LGPS Regulations 2014: better governance and improved accountability – Sackers’ response to consultation

Background

On 10 October 2014, the Department for Communities and Local Government (DCLG) published a consultation on draft regulations relating to the introduction of governance and cost control arrangements for the new Local Government Pension Scheme (LGPS) in England and Wales which came into force on 1 April 2014.

The main provisions of The Local Government Pension Scheme (Amendment) (Governance) Regulations 2014 include a requirement for the Secretary of State to establish a national scheme advisory board to advise him / her on the desirability of changes to the scheme.  Provision is also made for Administering Authorities to establish Local Pension Boards (LPBs) to assist them with the effective and efficient management and administration of the scheme and for a set of new cost control mechanisms to be introduced.

In this response

• General comments
• Establishment of Local Pension Boards
• Membership of Local Pension Boards

General comments

We welcome the opportunity to comment on the draft regulations.

We are aware of, and have sympathy with, the resistance amongst Administering Authorities to the requirement to establish LPBs, on the basis that existing structures can facilitate adequate scrutiny of Authorities’ compliance with the LGPS regulations and ensure efficient and effective governance and administration of the LGPS.  LPBs will be an additional administrative burden for Authorities at a time when they are already stretched.

At this stage, however, it is important to ensure that the present regulations are as useful as possible.  With this in mind, we outline below some practical considerations on the draft.

We are strong advocates of a review, within a reasonable period, of the new LPB structure.  It will be important to assess whether the LPBs provide a useful function in practice and the extent to which they provide value for money.

Establishment of Local Pension Boards

Where a local authority discharges its pension functions through a “section 101” committee or committees, it is proposed that, with the approval of the Secretary of State, it will be able to appoint that existing section 101 committee to be the LPB.

It has become clear that Administering Authorities do not consider this to be a viable option in its current form for two main reasons.

The requirement to approach the Secretary of State is unattractive.  There is a perception that permission may be difficult and time consuming to obtain.  Similarly, the ability for the Secretary of State to withdraw his / her permission at any time could cause practical difficulties for the operation of the committee.

In addition, we are not aware of a satisfactory explanation as to how a pension committee in the LPB role could effectively “assist” itself in discharging this function.

We accept that DCLG is unlikely to entertain radical changes at this stage.  It would therefore be helpful if the Shadow Advisory Board could provide guidance for Administering Authorities as to the terms on which approval may be given and withdrawn.

Membership of Local Pension Boards

Draft regulation 107 provides for each administering authority to determine the membership of their LPB.

Joint boards

107(2) sets out the requirements for employer and member representatives on LPBs.  Administering Authorities have shown considerable interest in establishing a single LPB to act in respect of a number of different LGPS sections.  These proposals could assist in getting the most out of the resource and cost associated with administering the LPBs.

It is difficult to reconcile these proposals with the requirement for “relevant experience and the capacity to represent employers on the local pension board” (our emphasis), as members of a joint board would not ordinarily be linked to the employers of more than one section.  The same comment applies to the requirement to have “relevant experience and capacity to represent members”.  The ability to “represent” members suggests a link to the membership of a particular section of the LGPS which might not exist in a joint board.

We support the ability to use joint boards and therefore suggest that the wording of 107(2) is amended to remove this potential obstacle to their establishment.

Employer and member representatives

We are aware that the section 101 pension committees already established by a number of Administering Authorities have member and/or employer representatives in place.  By introducing the requirement for LPBs to have employer and member representatives in its current form, there is a risk that the representative element of current pensions committees would be removed.  In our view, this would be an undesirable outcome.  It would therefore be helpful to build in an exception to the requirement in 107(2), where equivalent arrangements are already in place at pension committee level.

Officers and elected members

As drafted, regulation 107(3) would prohibit any officer or elected member who is responsible for the discharge of any function under the regulations from being an LPB member of any board in England or Wales.  In our view, this restriction goes further than is necessary (or is intended).  We see no reason to prohibit officers / elected members from being on the pensions board of a different local authority.

We therefore suggest that the text of draft regulation 107(3) is amended as follows:

“No officer or elected member of an administering authority who is responsible for the discharge of any function under these regulations (apart from any function relating to local pension boards or the Local Government Pension Scheme Advisory Board) may be a member of the local pension board in question.”