Current Issues in the LGPS
30 Nov 2018 - Estimated reading time: 5 minutes
All else being equal
The GMP juggernaut rolls on. First there was reconciliation, then indexation, and now equalisation following the recent Lloyds Bank High Court ruling. HMT has stated that their preferred long term indexation solution of converting GMP to scheme pension, outlined in their January 2018 consultation response, will also meet the requirements of equalisation. The longer term solution has funding and accounting implications. We will send you a briefing on the subject shortly.
Climate change: the time to act cool
Friends of the Earth released their report titled ‘Risky Business: Local government pension funds and the climate crisis’ which provided thoughts on how investors are ‘failing to protect themselves from the financial risks of climate change’. With the IPCC report stating that we have just twelve years to significantly decarbonise and avoid global temperatures rising above 1.5ºC, can the public sector continue to bear the costs of the physical risks of climate change? Our Summary discusses this and explains why there may be a shift in the responsibility for managing the external impacts of our economic activity.
Don’t mention the B word
Brexit is dominating the daily news headlines with differing and contradictory opinions being aired every minute, or so it seems. Whilst no one knows what Brexit will actually mean in both the short or long term, that doesn’t mean its impact should be ignored by pension funds. As well as the potential impact on financial markets, funds should also think about the operational aspects of their investments and potential scenario planning e.g. “what would you do if you were about to implement a transition and news of a deal comes out the day before”. Although scenario planning might not change the eventual outcome, having the discussion early at least ensures a plan is in place.
Planning for 2019
Just like Christmas shopping, it’s never too early to start planning for a formal valuation. With the 2019 round of valuations in England & Wales less than 5 months away, funds should have started making sure plans are in place to make next year as smooth and efficient as possible. To help funds with their preparations, we recently held a valuation planning webinar.
Making a statement
With the 2018 annual benefit statements recently released and funds moving onto other pressing matters, the Regulator has brought this issue back into focus with a guide to issuing annual benefit statements and preparation checklist. The guide sets out an annual review process, confirms the importance of planning and the now omnipresent ‘importance of good data’. There are a number of steps in the guide for funds to work through and ultimately help them produce robust, clear and accurate benefit statements.
It was acronyms galore at the annual Pension Managers’ Conference at Torquay a couple of weeks ago: this included updates from LGA, tPR, TPO (Pensions Ombudsman), as well as topics such as GDPR. Whether or not you were at this seaside event, read our summary for up-to-date insights on the administrative side of the LGPS. Continuing the acronym theme, the SPS Conference in London had an investment focus instead: this looked at various asset classes, cash flow negativity, and Artificial Intelligence among other things. There was also a summary of the actuary’s perspective on how funding and investment are inter-linked, delivered by our own Douglas Green. See our highlights document for more details.
Alphabet soup (part 2)
The recent weather conditions may be a taste of what is to come on the LGPS regulations front, with a “blizzard” of consultations expected before Christmas (to have a chance of being picked up in Parliamentary time when MPs aren’t talking about you-know-what). One to especially watch out for is whether and how the LGPS benefit package for members may change as a result of the cost cap: SAB has submitted proposals to HMT, so watch this space! In the meantime, GAD has published some commentary on the cost cap mechanism, for you detail-junkies out there.