New Regulatory Oversight for LGPS Pension Schemes
This report discusses recent changes brought about by the Public Services Pension Act 2013 (“The Act”) which have changed the regulatory framework of the LGPS Pensions Scheme. The Board is asked to note that the Pension Fund will need to comply with the section 13 process of the Act, responding to all queries and requirements of Government’s Actuary Department (GAD).
The Board considered a report by the Council’s Chief Finance Officer, which informed Members of recent changes to the Public Services Pension Act 2013, which had thereby changed the regulatory framework of the Local Government Pension Scheme (LGPS). In particular, Section 13 of the Act had introduced additional oversight of LGPS Schemes from Central Government via a specific Government Actuary Department (GAD). This included a review of LGPS funding valuations and employer contributions rates to check that authorities were continuing to manage their Pension Schemes appropriately and for remedial steps to be identified and taken by scheme managers where necessary. The Chair stated that he had attended a briefing from the Government Actuary on the changes recently and that this was a highly significant change of which Members should be aware.
A Member of the Committee noted that GAD had stated its current analysis was a ‘dry run’ based on 2013 local pension fund valuations and questioned when the full report would be ready. The Chair commented that this was typically a long process and would require a lot of data to be gathered and then analysed before an up to date GAD review would be published.
A Member referenced the four key areas that GAD would be assessing LGPS on: Compliance, Consistency, Solvency and Long-Term Cost Efficiency and asked how confident Brent was in its Pensions Fund being judged favourably against these criteria. Gareth Robinson ran through each area in turn, and replied firstly that LGPS funds tended to be very compliant with the regulations. On consistency, he stated that this had been a slight issue because different organisations had different assumptions to GAD on their Pensions Fund base and drew Members’ attention to the table on page 58 on the public agenda pack as an example of this. He outlined that GAD viewed Brent as one of the more prudent authorities and less of a risk in addressing its Pensions Fund deficit. On solvency, the Committee heard that Brent was aiming to achieve a 100 percent solvency level and that there was a 19 year strategy in place to achieve this. On long-term efficiency, Gareth Robinson outlined that the Fund had a high contribution rate that meant costs were not pushed off into the future, a planned rate of return consistent with its investments and a realistic timeframe for achieving 100% funding, as reviewed by GAD in the ‘dry run’ with 2013 data, subject to the standard caveats.
Gareth Robinson also noted that the Fund was well invested in tracker funds, which have lower charges. Choosing to invest through the London CIV was also intended to reduce fees. It was hoped that combining this with higher pension contribution rates over a period of time would aid the Fund’s long-term efficiency. He reiterated that the strategic approach of focusing on investments with lower fee structures was seen as less risky and endorsed by the Government.
In response to a Member’s question on what the possible negative impact of the new regulatory oversight would be for other employers, which formed part of Brent’s Pensions Scheme, Gareth Robinson said that some other employers would be deemed to have a higher level of risk. He noted that some of the possible solutions to this would be either putting guarantees in place to ensure employers met their obligations or raising the contribution rates for their respective employees. The Committee heard specifically that the data quality issues in some smaller admitted bodies and academies, which contributed to their level of risk, was an area that needed to be looked at going forward.
(i) The report be noted;
(ii) The Pension Fund would need to comply with the Section 13 process, responding to all queries and requirements of the Government’s Actuary Department (GAD); and
(iii) The results on the review by GAD come back to the Pension Board when GAD had completed its report in early 2018.