• Home
  • About
  • Subscribe
  • Conference
  • Events Calendar
  • Webcast151
  • MOTB
  • Log In
  • Register

Room 151

  • Treasury
  • Technical
  • Funding
  • Resources
  • LGPS
  • Development
  • 151 News
  • Blogs
    • David Green
    • Agent 151
    • Dan Bates
    • Richard Harbord
    • Stephen Sheen
    • James Bevan
    • Steve Bishop
    • Cllr John Clancy
    • David Crum
    • Graham Liddell
    • Ian O’Donnell
    • Jackie Shute
  • Interviews

Terry Crossley: Pooling is like a rugby ball, the bounce is unpredictable

0
  • by Guest
  • in LGPSi
  • — 24 Jan, 2017

Pooling of LGPS is well under way but Terry Crossley argues the reform is “venturing into the unknown” based on “flimsy policy analysis”.

Photo: Pixabay/laurabodenschatz, CC0

Those engaged with the LGPS  understand  its capricious and dynamic qualities. Rather like a rugby ball, knowing what happens next when it bounces is part of the attraction, challenge and complexity. Perhaps this explains why the scheme is where it is as 2017 leaves 2016 in its wake. Whitehall of late seems to lack a depth of knowledge and understanding of the LGPS and its dynamics, functional complexities and that bounce.

Geopolitical upheavals and cyclical, global effects of economic turbulence, quite apart from the Brexit challenges, have been particularly significant in 2016 with the prospect of continuing into 2017, and beyond. The scale of these patterns create significant implications for administering authorities, and the management and investment of their assets. Additionally, the timetable for the government’s aspirations to see substantive  progress towards the pooling of scheme assets in England and Wales only adds a high-risk dimension to the external challenges already confronting fund authorities in their emerging and untested multi structures.


Subscribe to our LGPS Quarterly Briefing and be first to receive more content like this.


Hutton

Since 2010, the LGPS has seen a series of benefit reforms stemming from the Hutton report recommendations for public service pension schemes. Brought together by the 2013 Public Service Pensions Act, it ensured Treasury’s centralisation of policy and future design for all schemes. However, the LGPS remains administered, funded, invested and managed by locally elected councillors.

Hutton was not given the task of reforming the scheme regulations which governed the management and investment of the scheme’s fund assets. However, after a number of embarrassing ministerial false starts, Budget 2015 announced first steps to establish an ambitious, radical pooling framework for the scheme.

Uniquely, no legislative timetable, nor guidance on structures was provided initially but authorities responded constructively and with initiative. In their enthusiasm, it appeared they chose to ignore the fact that the budget request lacked legality and could ultimately lead to a weakening of the scheme’s local, democratic status.

Intervention

DCLG issued draft regulations in November 2015 governing the management and investment of funds.  Deregulation became the prime purpose of the proposals, so doing away with a long-held tenet of previous policy and regulation that public assets needed a nationally prescribed prudential standard.

The risks were now firmly with administering authorities who in turn assumed greater local responsibilities. More radically, the proposals introduced a highly controversial step which allowed ministers to intervene and assume responsibility for some or all of a pension fund authority’s assets where they judged there had been a failure to comply with national, statutory guidance.

There was a surprising lack of substantive, legal challenge to these proposals from authorities and the LGA. This persisted even until the regulations came into force on 1 November 2016.  In September 2016, DCLG issued highly germane statutory guidance intended to be the authoritative basis of the compliance test against which ministers will assess the need to intervene.

Given the importance of this material in the new order, there is scant objectivity and measurable criteria against which rational assessments and ministerial decisions may be taken. The high level and metric-free nature of the principles provided actually load the potential intervention action in favour of ministers.

Even in a recent e-petition debate, the chance to challenge the government was missed, and likewise when a more specialist Parliamentary procedure was used to challenge the government’s regulations, the opposition rather repeated the arguments and the motion to annul was, unsurprisingly, lost in favour of the government. Two rare parliamentary scrutiny opportunities were underused and failed to challenge the central policy issues created by the 2016 regulations surrounding intervention and the ownership and management of LGPS assets.

