PTL's Colin Richardson looks at the difficulties all LGPS administrators will face before April
Do you remember the Krypton Factor? 1980s television at its worst! The requirements upon all 89 Administering Authorities (AAs) of the Local Government Pension Scheme (LGPS) to EACH appoint a Pension Board by April 2015 has shades of that epic challenge!
There is the puzzle to solve:
- Who will decide the Board's format, how many member and employer representatives, how many other members?
- How will they be selected or elected? (Simple question but difficult to undertake)
- Should you appoint a Professional Chair?
- How should other Board members be chosen?
- What is the defined purpose of the Boards to be reflected in the 'Terms of Reference?
- Indeed who will draft, and when?
- What budget is needed for establishing and running the Board, including any advice it may require?
These questions have no easily defined answer, especially the interaction with existing Pension Committees undertaking most decisions at present. The Boards are defined to "assist" the AAs? This seems to mean all things to all parties!
Rather like the Krypton Factor, the puzzle has to be solved in a race against time. The approval processes of each AA needs to be factored in to ensure the establishment of the Pension Board by April 2015. This is tight. The Regulations were published on January 28th and the Pensions Regulator's Code of Practice a few days before.
In true Krypton Factor style, once approved in constitution there is a second race to select Board membership and establish the first meeting before 31 July. Following this the demands go on: information flows and reporting requirements. The running and output of the Boards will be public.
My recollection of the 1980s was that most contestants failed dismally! This was true in comical fashion for an unnamed friend of mine who appeared one week in a lime green track-suit. Many are predicting the same for Pension Boards. Not the track suits! But many predict a system of ineffective talking-shop committees achieving little other than an extra cost. Many suggest "interesting" relations with current Pensions Committees.
Certainly, the policy intention is for something of genuine positive assistance, with member influence included. Certainly, tangible value will be required to justify the effort. Fortunately there is help at hand. The LGPS Shadow Advisory Board has published an extremely high quality Guidance document for AAs also published January 28th. They are accompanied by a template Terms of Reference for AAs to start from.
The challenges are significant and the remit of the Boards are wide. To cover all aspects: decision processes, investments, administration and management, strategy, compliance and funding - the knowledge and understanding requirements for EACH Board member are strong.
In practice this means assessing all matters of Pension Committees - not replicating decisions but reviewing how decisions were taken (including all papers). It is to assist, not to be against the Pension Committees! The Government used the phrase "fingers in every pie" this week.
In the end, the Krypton Factor always felt an artificial challenge - created for TV, not real-life and eccentric. These Pension Boards can feel a bit artificial too. No-one knows precisely what they will do, how they will work and whether they will succeed as intended or face further legislation.
There are many saying that to run them effectively, the relatively modest cost of hiring an independent Professional Chair would be well worth it. This would be invaluable to achieve Board effectiveness, strategic aims and management and to work for consensus and the best conclusions if tricky or controversial issues arise. It may also save on external advice costs for Boards.
The membership, AAs and Council Tax payers deserve decent Boards working with AAs to applaud good practice and to assist with improvements where possible. AAs would well advised to appoint a good independent on the Boards and to create a process to advertise and select.
Colin Richardson, Client Director at PTL
