Issue - meetings

Good Governance in the Local Government Pension Scheme (LGPS)

Meeting: 24/09/2021 - Pensions Committee (Item 6)

6 Good Governance in the Local Government Pension Scheme (LGPS) and the Good Governance Project pdf icon PDF 230 KB

Report of Director for Corporate Services

Additional documents:

Minutes:

The Committee were informed that the origins of the good governance project could be traced back to the Shadow Scheme Advisory Board established in 2012 to assist in the design of the new 2014 scheme. The then Board agreed to consult on proposals to separate the pensions function from administering authorities, to resolve the perceived conflict of interest of elected members acting in the best interest of their local authority, rather than scheme members.

 

The separation project was put on hold while asset pooling was in its initial stages in 2015. However, in June 2018 the Scheme Advisory Board agreed to its re-commencement as the Good Governance Project. The objective was to identify both the issues deriving from the current scheme administrative arrangements and the potential benefits of further increasing the level of separation between host authority and the scheme manager role.

Following a procurement exercise, the Board appointed Hymans Robertson in January 2019 to examine the effectiveness of current LGPS governance models and to consider alternatives or enhancements to existing models which could strengthen LGPS governance going forward. This resulted in the Phase 3 Final Report and the Action Plan published on 23 February 2021.  The Phase 3 report built on the key proposals from the Phase II report (published February 2020) and provided further detail on the ways in which the proposals might be implemented.  The key proposals were: 

  • an ‘outcomes-based’ approach to LGPS governance with minimum standards rather than a prescribed governance model.

 

Critical features of the ‘outcomes based’ model should include:

 

(a)    robust conflict management including clarity on roles and responsibilities for decision-making;

 

(b)    assurance on sufficiency of administration and other resources (quantity and competency) and appropriate budget;

 

(c)    explanation of policy on employer and scheme member engagement and representation in governance; and

 

(d)    regular independent review of governance- thisshouldbe basedon an enhanced governance compliance statement which should explain how therequired outcomesare delivered.

 

  • The need forenhanced training requirements for S151 Officers and S101 Committee Members (requirements for S101 should be on a par with Local Pension Board members).

 

  • The need toupdate relevant guidance and provide better sign-posting. This should include the 2014 CIPFA guidancefor S151 Officers onLGPS, the 2014 CIPFA guidancefor S151 Officers onLGPS responsibilities and the 2008statutory guidance on governance compliance statements. All this guidance pre-dated the involvement of the Pensions Regulator and Local Pension Boards in the oversight of the LGPS and also LGPS investment pooling.

In addition to the Phase 3 report, the SAB also published an Action Plan.  The agreed Action Plan comprised:

(a)  Those matters that would fall to MHCLG to implement, either by amending scheme regulations or producing statutory guidance:

(b)  Those matters that would fall to the SAB and other bodies to implement - subject to the actions in (a) being taken by MHCLG; and

(c)  Actions to identify and promote existing best practice that the SAB could take  ...  view the full minutes text for item 6