Local authority scheme experts at Wednesday's National Association of Pension Funds' 2014 Local Authority Conference discussed greater separation in decision-making structures, or increasing guidance, as ways to improve governance.
Improving the governance of the Local Government Pension Scheme was one of the key themes of the Department for Communities and Local Government’s call for evidence last year. This month the department proposed combining LGPS assets into two passively managed common investment vehicles.
There are few chief financial officers who would say they had enough time to give the concentration they need to the pension fund and pension fund matters
Nicola Mark, Norfolk Pension Fund
Joanne Segars, chief executive of the National Association of Pension Funds and chair of the sector’s Shadow Scheme Advisory Board, said: “One of the key questions the shadow board has been considering is, can the local pensions board and the pension scheme manager be one and the same?
“That really comes down to the tension between the governance structure and the available resources within the LGPS, because ideally you want there to be a separation.”
Greater separation could address issues around conflicts of interest and transparency, she told delegates, as well as allowing the manager to operate independently of the authority’s financial and political constraints, but it was not the only option.
“If there is to be one body, then that requires a higher level of guidance to ensure consistency and standards of governance across the funds, and to manage conflicts of interest and ensure that both functions of the committee and the board can be carried out to a higher quality.”
Some argued that many local authorities were under-resourced already, without the creation of a separate body to manage the fund.
“There are few chief financial officers, when you talk to them in detail, who would say they had enough time to give the concentration they need to the pension fund and pension fund matters,” said Nicola Mark, head of Norfolk Pension Fund.
Mark said many schemes were facing 30 per cent staff cuts while the reforms were underway.
Others argued the LGPS already has a degree of separation, as evidenced by a number of its funds. Gary Delderfield, partner at law firm Eversheds, said: “You can point to specific examples where bodies like the London Pensions Fund Authority, South Yorkshire Pensions Authority and the Environment Agency where those bodies are not the primary authorities in their funds at all.”
