PENSIONS
and achieving a greater focus on value to deliver better outcomes for future pensioners, rather than cost l encouraging further pension investment into UK assets to boost growth across the country. On 6 September 2024, a call for evidence (CfE) (https:// ow.ly/7Zmj50Uoi5w) was published, inviting interested parties to inform the first phase of the pensions investment review (https://ow.ly/IGyI50UoieV). The CfE closed on 25 September 2024, giving a very narrow timeframe for respondents to reply. The CfE included questions for stakeholders within the LGPS and for those from the DC industry to answer. Apart from the LGPS, the rest of the defined benefit market was out of scope for this part of the review. In the CfE, responses were invited to include ‘data or unpublished analysis or reports relevant to the questions’. “ There could also be chances to engage about how the pensions system works for scheme members who are typically low-paid and often part-time workers” Responses regarding the pensions investment review The board provided a response (which can be read here: https://ow.ly/OwIz50Uoiku) to the CfE, as did many other LGPS stakeholders, such as funds, pools, trade unions and advisers. Responses were limited to 500 words per question, which made it challenging to address everything relevant to the LGPS. However, there’s been extensive engagement with the board and other stakeholders beyond the CfE itself, with many LGPS funds and pools invited to engagement events with government directly. In its response, the board highlighted fund consolidation as being a distraction which could potentially lead to inertia around the government’s aim to increase the level of pooling. It also suggested that forced mergers or consolidation
should be avoided at all costs because of the significant service delivery risk to scheme members and employers. It also highlighted that, where voluntary mergers have happened, these have taken years of collaboration and cooperation both before and after the transfer of functions from one fund to another. The board also highlighted that the scheme being based in local government is important to scheme members and employers, particularly in terms of accountability, democracy and accessibility. To ensure decisions were evidence- based, and with confidence about LGPS funds’ strong record of delivering a good service, the board proposed the commissioning of a study of administrative effectiveness and efficiency. It suggested this should include not just LGPS funds, but other comparable schemes, e.g. other public sector schemes such as Railpen or the Universities Superannuation Scheme.
funds, which the scheme advisory board secretariat team at the Local Government Association will coordinate. The board welcomes the clarity provided in the consultation that’s been published, and it’s clear the government’s view is that change in the LGPS is necessary. The board will work with funds, pools and the government to ensure any change will be beneficial for members and employers, and that their best interests remain at the heart of the LGPS. The secretariat has been considering the proposals closely and listening to views from LGPS stakeholders to form the board’s response. This will be published as soon as practicable on the board’s website prior to the consultation closing date. What does the future hold? Looking ahead to phase two of the pensions review (which hasn’t been formally launched at the time of writing and is disappointingly expected to now be delayed), there are likely to be several issues relevant for the LGPS, and so the industry will want to engage with it. For example, the board hopes it’s expected that phase two when launched will be exploring pensions adequacy, which encompasses the gender pensions gap and potentially other pension gaps which research has shown to exist (e.g. around ethnicity). There could also be chances to engage about how the pensions system works for scheme members who are typically low- paid and often part-time workers, which are areas the board considers extremely important and would like to see in scope when phase two is eventually launched. n “ The scheme being based in local government is important to scheme members and employers, particularly in terms of accountability, democracy and accessibility ”
Further reform On 14 November 2024, in her
Mansion House speech (https://ow.ly/ b3as50UoiyP), the chancellor announced plans for further reform in the LGPS in a consultation which closed on 16 January 2025. These reforms are focussed on the eight existing investment pools. We aren’t expecting any changes to the structure of the underlying 86 funds in England and Wales as a result of this consultation. The consultation gives further details of the proposals, which include: l requiring LGPS pools to be regulated by the Financial Conduct Authority, with the capability to manage assets internally, and to give investment advice to their LGPS partner funds l LGPS funds will retain responsibility for setting their fund’s strategic asset allocation, but will be required to fully delegate the implementation of their investment strategy to the pool, and to take their principal advice on their investment strategy from the pool l LGPS funds would be required to transfer legacy assets to the management of the pool l LGPS funds and pools will be required to work more closely with combined mayoral authorities and will be asked to formulate a plan for more investments in local growth, taking account of local growth plans l there’ll also be a new biennial governance review process for LGPS
The LGPS scheme advisory board website: https://ow.ly/4fB150Uoj6j.
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| Professional in Payroll, Pensions and Reward |
Issue 107 | February 2025
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