Concerns have been raised by the pensions industry regarding conflicts of interest within local government pension schemes (LGPS).
At the Public Sector Pensions event in London yesterday, a panel of experts within the pensions industry agreed that there was a clear conflict of interest within the pension committees of local government schemes, especially in light of the role that local councillors play.
Dr Debbie Harrison, senior visiting fellow at the Pensions Institute, Cass Business School, said that in some cases decision-makers are influenced somewhat by behavioural and political factors than by current investment governance.
She added that there might be a connection between poor investment governance and the increasing trend for schemes to defer the costs of their liabilities into the future.
In a panel discussion, Dr Harrison said that schemes face very difficult political decisions as a number of councillors have expressed that although they want to look after the scheme's interests, they feel that that was not what they were elected to do.
"I can only sympathise with that perspective. That's why I have said that it is up to the Government to try and give a better steer on what is expected in terms of working within a fiduciary role within schemes," said Dr Harrison.
She called for greater transparency around the numbers, in particular the funding levels, so that councillors who are looking after the schemes can make informed decisions.
Steve Dainty, head of pensions at LGSS, a partnership between Cambridgeshire and Northamptonshire County Councils, said: "I'm starting to question the makeup of the pension board.
"Why should the 'trustees' come from the county council when that administrating authority in the very near future could very well be one of the minor employers, because of all the outsourcing they are doing?"
He added: "I really do despair when I hear them say, 'I am sitting on this pension board to represent the interests of my district council or my county council'. No they are not – they have got a fiduciary duty to their membership. And it doesn't matter how often you tell them, they always go back to that."
Councillor Richard Greening, deputy leader and executive member for finance and performance at Islington Council, echoed Dr Harrison's points and said that there needs to be more consistent and transparent data.
"[This] would enable us to look across similar pension funds and make direct comparisons, which at the moment is rather more difficult than it should be," said Councillor Greening.
Additionally, worries were expressed concerning the continuity of expertise within pension committees, especially in light of the turnaround of councillors who serve in the pension committees, and the fact that there is little ongoing training because of the short-sighted view that councillors will only be there for a four-year period, when this is often not the case.
Dr Harrison said in a presentation: "Councillors dominate pension committee decisions. While evidently their responsibilities, their ability to develop experience and expertise appears to be limited because their tenure is predicated on four-yearly elections."
The panellists agreed that elected members who govern local government pension funds need to be trained consistently, regardless of how long they may serve on the board.
Dr Harrison added that the lack of training may be due to a lack of resources, and said it may well be an area where there could be a merger of services between different schemes.
Dainty said that 'trustees' would also need to accept their responsibility to do the training, and said: "Members do need training, and that will be especially important from 2 May where we're likely to get a lot of inexperienced members joining the pension board."
First published 25.04.2013
monique_simpson@wilmington.co.uk
