Too many fingers in the lgps pie?
The Scheme Advisory Board (SAB) commissioned review into LGPS governance was published a few weeks ago. The context is the increasing complexity of the Scheme as a result of legal changes (eg. the advent of pooling) and some clear governance gaps (eg. training requirements apply to Local Pension Boards (LPBs) but not the s101 Committees) and potential conflicts of interest.
The review by Hymans Robertson looks at four options ranging from simply improving practice to a legal separation of pension fund from administering authority. It comes down firmly towards the former end of the spectrum, arguing that good practice can be found across a wide range of structures and so the latter is not a predictor of the former.
The review explicitly focuses on outcomes. It proposes putting in place four governance measures to achieve better ones: robust conflict management processes, assurances that the administering authority resources the pension fund adequately, a statement on how employers and members are represented, and regular independent governance reviews.
So far, so good. We all like a good outcome and these proposals aim to tackle the issues without imposing yet another layer of legislation and complexity on the LGPS. Thus far, I commend it and I don’t have better suggestions to make.
One of the review’s other recommendations is to update and clarify the relevant guidance. As one Officer is quoted, ‘Funds are currently pulled in too many directions by lots of guidance – CIPFA, SAB, TPA etc’.
Just to make this point, the Local Government Association (LGA) has this week published a document entitled 'The LGPS Community' which describes the various bodies involved in LGPS decisions. It is undoubtedly aiming to be helpful but the very fact that it lists seven different groups pinpoints what the problem really is. There are too many fingers in the pie.
Of the seven bodies described in detail, no less than four are supposed to assist or advise the s101 committees who administer each fund on behalf of the administering authorities (SAB, LGPC, the Technical Group and LPBs). The document makes little or no mention of CIPFA, MHCLG, or The Pensions Regulator, all of whom create guidance or codes of practice funds are expected or obliged to follow.
This multiplicity of bodies, whatever the rationale behind the creation of each, is the underlying issue behind LGPS governance. The outcome is grey areas in the guidance and advice which provide anyone who doesn’t wish to comply with an excuse not to.
As an example of this, The LGPS Community document provides the usual schematic of eleven bodies with, in pride of place and appearing to be the ultimate decision-maker, Local Pension Boards. Anyone involved will know that that is a misrepresentation of reality, where LPBs have zero executive powers and almost no sanctions they can impose. But, looking at this, it is too easy for other parts of the LGPS to pass responsibility on to LPBs.
I wish the Hymans’ proposals well but to make a real difference somebody (the SAB?) needs to reduce the number of bodies involved in the LGPS.