The chair of the advisory board for the local government pension scheme (LGPS) in England and Wales has welcomed as a valuable input to its good governance project work carried out to assess the level of knowledge of LGPS pension committees and local pension boards.
Writing in Hymans Robertson’s report about its first-time LGPS national knowledge assessment, Councillor Roger Phillips said the findings would contribute significantly to the LGPS advisory board’s (SAB) good governance project, in particular with regard to how it could help both committees and boards match standards required by the Pensions Regulator (TPR).
“[W]e are reaching a critical stage under the good governance project where aims and aspirations are developing into practical and real world changes to improve the governance and administration of the scheme on a consistent and measured basis that will match the standards expected by TPR,” he wrote.
“The results of the national assessment on both confidence and knowledge will greatly assist the good governance implementation group in making their final recommendations to the scheme advisory board.”
The good governance project is in its third phase, which will involve the SAB consider draft statutory guidance and what key performance indicators could be used to measure governance effectiveness.
Hymans Robertson is assisting the SAB with its good governance project. The national knowledge assessment it carried out is an independent project, but “chimes with the good governance review,” said Ian Colvin, head of LGPS benefit consultancy at Hymans.
The national knowledge assessment follows the consultancy’s confidence assessment in 2018.
“It felt appropriate this year to expand from the confidence assessment to actually testing knowledge,” said Colvin.
The assessment was conducted to help funds in the LGPS benchmark the knowledge and understanding of their pension committee and pension board members, in line with the expectation from TPR.
Twenty funds signed up to participate, which Hymans Robertson said was encouraging although what was “most reassuring” was the level of uptake within those funds, with the average participation level over 60%.
The assessment found higher levels of knowledge in the topics that have traditionally been the focus of committees and pension boards, such as investment and financial markets, and lower levels of knowledge in areas such as administration and actuarial methods, standards and processes.
However, individual fund results still showed a good spread of knowledge on all topics assessed. Chairperson results were typically much higher on all topics than the rest of the committee and pension board members.
Catherine McFadyen, head of LGPS consulting, said: “It’s really encouraging to see such high levels of knowledge demonstrated by funds of all sizes. The expertise evidenced by chairpersons in particular shows both leadership and commitment in this area.”
“I take a considerable amount of comfort in the outcome that there is no significant difference between the knowledge of pension committee and local pension board members across the sections of work explored”
Councillor Roger Phillips, chair of the LGPS advisory board
SAB chair Phillips noted the finding that, in most of the eight areas explored, the level of confidence exceeded the level of knowledge for members of both pension committees and local pension boards.
He said this was understandable given the collective knowledge provided through the support of both officers and advisors, but suggested care may need to be taken to ensure that such support was not taken for granted or perhaps relied on a little too heavily.
“To that end, the good governance project will be seeking to assist administering authorities in evidencing how this collective knowledge is both achieved and maintained,” he wrote.
“Finally, we shouldn’t forget that the acquisition of knowledge and understanding is a statutory requirement for members of local pension boards but not for members of pension committees,” added Phillips.
“I therefore take a considerable amount of comfort in the outcome that there is no significant difference between the knowledge of pension committee and local pension board members across the eight sections of work explored in both assessments.”
Pension boards became a requirement under the Public Service Pensions Act 2013. Pension committees are responsible for all the functions and responsibilities relating to the management of LGPS funds, while pension boards are there to assist with good governance.