New code places data pressure on LGPS governance

LGPS managers will be under pressure to address documentation and record keeping by the pension regulator’s new code of practice, says William Bourne

The Pensions Regulator’s (TPR) draft Code of Practice No 14 in respect of public service pension funds will become official guidance for all scheme managers under the LGPS Scheme on 1st April 2015. TPR Codes provide practical guidance and set out expected standards, but do not comprise a legal statement.  However, any manager choosing not to comply with the code would have to demonstrate that the legal requirements set out under the Pensions Acts 2004 and 2008 are met and the code’s provisions might be used as evidence in court.

TPR’s code is divided into the following sections: conflicts of interest and representation, knowledge and understanding, publishing information, internal controls, scheme record-keeping, maintenance of contributions, providing information to members, internal dispute resolution and reporting breaches of the law.

As long-established functioning pension schemes, LGPS managers and governance procedures will, in many cases, already have processes in place which meet the new TPR requirements.  However, not all scheme managers have yet appreciated what will be required of them after 1st April and, in particular, in the area of documentation and record-keeping.  The point we make is that TPR will expect schemes not just to meet them but to be able to demonstrate it, and this may require a change of emphasis in how LGPS managers document their activities.

Schemes should ensure that there is an agreed and documented conflicts policy and procedure, which includes identifying, monitoring and managing potential conflicts of interest. They should keep this under regular review while also demonstrating this is taking place.

On knowledge and understanding, “Schemes should keep appropriate records of the learning activities of individual pension board members and the board as a whole”. We are not convinced that all schemes currently do this for their existing panels or committees, let alone for the new pension boards.

Schemes should prepare and keep an updated list of the documents with which they consider pension board members need to be conversant. This will enable them to effectively carry out their role.  They should make sure that both the list and the documents are available in accessible formats.  Again, how many schemes keep such a list, let alone specifically set up for the new pension boards?

Pension board members should undertake personal training which needs analysis, and regularly review their skills, competencies and knowledge to identify gaps or weaknesses. They should use a personalised training plan to document and address these promptly.  Can schemes today demonstrate a personal needs analysis?

Schemes should continually review their data and carry out a data review exercise at least annually. This should include an assessment of the accuracy and completeness of the member information data held.  We would expect most schemes to review their data regularly but how many publish an assessment of the member data, let alone other data such as performance data?

Currently most public service pension schemes are exempt from such a requirement under s227 of the Pensions Act 2004 but this makes it clear that, even though they are legally exempt, they will be expected to create such a record. Consequently, public service pension schemes should develop a record for monitoring the payment of contributions to the scheme – ie. contributions monitoring record which must reflect any requirements in scheme regulations where relevant.  Schemes should also prepare this record in consultation with employers.

The 1 April deadline is fast approaching, and most LGPS schemes are simultaneously busy setting up their Local Pension Boards. The TPR’s own response to its most recent consultation on compliance and enforcement for public service pension schemes, which closed on 5 March, has not yet been published.  It is therefore almost inevitable that LGPS schemes will be given some time to comply with the new requirements.  However, officers with responsibility for governance and compliance will need to turn their attention to the new code before much time has elapsed.

William Bourne is a director at City Noble.