Is governance in the LGPS fully aligned with TPR’s viewpoint?
Earlier this year Hymans Robertson was appointed by the Scheme Advisory Board (SAB) to facilitate a review of governance structures for the LGPS. The major issues have been conflicts arising between the administering authority and the pension fund, often centred round the role of the 151 Officer legally responsible, and lack of clarity and accountability between different roles and stakeholders.
It is quite clear from The Pension Regulator’s presentation at the PLSA conference last week that their understanding of accountability is different from the LGPS community. TPR’s focus is on local pension boards (LPBs) – witness the fact that TKU requirements in the public sector code of practice (COP14) apply to board members but not the pension committee members who actually take decisions.
Given that LPBs have no executive powers and very limited sanctions, this cannot be right. Either TPR in concentrating on LPBs has misunderstood how the LGPS works, or their focus is deliberate but misplaced. Either way, it leads to two glaring loopholes in governance: LPB members are accountable for non-compliance despite having no powers and there are no training requirements for those committee members who do have the (delegated) powers.
We welcome the Hymans’ Good Governance project. In our view a good outcome will be to clarify the relationships between the various stakeholders managing the fund. These are primarily the administering authorities, the 101 committees with delegated powers and pension boards whose role is to ‘assist’ the administering authorities. However, equally important are the other stakeholders, the members whose pension money it is and the employers who bear the brunt of contribution changes.
Hymans are looking at four models, of which we think three would be feasible. We would like to see clarity of responsibilities and duties (and TPR’s COP14 fully aligned with whatever is ultimately decided) and processes for dealing with conflicts of interest. Above all we would like to see effective remedies for poor performance, particularly as pooling and shared services are an increasingly common model. In the private sector, one can always terminate contracts but that isn’t the case here.
Read more about Linchpin’s approach to advising on governance here.