Into the unknown

The LGPS is venturing into the unknown on the basis of flimsy policy analysis, false comparisons with foreign  investment frameworks with little relevance to the character of the LGPS and, for the most part, statutory guidance and criteria which is far from equitable in its formulation.

Confusion persists on MiFID II, and the continuing bespoke approvals process from DCLG remains unsatisfactory. The lack of regulation for many elements in the pooling challenge suggests a lack of confidence at the centre as to what is optimum. The absence of cost/benefit evidence to justify the rationale to cajole administering authorities into ad hoc groupings lacking, in some cases, geographic and functional coherence, is highly unusual. And yet, the closing months of 2016 saw initial approvals from Whitehall.

Seeking to be modern and reformist is one thing but, of late, ministers have believed that they alone know what is best for the LGPS and their disjointed policy approach has forced the imposition of a radical pooling concept on a multi-structured pension system funded locally. The intention to achieve efficiencies and savings are laudable, even if that is to secure additional infrastructure funds, which is at best sensitive. If this is the appropriate direction for the LGPS in 2017, it remains a speculative unknown bounce.

Terry Crossley is an LGPS consultant.

Room151 Newsletters

Share

You may also like...

  • James Bevan: Confident bulls and desperate measures James Bevan: Confident bulls and desperate measures 16 Mar, 2016
  • LGPS governance consultation moots s151 responsibilities split LGPS governance consultation moots s151 responsibilities split 17 Apr, 2019
  • John Harrison: Is LGPS ready for rising interest rates? John Harrison: Is LGPS ready for rising interest rates? 19 Jan, 2016
  • Where next for the banks? Where next for the banks? 2 Oct, 2012

Leave a Reply Cancel reply

You must be logged in to post a comment.

  • Register to become a Room151 user

  • Latest tweets

    Room151 1 day ago

    The vaccine may help settle cash flows but inflation remains a risk: Sponsored article: Lauren Sewell examines the prospects for long-term borrowing as Brexit settles and vaccines are deployed against Covid-19. On the 9th October 2019 Whitehall sent… dlvr.it/RqZXCr pic.twitter.com/PzgOZOGQ0k

    Room151 1 day ago

    ESG in liquidity: Sponsored article: Gavin Haywood looks at the integration of ESG in Federated Hermes’ money market funds. Federated Hermes has over 300 public sector clients invested in our AAA rated money[...] dlvr.it/RqZX5f pic.twitter.com/E87sBXsay8

    Room151 2 days ago

    New realities of investing cash and liquidity: “What to do now?”: Sponsored article: Brian Buck looks at the “unique challenge” for cash management strategies. As investors assess the ongoing impact of the pandemic on their business, levels of cash and… dlvr.it/RqVbk9 pic.twitter.com/ZElVASmEUV

    Room151 2 days ago

    Extra finance promised by the government receives a broad welcome: Sponsored article: The financial pressures facing local authorities this year continue to pose challenges for council treasurers. While the launch of the UK’s Covid-19 vaccination… dlvr.it/RqTzTF pic.twitter.com/HCjH0pyHR5

    Room151 2 days ago

    A savvy approach to managing your cash: Sponsored article: Caroline Hedges examines the need for active cash management to achieve a higher than average return. Last year saw the already mountainous pile of negative-yielding debt around the[...] dlvr.it/RqTzMK pic.twitter.com/uP0RQYTJLt

    Room151 3 days ago

    Putting alternatives at the heart of multi-asset portfolios: Sponsored article: Nick Edwardson looks at the assets that provide the “most attractive opportunities”. We believe that asset allocation is the primary driver of investment returns and that the… dlvr.it/RqQ2Qt pic.twitter.com/WLBzvRRRUQ

    Room151 3 days ago

    Thriving in the pandemic: Avoiding the stragglers: Sponsored article: George Crowdy looks at the sectors providing opportunities for sustainable investment. Throughout much of 2020, we talked about why sustainable investing has thrived in the pandemic,… dlvr.it/RqQ2NQ pic.twitter.com/dxiPWKFsPl

    Room151 3 days ago

    The development of CCLA’s mental health benchmark: Sponsored article: Amy Browne examines the importance of investing in mental health in the workplace. We are living through a public health emergency in more ways than one. Physical health[...] dlvr.it/RqQ2Jx pic.twitter.com/o6yRSCX3oF

