North East Scotland Pension Fund plans to establish a dedicated governance team – incorporating communication responsibilities – to deal with the increased workload produced by local government pension scheme reforms.
The new Scottish local government pension scheme, which will be a career average revalued earnings scheme, will take effect from April 2015.
Data automation
NESPF's employer services team has been set up in conjunction with the scheme’s move to a fully automated process for employers to submit member data.
The system allows straight-through processing of data by allowing employers to submit a monthly file from their payroll system, improving data accuracy.
Members are also able to access the system to update their information.
The £2.8bn NESPF will appoint a governance manager and will also have communications officers to deal with its internal and external stakeholders.
Pensions manager Laura Goodchild said there are a lot more governance arrangements to be considered around the new LGPS that is coming into force.
“And we need a specific team to assist that and just manage internal governance as well, which basically covers committee reports and making sure all our policy documents are up to date, things like that,” she said.
Duties that will be carried out by the new team are currently split between the pensions manager and other senior members of the fund’s management.
The governance team will play a part in setting up the pensions board but the pensions manager will take the lead in the process, said Goodchild.
The scheme's funding level was 88 per cent at the time of its latest valuation at March 31 2011, according to its 2014 annual report.
As part of its pensions administration strategy the scheme has also set up an employer services team, which is designed to provide participating employers with one point of contact to assist with pension enquiries.
Goodchild said the scheme has had more contact from employers with issues such as funding since the financial crisis.
“That area of the fund’s work has increased dramatically over the last few years,” said Goodchild. “It’s too much for the pensions manager [who] has to focus on a more strategic position."
Preparing for reforms
The Public Services Pensions Act 2013 requires local government schemes to put in place a pension board – comprised evenly between employer and member representatives, which will be overseen by a national scheme advisory board.
English and Welsh schemes will have until April 2015 for pension boards to be operational.
However David Davison, director at consultancy Spence & Partners, said one of the issues for schemes is that since they have always acted autonomously, there is a lack of consistency in their general governance processes.
“This is part of the issue, in that you have an internal governance board within the LGPS [but] where are its terms of reference?” said Davison.
Historically, many local government scheme boards have focused primarily on investment, said Davison, adding: “Whereas now the board should have a much wider governance remit and look at all the risks that affect the scheme."
The Department for Communities and Local Government last month issued its draft regulations on LGPS governance for English and Welsh schemes.
Colin Richardson, client director at independent trustee company PTL, said most schemes are yet to decide how they will implement the reforms.
One of the key factors for schemes will be how they get effective member and employer representatives to sit on the board, said Richardson.
This may well include those with experience of management or administration, he said. “[Schemes will have to] decide on what the committee objective for the board is and what additional support and members they need," said Richardson.
