And then there was one (month)

We are now just one month from the Government’s target date for LGPS pooling. The progress made across England and Wales is a credit to all those involved (click here to read our previous article on transitioning to the new world of pooling). Key activities over the coming months include identifying how funds’ investment strategies are mapped into the Pools and how the transitions can be achieved efficiently. We also encourage committees to develop a set of key indicators (beyond just manager performance) with their Pools to assess the effectiveness of decisions being made on the funds’ behalf.

Trigger happy

2018 has seen the return of equity volatility, with (at time of writing) UK and global equities (£ terms) down 5% and 1.7% respectively. Firstly, it is important to set this relatively modest correction in the context of the strong equity performance in 2017. However, it does act as a useful reminder for committees to focus on their strategic objectives (including equity exposure at “full funding”) and have plans for working towards these objectives (including the use of de-risking triggers on the back of strong market returns).

No big deal

The ‘interim solution’ in place between 6 April 2016 and 5 December 2018 of fully indexing GMPs (in public service pension schemes) will be extended by two years and four months, thereby covering members who reach SPA before 6 April 2021. We think this change to GMP indexation will only make a very small impact on employers’ liabilities – even if this indexation were to be funded by LGPS funds indefinitely, we estimate this would increase its liabilities by just 0.2% in a typical case. For some employers, it could be a little higher if there are particularly large combined pre-1997 accrued pensions within its workforce, but for others with less mature memberships the figure will tend even closer to nil. For accounting purposes, we would certainly encourage auditors to take a pragmatic approach and ignore this change on the grounds of materiality, particularly given the approximate roll-forward nature of FRS/IAS accounting figures.

Take control

Participating in the LGPS delivers valuable benefits for scheme members but there are associated costs and risks for employers participating in the Scheme. It is vital, therefore,  that scheme employers gain a better understanding of how to manage their participation more cost effectively. In order to do this, employers need to be better informed about topics such as managing data, funding (looking forward to the 2019 valuation), understanding accounting disclosures, national LGPS initiatives that directly affect employers and, of course, how to engage with their fund. In a series of upcoming employer seminars our experts will be discussing all these topics and more so that your employers will be better positioned to take control of their costs and risks in the LGPS.

Getting the most out of the Data Portal

In early February, we hosted a webinar on the change in approach for clients using the Data Portal. For all employer work going forward, the Universal Data Extract should be uploaded to the Portal. We detailed what the new upload looks like and how we expect salary and CARE pot information to be provided. In preparation for the 2019 valuations, and with the Regulator’s increased focus on data quality, using the Data Portal to complete data cleanse exercises is highly recommended.

One-stop shop

The Pensions Advisory Service’s dispute resolution function is moving to the Pensions Ombudsman. The transfer is expected to be completed by 1 April 2018. In future, scheme members will be able to access all pension dispute resolution, whether pre or post a scheme’s internal procedure, in one place. Member communications e.g. scheme booklets, will have to be revised to reflect this.