    Room151 4 days ago

    Brexit: What the EU trade deal means for the UK economy: Sponsored article: Hetal Mehta looks at the impact of Brexit on economic prospects. Four and a half years after voting to leave the EU, on Christmas Eve the UK finally[...] dlvr.it/RqLBDt pic.twitter.com/No62srfE8h

    Room151 4 days ago

    Cash dethroned: The quest for liquid yield: Sponsored article: Peter Hunt and George Carne ask how treasury departments can balance the need for yield and liquidity. The massive stimulus and waves of liquidity provided by central banks[...] dlvr.it/RqLBDj pic.twitter.com/05g6Zhu1kU

    Room151 4 days ago

    Richard Harbord: Delayed “capital determinations” make section 25 opinions a new crunch point: The severe pressure on local government budgets now means section 151 officers confront a tricky call on  whether they can make a judgement on the robustness… dlvr.it/RqLBDV pic.twitter.com/vTAbDKFzkI

    Room151 4 weeks ago

    PWLB Consultation: Analysis straight from Dickens: Helen Radall and Paul McDermott present a legal examination of the new PWLB borrowing rules as Charles Dickens might have imagined it. Free and easy PWLB (“Marley” to his friends)[...] dlvr.it/RnmwLq pic.twitter.com/yFxcPrQqEG

    Room151 1 month ago

    Room151’s top stories from a momentous year: 2020 was the year in which local government grappled with Covid-19, funding strains, controversy over borrowing rules and the threat of financial collapse. It has been an exhausting and historic[...] dlvr.it/RnlpZg pic.twitter.com/g3myNyox6J

    Room151 1 month ago

    Tracy Bingham: 2020, a year best forgotten but also one of learning: Many will rush to erase 2020 from their memories but, writes Tracy Bingham, there were also many lessons about finance teams, strategic planning and leadership. 2020: A year we’d… dlvr.it/RnlpY2 pic.twitter.com/m7G1krrtCu

    Room151 1 month ago

    Settlement must address ‘precarious’ local government finances: Dan Bates crosses his fingers for “no nasty surprises” in this week’s funding settlement but argues the “bigger prize” is post-Covid financial certainty. Thursday (17 December) should be the… dlvr.it/Rnj9dG pic.twitter.com/KLKjjuBqJE

    Room151 1 month ago

    PWLB consultation: Big change on the way but there are ‘grey areas’ and opportunities: The consultation on PWLB borrowing has concluded creating a new landscape for funding property acquisition. Our experts look at the implications. Tracie Langley The… dlvr.it/RndRvJ pic.twitter.com/KEqXEBmEfq

    Room151 1 month ago

    2021: Better income outcomes?: Sponsored article: Investors should be mindful of structural challenges posed to income generation as a result of rapid thematic change. Jon Bell looks at the prospects for the coming year.[...] dlvr.it/RndRsw pic.twitter.com/TxVk8aXkMq

  • Categories

    • 151 News
    • Agent 151
    • Blogs
    • Chris Buss
    • Cllr John Clancy
    • Dan Bates
    • David Crum
    • David Green
    • Development
    • Forum
    • Funding
    • Graham Liddell
    • Ian O'Donnell
    • Interviews
    • Jackie Shute
    • James Bevan
    • Jobs
    • LGPSi
    • Mark Finnegan
    • Recent Posts
    • Resources
    • Richard Harbord
    • Stephen Fitzgerald
    • Stephen Sheen
    • Steve Bishop
    • Technical
    • Treasury
    • Uncategorized
  • Archives

    • 2021
    • 2020
    • 2019
    • 2018
    • 2017
    • 2016
    • 2015
    • 2014
    • 2013
    • 2012
    • 2011
  • Previous story Allocation: Getting the best out of your assets
  • Next story John Harrison: Rethinking asset allocation

© Copyright 2021 Room 151. Typegrid Theme by WPBandit.

We use cookies to ensure that we give you the best experience on our website. If you continue without changing your settings, we'll assume that you are happy to receive all cookies from this website.OK