07 November 2008
By Paul Dicken
Regulations for the Local Government Pension Scheme need to be clarified and simplified, a leading expert has said.
A survey of two-thirds of pension funds, representing around £107bn in assets under management, showed that 52% of respondents thought current regulations were 'detrimental to efficient portfolio management', while 51% said the regulations 'prevent access to risk/reward opportunities'.
Discussing the outcomes of the review into LGPS investment regulations, commissioned by the CIPFA Pensions Panel, Peter Scales, the chair of the working party, said some people believed that 'maintaining the status quo' was not an option when looking at the future for the regulations.
'There was a view that there was some cost involved in lost market opportunity,' he said. This could amount to tens of millions of pounds.
Scales told delegates at the CIPFA Key Issues in Pensions Governance conference on November 5 that the review was partly prompted by 'concern about the consistency of application of those regulations between local authorities'.
He indicated that the final report from the review would look to simplify and clarify 'patched-up' definitions for investment. Among other aspects, the review is looking at the regulations on hiring asset managers, the power to borrow and transparency of funds.
He said there needed to be a 'better definition of what are the best interests of the scheme', and warned that care was needed in managing pension funds. 'Most of the cost does fall on council tax payers, either through contributions or ultimately as guarantor,' he said.