LGPS board considers guidance to avoid conflicts of interest

The LGPS Advisory Board is consulting on whether new rules are needed to avoid conflicts of interest in the governance of the scheme.

It has appointed pension adviser Hymans Robertson to carry out the work, which revives a process that took a back seat to the process of investment pooling.

The move is considered necessary due to a large rise in the number of employers in the scheme in recent years, mainly due to academisation, as well as pressure on administration resources.

A statement from the board said: “We have asked Hyman Robertson to help the SAB identify the real issues and potential options for change to the current arrangements which are proportionate, pragmatic and would improve LGPS governance in these areas.”

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“The purpose of the consultation is to consider how best to accommodate LGPS functions within the democratically accountable local authority framework in a way that ensures that conflicts of interest are addressed and managed appropriately and that the LGPS remains appropriately resourced and able to deliver its statutory functions.”

Speaking to Room151, the board’s secretary Jeff Houston, said: “The LGPS has 16,000 employers but is now administered by 88 funds, who are also employers within the scheme.

“The system works incredibly well, but people looking in from the outside might think ‘gosh!’.”

“We are looking to see whether there is anything we can do in terms of guidance and regulation to help the pension administrators do their job.”

He also said that it was often difficult for pension funds to escape recruitment freezes imposed by their local authorities because staff sat in the same building.

He said that the consultation would consider the model run by South Yorkshire, where administration is carried out by a separate organisation, while decisions are still made by a joint committee of councils in the area.

However, he said that it is unlikely that administration of funds would be passed to pools in the same way as investments have been.

“The government is taking the view that the potential savings from pooling administration are tiny compared to those from investment and is not worth it.”

Hymans will produce an initial report to the board in April before a decision on whether more guidance is required.

Catherine McFadyen, partner at Hymans, said: “We look forward to working closely with stakeholders from across the LGPS as we facilitate the consultation process and help the scheme advisory board in its objective of identifying the real issues and the best possible options for change.”G

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