OUR ROUND-UP OF THE LATEST PUBLIC SECTOR NEWS AND INSIGHTS
Current Issues in the LGPS - February 2020
04 Feb 2020
Good Governance Update
A big thank you to everyone who dialled into the Good Governance webinar or attended one of the roundtable events over the last few weeks. These events have been invaluable in ensuring that the SAB gets to hear the views of LGPS practitioners as Phase III of the project continues. The next few months will see the project team develop draft guidance, a set of governance KPIs and the independent governance review process. Click here to read more on the Good Governance project so far and examples of what funds can be doing to get ahead of the game. If you wish to discuss any aspect of the project in more detail, please feel free to get in touch with one of the team.
Scottish consultation on valuation cycles and exit payments
The Scottish Public Pensions Agency (SPPA) has recently issued a consultation, seeking views on changes to the LGPS in Scotland. The consultation covers two specific areas. Firstly, views are sought on moving to a four yearly valuation cycle. The opportunity is also being taken to assess the impact of changes introduced in 2018 giving administering authorities the option of suspending an employer’s liability to pay an exit payment when managing its exit from the scheme. The consultation is available to view on the SPPA website and closes on 9 March 2020.
2020 Scottish valuations - morning seminar
Please join us in our Edinburgh office on Thursday 20 February for a wide ranging discussion on the 2020 valuations. Ronnie Bowie is due to retire this year and he will be providing an entertaining perspective on the development of the Scottish LGPS over the last few decades, and what the future may bring. Other experts from our LGPS team will also be on hand to lead discussions on areas such as setting employer contributions when in surplus, options to protect improved funding levels and how having a better handle on risk can help to optimise your funding strategy. There will also be an update on the Good Governance project in England and Wales. Please register here – the event runs from 10am to 1pm.
A clean bill of health for Scottish funds
The Government Actuary’s Department (GAD) has finally published its section 13 report on the 2017 Scottish local valuations. The good news is that no concerns were raised for any Scottish fund on 3 key criteria against which they were measured i.e. compliance, solvency and long term cost efficiency. GAD have made 2 recommendations to SPPA around the consistency criteria – 1) to require funds to publish a dashboard of key information in the valuation report, and 2) to develop a standardised actuarial basis and require funds to calculate a funding level using these assumptions. We’ll be speaking to the SPPA over the coming months about how to ensure that any actions arising from the report are appropriate and in the best interests of the LGPS in Scotland.
LGPS National Knowledge Assessment coming soon!
Following the success of the first ever LGPS National Confidence Assessment, we’re proud to announce that the first ever National Knowledge Assessment will launch in March. The assessment of Pension Committee and Pension Board members will give LGPS funds a unique insight into the knowledge levels of their key decision-makers. The assessment will provide key evidence and information to all participating LGPS funds on the management of their fund, and will be an important step in identifying future training requirements for individual funds, and the LGPS as a whole.
RPI consultation delay
January was expected to see the launch of the joint consultation from the government and the UK Statistics Authority regarding the proposed changes to RPI. However, a letter from Sajid Javid published on 13 January confirmed that this will now be launched in March in conjunction with the Budget. This has the potential to impact many LGPS funds, particularly those holding index-linked gilts or RPI linked investments, and is therefore something which funds should look to engage with.
Watch out for the lumps
Many LGPS funds are becoming more aware of changes in their net cash flow position and are considering ways in which they can manage cashflow requirements effectively. The cash flow profile for some is now becoming more of a challenge with employers paying several years of contributions up front. While the phrase “cash is king” is often used when discussing pension funding, managing these more “lumpy” cash flows is something funds should be considering.
Ban on Boycotts
There have been further developments in relation to the potential for the UK government’s ban on boycotts by public institutions to extend to the LGPS. A document published alongside the recent Queen’s speech stated that the government will "stop public institutions from imposing their own approach or views about international relations, through preventing boycotts, divestment or sanction campaigns against foreign countries and those who trade with them". Details on how this might apply to the LGPS have still to be published but the position will no doubt receive further legal challenge.
Reasons to be fearful?
As more and more Pensions Committee meetings receive visits from climate change protesters, Douglas Green’s blog wonders how an LGPS Fund might look to a typical member of the public, and suggests three simple steps to ensure your Fund is on the front foot to meet these challenges.