Essex mulls delaying SME rep election as reform hits

The fund is seeking input from eligible employers on whether to begin the election of the new representative immediately or to delay it to coincide with the governance changes taking effect in April 2015.

“It is expected that the existing governance arrangements of the Essex Pension Fund will undergo some change or realignment in around a year’s time and any new appointment might therefore be short lived,” said the scheme in a message on its website.

The 2013 Public Services Pensions Act requires schemes to create a pensions board, responsible for assisting the scheme manager. But industry figures have said the legislation lacks details about the board’s requirements.

“[The act] says schemes have to have an equal number of employer and employee representatives. It doesn’t spell out what it means by that,” said Jeff Houston, head of pensions at the Local Government Association.

“It doesn’t say how many members, or how long they need to serve.”

The act states “the board [must] include employer representatives and member representatives in equal numbers”. It also requires that board members do not have a conflict of interest.

Pension committees

Many local government pension schemes have already formed section 101 pensions committees following the 1972 Local Government Act.

These may partially fill the role required by the new legislation, but consultants have concerns that schemes will have to form separate bodies with an oversight role.

“There has always been a thought that [the board] would be an oversight body,” said Barry Mack, head of governance at Hymans Robertson. “We expect that the [Pensions Regulator] will say you can’t have decision-making and oversight in the same board.”

Schemes should assess who needs to be on the board, said Houston. There are concerns that more detailed regulatory guidance has not yet been published and schemes may not have adequate time to fully implement the reforms.

“What concerns me is that there’s a lot coming in, you have to adjust what you already have. There’s a lot to do,” said Rosalind Connor, partner at law firm Taylor Wessing.

“You have to read the small print, but it hasn’t been published yet. I don’t think everyone is necessarily aware how radical a change it is,” she said.

The scale of reforms has also raised concerns over increased cost and bureaucracy within pension schemes.

“The downside is that a lot of schemes have reasonably good governance in place and this imposes an oversight [body] that doesn’t need to be there at a time when local governance pension schemes are being asked to save,” said Mack.

Despite this, the introduction of standardised oversight across all public service schemes will be useful for governance, Mack added.

Michael Hayles, a partner at law firm Burges Salmon, said more oversight may increase the security of schemes and ultimately justify rises in cost.

He added: “The overall benefit will outweigh the cost. The main effect will be an extra tier of security to ensure decisions are being taken for the right reasons.”