Current Issues in the LGPS
04 Mar 2019 - Estimated reading time: 2 minutes
Uncertainty for the foreseeable future
With HMT’s recent suspension of the cost cap valuation, and SAB in England & Wales following suit until the resolution of the ‘McCloud’ case, it seems that we are in for several uncertain months over what benefits will be earned by members from 1 April 2019. Whilst this has implications for the 2019 valuation, the potential impact on funds’ administration resources could be severe and we would expect to see this be reflected in risk registers. If you need any further information about the details please get in touch with us.
1 month to go…
...until the 31 March which heralds the start of the year-long 2019 formal valuations in England and Wales. We have recently been working with funds to provide objective and transparent analysis and justification for the choice of each assumption. We also recently held our 2019 valuation seminar in London which explored areas where our expectation of risk may not match reality, the impact ESG issues may have on funding and how you can plan and prepare for the year ahead. Here’s a short summary.
Europe – the Final Countdown
Brexit is almost upon us (or it is at time of writing), although what this means for any of us remains uncertain. From a funding and strategic perspective, our long-term focus and approach eases concerns over the Brexit and valuation dates coinciding. In terms of shorter-term factors, we have carried out ‘stress testing’ for some funds to understand the potential financial impact, see our summary here. We also encourage funds to consider potential operational ‘squeezes’ e.g. investments in offshore money market funds, derivative settlements over the period and exposures to more UK economically sensitive sectors e.g. small cap/property. We discuss property and other asset classes in more detail in our latest Investment Perspectives.
MHCLG Consultation – You were right, Mrs McKenzie
We anticipate funds and pools will be in advanced stages of thinking about how they will respond to the Government’s consultation on statutory pooling guidance (responses are due by 28 March). In the following blog we pick out some of the consultation’s key themes and focus on three words that feature throughout the consultation – ‘must’, ‘should’ and ‘may’ – which could have a big impact on the LGPS.
Investment markets: ten year challenge
Users of social media will be aware of the ‘ten year challenge’, which involves people showing pictures of themselves now and a decade ago. Ten years ago (early March 2009) marked the market lows, following the collapse of global equity markets in the slipstream of the global financial crisis. In the following article we take a high-level look at a very unusual decade and whether it can give any pointers to the next one.
A Fair Deal?
You’ll need a long memory to recall that ‘new Fair Deal’ guidance, which deals with pension protection for public sector employees whose employment is compulsorily transferred to a private sector provider, was launched in 2013. We are now on the cusp of learning how it will be implemented in the LGPS. The current MHCLG consultation introduces new definitions (‘Fair Deal employers’ and ‘protected transferees’), a ‘deemed employer’ approach to simplify risk-sharing arrangements between letting authorities and service providers, and automatic transfers of an employer’s assets and liabilities during mergers or takeovers. The consultation closes on 4 April 2019 and you can find our response here.
On 3 December 2018, the UK Government published a consultation designed to seek views on a range of questions relating to the creation of pensions dashboards. Hymans Robertson submitted a response to the consultation which can be found here.
Good Governance in the LGPS
In February, we were appointed by SAB to conduct a piece of work on the governance arrangements of the LGPS. This important project will consider how the best practice arrangements that work well in many funds can become the standard practice throughout the Scheme. You can read more here, including how to make your own views known.
Future proofing your administration
2019 will be a busy year for funds in England & Wales, as they add the triennial valuation to their increasing list of tasks to complete. With so many important deadlines to meet throughout the year, together with the changing demands of scheme members and employers, it is more important than ever that funds plan appropriately for the future. These plans should capture all of your priorities to avoid losing sight of your objectives for the year, and make sure you have the right structure in place to ensure that delivery happens. We have set out our thoughts on how this can be achieved here.