Scheme managers raise doubts on joint LGPS governance boards

Under the Public Service Pensions Act 2013 local government schemes must maintain a scheme manager – responsible for administering the scheme – and a local pensions board that will assist in ensuring compliance with the scheme’s regulations. 

However, section 5 of the act states the pensions committee and local pensions board can be combined, where the scheme manager role is fulfilled by a committee of a local authority.

The government is consulting on whether local authorities should be able to merge the two – subject to gaining approval from the secretary of state – or whether this should be prohibited.

David Dickinson, group manager of pensions and treasury at the London Borough of Barking and Dagenham Council, said he believes the pensions committee and board should be kept separate.

“There would be a few areas where there might be conflict if they were combined,” Dickinson said. He said their £666.5m scheme already has an oversight function within its pensions panel, which is made up of seven members plus an employer, employee and trade union representative. 

There would be a few areas where there might be conflict if they were combined

David Dickinson, London Borough of Barking and Dagenham

Dickinson said the scheme would look to transfer the latter three members as well as appoint a legal representative to a separate pensions board.

“They should be completely different because the pensions committee – they appoint the managers and will form the strategy on that basis,” he said.

“Whereas the pensions board isn’t going to be involved in that area at all – it does seem it’s going to be more an audit or scrutiny board.”

Mark Gayler, assistant county treasurer at Devon County Council, said while its £2.7bn scheme had not submitted a response to the consultation, he did not see how the two could be joined due to the different roles they need to perform.

“We don’t see how it could work in terms of what’s in the act, what the role of the board is,” he said.

However, Dawn Turner, head of pension fund management at the Environment Agency, which will also be subject to the regulations, said it is “strongly in favour” of combining its pensions committee with its pensions board and “can see no reason why it should be denied this flexibility”.

“For the Environment Agency, we are pretty much there,” said Turner. “To [establish] a pension advisory board over and above the pensions committee doesn’t actually seem to move our governance forward.” 

Turner said the scheme already has an equal balance between member and employer representatives on its pensions committee, while one of its members is also head of the audit, risk and assurance committee.

Other local authorities, including Staffordshire County Council, have also expressed the desire to combine the pensions advisory function with its existing pensions committee.

Lauren Jackson, associate at law firm Sackers, said there may be savings to be made in terms of costs and efficiency by uniting the pensions board and committee. 

“However, in practice a combined body would be subject to two separate legal codes and associated legislation, which could make compliance more difficult,” she said.