CIPFA calls on LGPS administrators to develop risk frameworks

3 Dec 18

CIPFA has urged local government pension scheme administrators to develop their own comprehensive risk management framework as it issued revised guidance in this area.

The institute teamed up with professional services firm Aon to update the support and advice it provides to LGPS funds.

Administering authorities can use the refreshed guidance to explore the risks that are present in a broad range of LGPS activity and ensure these risks are properly identified, analysed and managed, CIPFA said.

Neil Sellstrom, CIPFA’s pensions network adviser, highlighted that new governance requirements, introduced in 2015, have made risk management increasingly important for LGPS funds.

These governance changes also underlined the need for administering authorities to focus risk management on all aspects of the scheme’s operation, not just investment, he added.

Risk mitigation and control is well established in private sector schemes but in producing this guidance, we were keenly aware of the special nature of the LGPS as a funded public service scheme, most of whose participating employers are likely to have a greater capacity to absorb risk than their counterparts in the private sector,” Sellstrom said.

“It is important therefore to strike the right balance between risk control and being too risk averse. Our guidance aims to help administering authorities to develop a risk management framework which will enable them to decide which risks can and should be controlled, and where the upside potential justifies taking the risk.”

Aon partner Alison Murray added that effective risk management was at the heart of “sound corporate governance”.

“The LGPS is certainly no exception,” she said.

While many LGPS funds have effective risk management plans in place, Murray encouraged administrators to “step back and review their approach”.

CIPFA pensions panel chair Mike Ellsmore says the LGPS is alive, kicking and setting the pace.

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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