Governance and Stewardship

Scheme governance, management, administration, transparency, and accountability

At the national level the LGPS in England and Wales is governed by the Department for Levelling Up, Housing and Communities (DLUHC) (formerly the Ministry of Housing, Communities and Local Government (MHCLG) and overseen by the LGPS Advisory Board. The LGPS has to take account of guidance issued by the Pensions Regulator, and of Pensions Ombudsman determinations.

The investment and management of LGPS assets, the collection of employer and employee contributions, and payment of pension benefits is the responsibility of LGPS administering authorities.

DLUHC issues statutory guidance and each administering authority is required to publish a governance compliance statement and explain any non-compliance. Each administering authority is subject to an annual external audit and has to publish an audited financial statement and annual report.

The role of the Scheme Advisory Board is to help and support DLUHC and administering authorities fulfil their statutory duties and obligations. The secretariat, hosted within the Local Government Association, assists the Board to discharge its functions. 

Asset Management and Stewardship

Stewardship and responsible investment

Collectively the £369bn LGPS funds are one of the largest 10 global sources of capital and can influence behavioural changes that lead to better stewardship by the global asset management community and the entities and places they invest in.

All LGPS funds have published their Investment Strategy Statement (which replaced the Statement of Investment Principles) and the majority report against the Myners Principles – which is discretionary under the LGPS (Management and Investment of Funds) Regulations 2016.

The UK Stewardship Code 2020 and global United Nations Principles of Responsible Investment (UNPRI) set out key principles of effective stewardship for asset owners to help them better exercise and understand their stewardship responsibilities.

Compliance with these UK and global sets of principles is not mandatory for LGPS funds, but they have the support of the UK Government and Local Authority Pension Fund Forum (LAPFF).

Quoting from the Financial Reporting Council’s 2020 Stewardship Code, stewardship is “the responsible allocation, management and oversight of capital to create long-term value for clients and beneficiaries leading to sustainable benefits for the economy, the environment and society”. The update to the Code from 2020 set high stewardship standards for asset owners like the LGPS, with the Code comprising a set of ‘apply and explain’ principles for prospective signatories to meet in order to gain signatory status. That status needs to be renewed on an annual basis and obtaining signatory status takes considerable commitment and effort from LGPS funds and pools, so it is pleasing to see the number of funds and pools applying for and obtaining signatory status continues to grow, and a number of funds and pools have also successfully applied to renew their status more recently.

Some 10 LGPS funds in England and Wales, and six pools, were awarded signatory status to the new 2020 Code in the year from 1 April 2021 to 31 March 2022. Seven funds and five pool companies were signatories to the UNPRI.

Signatories to UK Stewardship Code

Source:  https://www.frc.org.uk/investors/uk-stewardship-code/uk-stewardship-code-signatories