‘LGPS needs greater separation from local authorities’

17 Apr 19

A Local Government Pension Scheme consultation will consider “greater separation” of pension fund management from local authorities.

A survey conducted by the pension consultancy Hymans Robertson and the LGPS Scheme Advisory Board has proposed four potential changes to the governance of the LGPS – one of which would see section 151 officers lose some of their pension responsibilities.

The option suggests “greater ring-fencing of the LGPS within existing structure”, a move which the firm said would see “greater separation of pension fund management from the host authority, including budgets, resourcing and pay policies”.

Hymans said that 151 officers would retain responsibility for the pensions function but recommendations on what the pension fund budget should be set at would be made by a separate pension fund officer to the pensions committee.

“Alternatively, the pension fund could have a separate s151 officer to reduce conflicts faced by s151s,” a survey document said.

A conflict that a s151 could face would include when setting employer contribution rates an officer may be tempted to increase contribution rates to the LGPS to secure its long term future. However with equal responsibility for their council’s finances they may also seek to pay lower contributions to improve their budgeting position.

A Hymans spokesperson noted: “Many s151 officers, with the support of their committees and advisors manage this conflict very professionally.”

Catherine McFadyen, head of LGPS actuarial, benefits and governance at Hymans, said: “We are thrilled to have this opportunity to survey such a broad and expert network of professionals. Our first-hand experience in the LGPS shows that it is full of strong governance examples and this is an opportunity for funds across the country to identify and highlight their own good practices.

“The LGPS is a unique pension arrangement which spans the length and breadth of the country. We hope that this survey will allow us to generate a clearer picture on how key factors such budget management, clarity of roles and responsibilities, conflict management and the ultimate governance structure of the fund can impact standards of delivery for employers and members.”

Proposals in survey:

  • Improved practice - introduce guidance or amendments to LGPS Regulations 2013 to enhance the existing arrangements by increasing the independence of the management of the fund and clarifying the standards expected in key areas.
  • Greater ring-fencing of the LGPS within existing structures - greater separation of pension fund management from the host authority, including budgets, resourcing and pay policies.
  • Use of new structures: Joint Committees (JC) - responsibility for all LGPS functions delegated to a JC comprising the administering authority and non-administering authorities in the fund. Inter-authority agreement (IAA) makes JC responsible for recommending budget, resourcing and pay policies.
  • New local authority body - an alternative single purpose legal entity that would retain local democratic accountability and be subject to Local Government Act provisions.

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