Tuesday, December 10, 2013

The Future of the Local Government Pension Scheme: LAPFF 2013

The Government Minster for the LGPS had dropped out of appearing at conference this year (it was rumoured that he didn't want to be shouted at for the way that the consultation on merger was being handled - Surely not?) and Joanne Segars from NAPF and Chair of LGPS National Pension Advisory Board, who was suppose to replace him was ill.

So chair Brian Bailey now of PIRC, introduced a panel of what he called "three old codgers"-  himself, Terry Crossley (a former Civil servant responsible for the LGPS) and Cllr Kieran Quinn, to have a "chat" about the future of the LGPS.

They firstly discussed concerns about how sustainable the scheme was following the agreement of 2012. Especially mature schemes that had suffered the most in the recent revaluation.

Terry said he thought the current reform was rooted in the politics of the current Government Coalition. He was in the room when the LGA, unions and ministers agreed the deal and was suspicious since it was a big "ask" and a big risk in his opinion. A 1/49th career average scheme with no-one earning up to £43k paying any more?  How are the Hutton Report savings (£900 million per year) to be achieved? Increasing the contributions by staff was missed by the attempt to avoid further opt outs from the scheme.

Senior Firefighters in their scheme pay 17% of salary in pension contributions. Far more than senior managers in the LGPS (who to be fair, retire at a later age). Question mark on how long it can last? The 2016 revaluation is the most important. In 2019 the cost management process may mean that the Treasury in 2020 will insist in either an increase in contributions or reduced accrual (or only for new entrants?).

Kieran thinks that there will be continually uncertainty which none of us here have the answer yet but that the answer to increased costs could come from good investment returns (or of course cut the costs of running the LGPS?). 

Terry thinks LGPS 2014 saving are only £500 million pa. There will be problems with the reduction in numbers of active members as "maturation" occurs.

On the Governance side, Kieran thinks that the National advisory board is working well so far. The "call for evidence" on possible merger of LGPS produced many responses.  The new role of the pension regulator is currently unclear? We have to consider the role of non council employers in the scheme. He believes the role of trade unions and Employers working in partnership is very positive.

Terry is worried that that the National board might seek to be too ambitious. Elected Councillors are responsible for the fund. He believes that the role of local pension boards is advisory and only to scrutinise administrating authorities. (UNISON and others think he is wrong. If scheme members now bear the risk of poor investment then they must have an active say in governance)  He noted that there use to be 8 English local government regions. Is it possible to have 8 LGPS funds?

The treasury cost cap on employer pension contributions will be set next year by GAD (the government actuaries). The National Advisory Board meets on December 16th to consider the results from the "call for evidence".
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