Investment pool Access has earned the ire of the Local Government Pension Scheme Advisory Board, having failed to implement a policy on member representation that was decided in 2017.
LGPS SAB chair Roger Phillips wrote to local authority asset pools in 2019 urging them to adopt the policy, which requires member representation in investment pools’ governance arrangements. As of December 2021, only Access — which is composed of 11 LGPS funds covering more than 1m members and £56bn in assets — had yet to make such accommodations.
An update on the SAB website reads: “The board wishes to express its disappointment that Access continues not to have adopted the board’s policy, and strongly urges the representatives of the fund authorities to reconsider their position and to extend their governance arrangement to include scheme member representation, either as full members with or without voting rights or as observers.”
In essence, it will enable LGPS members and wider stakeholders to see how scheme assets are being spent, including on fees, and for what purpose
Matthew Swynnerton, DLA Piper
An Access spokesperson told Pensions Expert: “Access is aware of the investment pooling update published on December 17 2021 on the LGPS SAB’s website. Access is fully focused on its responsibilities to scheme members, and the matter of scheme member representation will be discussed at the March 2022 meeting of the Access Joint Committee.”
Member involvement is vital for transparency
Melanie Durrant, principal at Barnett Waddingham, told Pensions Expert that the policy was introduced in 2017 to ensure that members were properly represented in investment decision-making.
“In the past, we have seen many examples of members challenging different funds for all sorts of reasons, but particularly in relation to investment decisions.
"By giving members, who have the knowledge and experience, a seat at the table, their views should be taken into account in any decision-making process, and therefore could reduce the risk of future challenge by giving reassurance that their voice was being heard,” she explained.
“Ultimately the LGPS is there to pay benefits to its members, and so you can understand why members take such an interest in where the funds are being invested so that they believe the benefits that they have been promised will be paid.”
LGPS updated policy in 2018
Matthew Swynnerton, partner at DLA Piper, added that the SAB updated its statement in 2018 to make clear that member representation was not only encouraged but expected.
This was to ensure “that scheme managers involve employers and member representatives in assisting with the assurance of transparent reporting and ensuring the effective implementation of strategies, including consideration of provision of direct representation on oversight structures”, he said .
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The SAB explained that it wished to adopt a “comply or explain” approach, meaning that “any pool making a decision to exclude member representatives from their formal oversight structures should publish this decision and formally report the reasons to the local pension boards which the pool serves”, Swynnerton said.
He added that member representation could be achieved via the inclusion of trade unions or individual members, and could be as simple as allowing members to observe proceedings, rather than giving them voting rights — though the precise form would be for the investment pools to decide.
“In essence, it will enable LGPS members and wider stakeholders to see how scheme assets are being spent, including on fees, and for what purpose,” he said.
