Governance 2014

Scheme governance, management, administration, transparency, and accountability

At the national level the LGPS is governed by the Department of Communities and Local Government (DCLG) and the LGPS Shadow Scheme Advisory Board. The LGPS has to take account of guidance issued by the Pensions Regulator and 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.

The DCLG 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 statements and annual report.

The role of the Shadow Scheme Advisory Board is to help and support DCLG and administering authorities fulfil their statutory duties and obligations.  Training has been delivered to the Board on an ongoing basis at its meetings and through its professional advisers and attendance at LGPS conferences and other events.

Board membership and meeting attendance

Administering authorities

At the local level, each LGPS fund is administered by its administering authority. From 1st April 2015, under the provisions of section 5 of the Public Service Pensions Act 2013 and regulation 106 of the LGPS Regulations 2013 (as amended) each administering authority must establish a Local Pension Board.

To assist in the establishment of these Boards, the Shadow Scheme Advisory Board (SSAB) has developed guidance on the creation and operation of Local Pension Boards for Administering Authorities.  Information on Local Pension Boards will be added to this website when available.

LGPS collaborations and efficiency

The Value for Money and Collaboration Sub Committee completed work during Autumn 2013 to collate the active collaborations in the the LGPS.  The Active LGPS collaborations document lists the collaboration, service provider and eligible participants in each case.  See the sub committee page on this site for more information.

All LGPS Funds are required to procure services such as Actuarial and Benefit Consultancy, Investment Consultancy and Custodian Services.

Lord Hutton highlighted the potential benefits of co-operative projects within the LGPS and his recommendation for a greater degree of collaborative procurement was accepted by the Government and subsequently endorsed by DCLG ministers. LGPS 2014 takes this further.

The National LGPS Procurement Frameworks are a direct example of funds with shared interests and visions collaborating effectively to deliver benefits both locally and nationally across the entire LGPS. They are the result of collaboration between Buckinghamshire, Cambridgeshire, Croydon, Dorset, Environment Agency, Hackney, Lincolnshire, Lothian, Northamptonshire, Norfolk and Suffolk Pension Funds.

Procurement, Legal and project management support was provided by specialists from Norfolk County Council and the Norfolk Pension Fund. The initiative is supported by the Department for Communities and Local Government, the Shadow Scheme Advisory Board, and the Local Government Association. This initiative forms part of ongoing liaison with HM Treasury and Cabinet Office about scheme cost efficiency and sustainability.

DCLG draft regulatory consultations, final regulations and other issued documents

Between 31st March 2013 and 31st March 2014, the DCLG has issued the following:

Board actions and achievements

Details of the agenda and papers of the Board and sub-groups can be found under About the Board and Sub Committee menus.

During 2013/2014 the main work of the Board and its Sub-Groups has been:

• Analysing and reporting on the Call for Evidence for structural reform. More information can be found here
• Developing the LGPS Scheme Report. This involved collation of all 2013 Fund reports for publication on the Board website, aggregation of the fund financial statements into a set of scheme statements and scoping work to develop a matrix of comparative data.
• Building on this, a pilot key performance indicator (KPI) exercise is being completed in early 2015, and it is planned that the KPI document will accompany the valuation process in 2016.

During 2013/2014 the main work of the Board's Sub-Committees has been:

• Governance and Standards Sub Committee - Collating and publicing of all current regulations, codes, guidance and guides, bringing these documents in line with LGPS 2014 information. The Pensions Regulator (tPR) guidance has also been published on the www.lgpsregs.org website.
• Investment and Engagement Sub Committee - Developing recommendations on revised investment regulations. The questions on ultimate guarantor and fiduciary duty were submitted to counsel for advice on the basis and purpose of investment and advice from Mr Nigel Giffin QC was published on the on Board website.
• Administration and Communications Sub Committee - Developing recommendations on a revised ill health retirement process to include a more effective appeals procedure outcome.  Making recommendations on the format and content of post 2014 Annual Benefit Statements to include standard forecasting methods.
• Cost Management and Contributions Sub Committee - Formalising the LGPS cost management methodology and performed a ‘dry run’ using 2013 valuation data which included 2014 employers cap.  Determining the contribution bands and rates required to ensure a 6.5% yield in April 2014.
• Value for Money and Collaboration Sub Committee - Collating and publication of existing and planned frameworks and other collaborative purchasing initiatives.

Board Advice, guidance and news releases

During 2014 the Board has provided the following advice, guidance, and news releases:

a) to DCLG

22nd January 2014 - Shadow Scheme Advisory Board releases analysis and recommendations

The SSAB’s report viewed the Call for Evidence as an important step in the evolution of the LGPS in England and Wales; highlighting that structural reform to the Scheme will have far-reaching and long-lasting consequences. As a result, any proposed reform must meet the original objectives of delivering benefits to employers, local taxpayers and scheme members. In particular, any consultation on reform options should consider alternative methods for managing deficits and analyse the costs, benefits and barriers to greater passive management, collective investment vehicles and in-house investment strategies.  The SSAB made seven recommendations in its response.

b) to admin authorities

2nd April 2014 - Advice on Fiduciary Duty with regard to the investment of Local Government Pension Scheme (LGPS) funds

In summary, for example, an administering authority may choose to take into account the public health implications of tobacco investment but only if the result of such consideration is the replacement of these investments with assets producing a similar return.
Alternatively, an administering authority may take account of social housing needs but only if an investment in such stands up as an investment in its own right and can demonstrate that it is not preferring its own interests over other scheme employers in making the investment.
Iin making such decisions the administering authority cannot impose its view (on this or any other issue) on scheme employers nor can scheme employers impose their view on the administering authority if either resulted in a material risk to the return to and/or a suitable balance of assets in the fund.

c) to the media

22nd January 2014 Press Release LGPS SSAB submission on future structure of the LGPS

Board advisors

The Board has been supported and advised by the Board secretariat, a small team comprising Jeff Houston – Head of Pensions, and the pensions team at the Local Government Association.

The Board is also supported by a number of professional advisors and other service providers.