Agenda item

-       Setting the Scene

-       National Governance Structure

-       Pension Board role and responsibilities

The Board received a presentation from Annemarie Allen of Barnett Waddingham LLP, the Corporation’s Actuaries and Pension Benefit/Governance advisors.

This presentation provided information regarding the following issues:

-        The Background to the creation of Local Government Pensions Boards

-        The National Government Structure

-        The role and Responsibilities of the Board and Board Members for the Corporation’s Scheme

Background to the Creation of Local Government Pensions Boards

The Board was advised that Pensions Boards had been established following Lord Hutton’s Independent Public Service Pension Commission Review in 2010. The Board was advised that the Review had suggested amendments to Public Sector Pensions Schemes to improve affordability and to provide a sustainable, adequate and fair solution.

This Review had let to the Public Sector Pensions Act 2013, which had created a new governance structure for Public Sector Pensions, including the creation of Public Sector Pension Boards, effective from 1 April 2015. This Act was also supported by the Local Government Pension Scheme (Amendment) (Governance) Regulations 2015, which came into force from 1 April 2015. The role of the Boards was to assist the administering authority to secure compliance with LGPS and other legislation relating to Scheme governance and administration and the requirements of the Pensions Regulator (TPR), and to assist the administering authority to ensure the effective and efficient governance and administration of the Scheme.

Ms Allen informed the Board that the 2013 Act was supported by TPR’s Code of Practice No 14, titled Governance and Administration of Public Sector Pension Schemes. This document provided practical guidance on the exercise of functions under Pensions legislation, setting out the expected standards of conduct and practice. The Board was informed that the Code of Practice was not a statement of law, but sought to assist Pension Schemes in meeting the law. The Board was advised that there was an expectation that all Board Members would read this Code of Practice and it was agreed that the Town Clerk would circulate this document to all Board Members following the meeting.

The Code of Practice identified the main areas in which a Board should satisfy itself that appropriate management was in place. Ms Allen noted the legal requirements on the Board members and that internal controls, Scheme record keeping and providing information to members were key areas of focus of the TPR following their 2015 survey.

National Governance Structure

The presentation provided Members with information regarding the key organisations and roles within the new structures, particularly including:

-       Scheme Manager: the organisation responsible for managing or administering the Scheme. For the Corporation, this is the Court of Common Council of the City of London Corporation.

-       Scheme Advisory Board: a National Board responsible for providing advice to the Department for Communities and Local Government (DCLG) on potential changes to the scheme or to Scheme Managers and Pensions Boards on operation of the Scheme and other matters. The Scheme Advisory Board also receives all Pensions Schemes’ Annual Reports and gathers information regarding all schemes and their performance against specific KPIs.

-       Pensions Regulator: The 2013 Act had ensured that the Pensions Regulator’s remit now also covered Public Sector Pensions.

The Board was advised that the Pensions Regulator had conducted a survey of all Schemes in 2015 to determine existing levels of competence and compliance with Regulations. A further survey to assess progress was expected to be issued in the next few weeks. As a measure of progress that had been made in compliance, the Chamberlain explained that in 2015, 7 of 91 Schemes had issued their statements to members on time and the Corporation was one of those which had not issued the statements on time. In 2016, the Corporation had issued all statements on time.

The Board was also informed that the Pensions Regulator had enforcement powers against both Scheme Managers and Board Members. The maximum fine the Regulator was able to assess was £5k against Board Members and £50k against Organisations.

Ms Allen informed the Board that the triennial valuation of Pensions Funds was currently underway and would be completed in early 2017. Following completion of this, the Government’s Actuary Department, as Scheme Actuary appointed by DCLG, was expected to conduct a review of all funds and their funding levels to compare and assess the funding levels of each Fund and other associated issues.

Role and Responsibilities of the Board and Board Members for the Corporation’s Scheme

The Governance Structure of the Corporation’s Pension Scheme was explained to Members. The Scheme Manager delegated its role of running the Scheme to the Investment Committee (for investment matters, which in turn delegated to its Financial Investment Board) and the Establishment Committee (for staffing matters). It was agreed that a full diagrammatical explanation of the Governance Structure be provided to Members of the Board and included on the website.

The role of Board was set out in the LGPS Regulations as noted above. The Board was advised that the Regulations also provided the Board with the power to do anything which is calculated to facilitate, or is conducive or incidental to, the discharge of any of its functions. The role of the Board was set out within the Terms of Reference, considered earlier in the meeting. Ms Allen suggested that the Terms of Reference should be reviewed to provide more information regarding the role of the Board and the requirements on Board Members.

Ms Allen confirmed that Members of the Board had a legal responsibility in a number of areas including to ensure that they had capacity to represent all Scheme Employers and Members (as appropriate to which representative they were), to ensure that they had the requisite knowledge and understanding (as described in Code of Practice 14), reported any breaches of the law which were of material interest to the Pensions Regulator (in accordance with the Corporation’s reporting Breaches of the Law Policy, which would normally include reporting via an officer) and to not have conflicts of interest. In general members were advised that they should comply with the seven principles of public life.

With regard to breaches, the Chamberlain advised the Board that a register of all breaches was kept by the Chamberlain’s Department and it would be appropriate for this to be submitted to all meetings of the Board for information. It was also confirmed that the Board had the right to request support from any Department of the Corporation as required in the undertaking of their duties.

Ms Allen advised that there was a requirement that details of the Board Members should be publicly available and that TPR had advised that they would be checking on this.  Therefore, the Board agreed that the Town Clerk should update the relevant page on the Corporation’s website to indicate that contact with the Elected Members was as indicated on the website, and all communications to the remaining Board Members should be care of the Town Clerk. Ms Allen suggested that once this was completed, the Scheme Advisory Board should be informed to allow their checklist to be updated.

RESOLVED – That the Board notes the information regarding the background to the Local Government Pensions Board and their roles and responsibilities.