OUR ROUND-UP OF THE LATEST PUBLIC SECTOR NEWS AND INSIGHTS
Current Issues in the LGPS - May 2020
05 May 2020
COVID-19 and the LGPS
Keeping the LGPS connected – up till now
One great strength of the Local Government Pension Scheme has always been its sense of community. This has been evident in the past from the various LGPS conferences and seminars. But just because these have been cancelled or postponed for the foreseeable future, doesn’t mean LGPS Funds should stop connecting.
We are happy to have helped keep those connections in place, and the flow of information and ideas going. Here is a quick round-up of the main events, in case you missed any or would like to revisit something. Special mention goes to the expert-led discussions and analysis on the mortality statistics.
Keeping the LGPS connected – looking ahead
These fortnightly webinars have continued to attract officers and others from the majority of LGPS Funds, our next one will take place on Tuesday 19th May, 11.30-12.00pm. Look out for the invite coming soon.
COVID-19 and death rates
As the tragic human cost of the pandemic grows, more data related to COVID-19 deaths is emerging. Our colleagues in Club Vita have been poring over the data and explain the differences between “missing” and “missed” deaths – see part 1 and part 2 of their recent blogs. At this stage, it is not possible to accurately extrapolate the medium term impact of a higher death rate in 2020/21 either on future mortality or morbidity rates. However, initial indications suggest that different socio-economic groups are affected to different degrees and it is reasonable to assume that higher deaths than expected amongst pensioners will lead to lower liabilities for LGPS employers. Higher death rates may also lead to higher incidences of ill health retirements and more death-in-service benefit ‘strains’ (which may cause issues for small employers in particular as they are less able to absorb adverse experience).
TPR statement on communicating with scheme members during COVID-19 period
Another week in lockdown sees a further covid-19 related statement from the Pensions Regulator. Appreciating the financial pressures many scheme members may currently be under this latest statement highlights the importance of schemes communicating the risks of pension scams and transferring out accrued pension rights, together with the consequences of opting out during the pandemic. Additionally it requests schemes to issue a letter prepared jointly by TPR, the FCA and the Money and Pension Service to any DB member looking to transfer their pension rights warning them of the risks of doing so during the current period of uncertainty.
2019 valuation – we’re all ears
Minds and focus were on more significant issues at the time, but 31 March 2020 brought the 2019 valuations in England and Wales to a conclusion. As usual it was a busy year with its own unique challenges (McCloud and COVID-19) successfully navigated by all funds. A valuation always has high and lows and we want to hear your views and thoughts on the past 12 months; please keep an eye out for our Voice of Client survey (launching this month) and take the time to review the process with your Hymans Robertson consultant.
Supreme Court rules against the government in boycotts case
The UK Supreme Court has ruled that a provision in the Secretary of State’s 2016 guidance for LGPS, which stated that public pension schemes are prohibited from pursuing investment policies contrary to UK foreign or defence policy, is unlawful. This government-mandated restriction would in some cases prevent the LGPS from disinvesting on ethical grounds. This landmark ruling is the culmination of a series of hearings and further comment is provided on the Scheme Advisory Board website. Our Sixty Second Summary on the case and the implications of the judgement can be found here.
GAD data reporting
GAD have recently been reporting back to all English & Welsh funds on the quality of data submitted for their 2019 national valuation exercise. If you have any queries about their comments or wish to understand how it compares to our feedback from your own valuation please do get in touch. We are also busy completing GAD’s Section 13 data capture for their review of the 2019 valuations; you’ll be glad to hear there is nothing further for funds to do!
The fun begins in Scotland
Whilst 31 March 2020 concluded one set of valuations, it also started another for funds in Scotland. We started our regular valuation webinar series on 29 April which discussed the approach to setting funding plans at 2020 and what changes since 2017 (including COVID-19) may need to be factored in by funds -watch the recording here. We also updated our 2020 valuation toolkit with the latest guide which explains the impact of COVID-19 on the valuation. Please keep an eye out for more additions to the toolkit and future webinars.
NKA – extended for one more month!
Due to issues relating to COVID-19 and some LGPS funds coming onboard recently, we have extended the National Knowledge assessment until the end of May. There’s still time for your fund to sign up and join the rest of the funds participating. As an initial insight, the first 100 participants have displayed encouraging levels of knowledge and understanding and we would invite any remaining funds to sign up and see how they would compare.
Toward the end of March, CIPFA/LASAAC were considering radical proposals to streamline the 2019/20 accounts. However, it was subsequently determined that such proposals would not be acceptable to regulators and auditors and that the 2019/20 Code of Practice would stand unaltered (see CIPFA press release of 7 April 2020). Follow up correspondence with auditors confirmed that they now simply expect pensions results to be produced as "usual”.
With absences and remote working, we recognise the difficulties that employers/auditors face preparing accounts and current challenges around issues like asset valuations and McCloud judgement impacts. We are able to assist in a number of ways (e.g. by arranging a 3-way call with the employer/auditor, preparing a summary paper on an Employer’s specific figures explaining the key movements etc). Please contact our LGPS accounting experts.
Treasury announcement of protected pension ages
On 23 April HMT announced that it would be temporarily relaxing the rules around individuals who retire before age 55 due to a protected retirement age and then return to work. Normally, if such a member returned to work with less than a six month break (or a one month break if the re-employment is materially different), they would lose protected retirement age status and any payments made before age 55 would be unauthorised. The measure is principally aimed at police officers who have retired with a protected pension age and may otherwise have been discouraged from returning to work to take on roles to support the response to COVID-19.
While we continue to progress work and develop some of the thinking for the Good Governance project the timeline for completion has been extended. This is in recognition of the fact that the pressures placed on many senior local authority officers in dealing with the COVID-19 crisis has made it difficult for a proper and appropriate level of consultation and engagement to be carried out at this stage. The work being done now will mean we are in a better place to engage with senior local authority officers when the time is right but no decisions will be made until the SAB and senior officers have had the time and space to engage fully.