deficit to a newly created ‘employer body’ within the Shropshire County Pension Fund (‘WMS Pension’) managed and overseen by a new ‘WMS Pension Joint Committee’ comprising the same Owning Authorities.

The cabinet member finance and corporate services introduced the report and explained that the proposed changes were intended to give West Mercia Energy a better book position when it came to winning business by moving the pension liability to the books of the four owning authorities’ respective pension boards. Each of the owning authorities needed to agree the proposal. The financial situation for the council was unchanged as the owning authorities were already liable for the pension arrangements.

In considering comments and questions from group leader the cabinet noted general support for the proposal and that the company continued to buy energy and manage costs for the owning councils and a growing number of other customers. It was hoped this step would help to win more customer.

It was agreed that:

(a)   Cabinet, on condition that the Executives of Worcestershire County Council, Telford & Wrekin Council and Shropshire Council agreeing to the same recommendations, agrees: 

a.     To remove the responsibility for the discharge of its function in relation to the pension deficit liability in relation to former WMS employees (including Compensatory Added Years Benefits) as identified in this report from the business of the WME Joint Committee with effect from 1 April 2020;

b.     To allocate the pension deficit liability identified in recommendation a above to a new employer within the Shropshire County Pension Fund, called ‘WMS Pension’;

c.     To establish a joint committee pursuant to section 101(5) of the Local Government Act 1972, with Worcestershire County Council, Telford & Wrekin Council and Shropshire Council known as the WMS Pension Joint Committee and delegate responsibility with effect from 1 April 2020 to the WMS Pension Joint Committee to discharge the functions of Herefordshire Council relating to the pension deficit liability from former WMS employees (including Compensatory Added Years Benefits) as set out in Appendix A allocated to the WMS Pension employer within the Shropshire County Pension Fund;

d.     To approve the proposed governance arrangements set out in Appendix A, and that the Council’s appointed Executive Members to the WMS Pension Joint Committee shall be the Leader of the Council and the current Council representative(s) on the West Mercia Energy Joint Committee;

e.     To delegate authority to the Chief Finance Officer (Section 151) to progress and agree the arrangements as set out in this report, including a relevant payment mechanism and finalise a Joint Agreement for the WMS Pension Joint Committee incorporating the terms set out in Appendix A, in consultation with Section 151 Officers from the remaining Owning Authorities.

f.       To approve the treatment of the WME asset share to be fully funded with effect from 1 April 2020 using IAS19/FRS102 actuarial assumptions with the resulting additional cost of this funding option allocated to the WMS Pension employer within the Shropshire County Pension Fund. 

g.     To delegate authority to the Chief Finance Officer (Section 151) to agree the final figures, of which estimates are set out in the resources implications section of this report, and in consultation with the Section 151 Officers from the remaining Owning Authorities.