Call for greater separation of LGPS management

1 Aug 19

Local authorities should ensure greater separation between managing pensions and other finances, a survey has concluded.

Management of the Local Government Pension Scheme should have “clearer ring-fencing” from local authorities, research from the consultancy Hymans Robertson found.

The online survey sought views on a range of governance changes to the Local Government Pension Scheme (LGPS). The consultancy received 140 responses from stakeholders and found most of them supported separation of fund management from the host authorities’ financial management.

Hymans Robertson said it found respondents wanted “clearer ring-fencing of pension fund management from the host authority, including budgets, resourcing and pay policies.”

But a proposal in the survey that there should be a separate Section 151 officer to oversee the pension fund was rejected.

One respondent said: “Separation would actually push S151s away from the fund, leading to less responsibility and engagement with the fund, leading in turn to less expertise and worse decisions.”

“Better to get S151s more closely involved so they understand the requirements of the LGPS and make better decisions.”

The consultancy suggested: “The section 151 of the administering authority would retain responsibility for the pensions function but recommendations on budget would be made by a pension fund officer to the pensions committee, which would be responsible for agreeing the budget.”

The pension committee would be responsible for agreeing the budget as well as approving any changes to that budget during the financial year, it added.  

The survey, which was launched in April, suggested separation would reduce conflicts for S151 officers who currently oversee pension contribution rates as well as council finances as a whole.

Responses also called for “independent monitoring or review of local fund arrangements to ensure that everyone attains a minimum standard”.

Hymans Robertson suggested going forward that an outcomes-based approach would be better than a prescribed governance structure.

Catherine McFadyen, head of LGPS actuarial, benefits and governance at the consultancy said: “By moving to an outcomes-based approach rather than imposing a prescribed ‘model’ we will ensure that funds can maintain their individuality while delivering the highest standards of governance.

“Funds will need to think carefully about how they plan to evidence the approach they are taking in key areas and to show they are willing to learn from the experience of others. This will ensure that every fund in England and Wales is working together to continue to drive governance standards higher.”

Survey respondents were also clear that establishment of new bodies were not required; although this should be facilitated for funds who wish to pursue other arrangements voluntarily. Instead, the focus should be on greater specification of required governance outcomes from within the existing structures, and a process to hold funds to account for this.

Respondents favoured developing a set of standards that all funds are required to achieve, drawing on current best practice and not imposing disproportionate burden on administering authorities or disrupting current practices that deliver good outcomes already.

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