This is an article I wrote on behalf of the AMNT for Professional Pensions on the future Governance of the Local Government Pension Scheme.
"The Public Sector Pensions Bill is currently on its way back to
the House of Commons after being amended by the Lords. One of these
amendments, accepted by the government, is that the proposed new Local
Government Pension Scheme boards will have 50/50 employer/employee
representation.
There are 101 separate council pension funds in the UK. At the
moment most of details are still unclear but it is thought that board
members will have similar powers and responsibilities as those of
trustees in private sector defined benefit schemes.
Most existing LGPS schemes are supervised by elected councillors with
often little or none beneficiary representation. If for example it is
agreed that these new boards had ten members each, then there is a huge
organisational and logistical challenge ahead. It is thought the new
governance arrangements are planned to start in April 2014.
While many existing councillors may simply switch from existing
committee panels to boards, they will have to be selected, trained and
supported in the new arrangements. Employees will in many cases have for
the first time the right to representation and full voting rights.
I have been an employee representative on a London LGPS since 1996.
At first for many years I was called an "observer" on the pension
investment committee. This meant that I had no vote but did have access
to papers, attend beauty parades, training and could ask questions to
advisors and fund managers. This changed and now I and one other
employee representative have two seats and voting rights on the
investment panel and a seat but without voting rights on the formal
council pension committee.
I would point out that we have never felt the
need to actually force a vote at investment panel. Like the vast
majority of private sector pension trustee meetings, issues are best
dealt with by consensus whenever possible. I don't expect that to change
with 50/50 representation.
This is a huge step change for employees and the local government
trade union Unison is already planning an ambitious recruitment and
training programme for representatives. With a 19.5% total contribution
cap it is now very much in the interests of employees and employers to
make sure the fund is well run and efficient.
Professional advisers and fund managers will also have change the way
they do business with the LGPS. The issue of the merger of LGPS is
separate.
Everything will have to change to some degree. I am also an employer
trustee on a private DB scheme and it has been a very different
experience to that in the LGPS.
It is vital that we get the LGPS governance arrangements right. Not
only are four million people in the UK members but it is collectively
the biggest funded pension scheme in the UK with around £150bn in
assets. Meanwhile some senior members of the government have privately
referred to the LGPS as the British sovereign wealth fund and hope it
will invest more in housing and infrastructure to kick start the
economy.
The AMNT welcomes this development which puts to rest this governance
anomaly between public and private funded DB. Can the government now
tackle the appalling governance gap in contract-based defined
contribution schemes?
John Gray is chairman of the AMNT DB working group"
