There are about
4.6 million people in the UK who are members (active, deferred or retired) of the Local Government Pension Scheme (LGPS). Collectively it is the 5th biggest pension fund in the world and worth around £180 billion. It is of huge importance to the UK economy.
From the 1 April 2015 each LGPS will have to by law set up a local Pension Board. The statutory role of the Boards is to advise and assist the fund to make decisions on all matters. We are still waiting for the final government regulations to be signed off by the Minister and laid before Parliament.
While I think that the Government
has messed up over reform of the LGPS. Pension Boards will be good for the funds providing they are allowed to do their job properly and genuinely involve beneficiaries in the running of their funds.
Unless we improve performance and cut costs, due to the 13% employer contribution cap on future accrual (new pensionable service) the whole future of the LGPS will be put in peril.
UNISON has put together a model constitution for the Pension Boards (see below) which has been sent to all LGPS funds. This has already been adopted by all the Scottish LGPS funds.
I would recommend that every LGPS sets up a working group with UNISON and the other local government unions on how to make their local pension board work.
UNISON Model LGPS Pension Board Model Constitution
1.1 Each Local
Government Pension Scheme Manager in England and Wales is required to establish
a Pensions Board separate from the .............................. Pensions Committee
that acts as the Scheme Manager.
1.2 The
.......................................................... (name of fund) Pension Board is
established under the provisions of the .................................................
Regulations 2015.
2.
Objectives
2.1
The Pension
Board is the body responsible for assisting the Scheme Manager in relation to
compliance with scheme regulations and the requirements of the Pensions
Regulator and any other relevant legislation.
2.2 The Pension Board will determine the
areas they wish to consider including, amongst others:
- Reports produced for the pensions committee
- Seek reports from the scheme managers on any aspect of the fund
- Monitor investments and the investment principles/strategy/guidance
- Monitor fund investment and custodian transaction costs
- The fund annual report
- External voting and engagement provisions
- Fund administrative performance
- Actuarial reports and valuations
- Funding policy
·
Any other matters that the pensions board deem appropriate
3.
Membership
3.1 Membership of the Pension Board will
consist of equal numbers of trade union representatives and employer
representatives, drawn from councils and scheduled or admitted bodies in
membership of the fund. Pension Board
representatives must not also participate in or act as members of the pensions
committee. Local Authority employer
representatives will normally be Elected Members serving as part of the
Council.
(As a minimum there will be 4 trade union and 4 employer representatives
with the expectation that larger funds will require greater numbers. Numbers
from organisations on either side will broadly reflect respective membership in
the scheme.)
3.2 There will be ............. (number) trade union representatives
appointed by the trade unions as follows:
UNISON .......
GMB .......
Unite .......
3.3 There will be
.............. (number) employer
representatives appointed by the respective employer organisations as follows:
Councils ......
Scheduled bodies ......
Admitted bodies ......
(In smaller funds it
may be possible to name the councils and other bodies. In larger funds describe
the way representatives of these groups are appointed e.g. at the pension fund annual
meeting)
3.4 Pension Board
representatives will serve for a period of four years and may be reappointed to
serve further terms. Timescales for organisations to notify the Pension Board
of their representatives shall be locally determined. Employer bodies and organisations retain the
right to withdraw representatives and identify replacements on occasion.
3.5 Appointing
bodies can appoint a named substitute for their representative. Such
substitutes must undertake the same training as set out in (6) below.
3.6 Advisors may
attend meetings of the Pension Board in a non-voting capacity.
3.7 No person may be appointed to the Pension
Board that has a significant conflict of interest. A
conflict of interest is defined as a financial or other interest which is
likely to prejudice a person’s exercise of functions as a member of the Pension
Board. It does not include a financial or other interest arising merely by
virtue of that person being a member of the scheme or any connected scheme for
which the board is established. The Pension Board will adopt policies
and protocols for handling any conflicts that were unanticipated and might
arise during membership.
4.
Meetings
4.1 The Chair of the Pension Board will be
rotated on an annual basis between the trade union and employer sides of the
Pension Board.
4.2 Pensions Board meetings will be administered by
................. (pension fund or administering
authority depending on local practice) as agreed with Joint Secretaries
appointed by the trade union and employers sides of the Pension Board. All reasonable
administration costs shall be met by the fund.
4.3 The Pensions Board should meet at least quarterly. A majority
of either side may requisition a special meeting of the Pension Board in
exceptional circumstances.
4.4 The Pensions Board may establish sub-committees.
4.5 While the statutory roles and function of
the pension committee and pensions board are separate, the normal practice will
be that both bodies will meet at the same time to consider the same agenda,
with the Chair of the pension committee chairing the concurrent meeting. The
aim is to engender a positive and proactive partnership culture where in
practice the two bodies act as one.
5.
Dispute resolution
5.1 If the Pension Committee and Pension Board
cannot reach joint agreement on any matter the process for resolving any
differences between the two bodies will be as follows. Whilst this process is undertaken the
decision of the Pension Committee is still competent.
5.2 In the first instance, if at least half
of the members agree, then the pension board can refer back a decision of the
pensions committee for further consideration if any of the following grounds
are met:
- That there is evidence or information which it is considered needs
re-evaluating or new evidence or
data which the Pensions Committee did not access or was not aware of at
the point of decision making and which is considered material to the
decision taken;
- That the decision of the Pensions Committee could be considered
illegal or contrary to regulations;
- That the decision of the Pensions Committee is contrary to a
relevant Code of Practice published by the Pensions Regulator; or
- That the decision is not in the interest of the continued financial
viability of the Scheme or is against the principles of proper and
responsible administration of the Scheme
5.3 If there is no agreement after the matter
has been referred back to the pensions Committee, then the difference in view
between the Pension Board and the Pension Committee will be published in the
form of a joint secretarial report on the fund website and included in the fund
annual report.
5.4 The England/Wales LGPS Scheme Advisory
Board may also consider and take a view on the matter and, if considered
appropriate, provide advice to the Scheme Manager or the pension board in
relation to the matter.
6.
Training
6.1
All members (and named substitutes) of the Pensions Board must undertake
a training programme in accordance with any guidance issued by the pensions
regulator and complying with best practice training requirements of the
Pensions Committee.
6.2 The Pensions Board shall agree policies
and arrangements for the acquisition and retention of knowledge and
understanding for pension board members
6.3 The Scheme Manager will keep
an updated list of the documents with which they consider pension board members
need to be conversant to effectively carry out their role and make sure
that both the list and the documents
are accessible.
7.
Access
to Information
7.1 The Scheme Manager and Pensions Board
will together ensure that information is published about the activities of the
board including:
• the full terms of reference for the pension board,
including details of how they will operate
• the pension board appointment process
• who each individual pension board member represents and
• any specific roles and responsibilities of individual
pension board members.
7.2 The minutes
of the Pension Board will be published on the fund website. The Pensions Board
may undertake such communications and stakeholder engagement as it deems
appropriate to perform its functions.
