Matters Outstanding from Previous Meetings - Auto-enrolment
(Minute 68 – 12th February 2013)
At their meeting on 14th February 2013, the General Purposes and Licensing Committee agreed that the transitional period (between 1st March 2013 and September 2017) be used to defer automatic enrolment for eligible jobholders who, on 1st March 2013, were not members of either the LGPS or the TPS.
Matters Outstanding from Previous Meetings – London Mutual Pension Fund (Minute 68 – 12th February 2013)
The Director of Finance will provide a verbal update at the meeting to reflect some recent developments.
Minutes:
Members were updated on the matters below.
(a) Auto-enrolment
At their meeting on 14th February 2013, the General Purposes and Licensing Committee agreed that the transitional period (between 1st March 2013 and September 2017) be used to defer automatic enrolment for eligible jobholders who, on 1st March 2013, were not members of either the LGPS or the TPS. This would mean that costs would also be spread over a period of years.
(b) London Mutual Pension Fund
The Director of Finance provided an update to reflect recent developments.
There have been various recent appointments to the London Pensions Fund Authority (LPFA) Board and they all appear to favour a merger of London Boroughs pension funds. Recent press reports indicate that the Parliamentary Under-Secretary of State will announce a consultation paper later this month considering the option of merging pension funds. Poorer performing pension funds are likely to be keen to merge with better performing funds.
L B Bromley does not support the merger of funds for various reasons including, for example, significant set up costs, lack of evidence that “big is best”, risks of inefficiency and diversion into investments that would not provide the best financial returns. Bromley’s fund had chased returns with a high level of equity investment and larger funds did not necessarily perform better. The earliest a merger could start would be around 2017.
London Councils were proposing an alternative arrangement based on a collective fund which would provide more buying power and enable greater co-operation across the London boroughs. The structure would enable each borough to retain autonomy in asset allocation and funding strategy. There would be no obligation on London Boroughs to join and Boroughs could “pick and choose”.
Cllr. Grainger felt that economies of scale on merger were significantly overstated and there would also be a lack of flexibility. The Chairman was also concerned and he sent a letter opposing the merger and there was discussion about the engagement of a local MP to support Bromley’s concerns.
It was felt that any future direction could lead to infrastructure investment in certain sectors which may provide the best long term investment solution.
(c) Consultation on access by Councillors and other elected office holders to the LGPS
The consultation period had started with responses due to Government by 5th July 2013. Following the meeting, Sub Committee Members considered the questions posed in the Consultation document and options outlined for future arrangements.
(d) LGPS changes from 2014
Regulations on new LGPS arrangements would come into effect in 2014. The Council had indicated to Government that the measures did not go far enough in reducing employer costs. Additionally, non-consolidated bonuses continued to be pensionable in contrast to other public sector schemes e.g. Civil Service and Health Service. The Government had not reflected the Council’s concerns in the latest proposals. The Leader of the Council had also made representations with support of various other local authorities.
(e) Changes to State Pension
New state pension arrangements had been brought forward to 2016/17. Contracted out National Insurance would be abolished resulting in a potential additional cost to the Council of £1.3m per annum.
(f) Triennial valuation
The actuary would start work on the Pension Fund’s Triennial valuation in June 2013. Initial figures would be provided in July 2013 with actual figures available in October 2013.
Although returns had been good, there was concern over liabilities. An update will be provided at the Sub Committee’s next meeting. Any worsening deficit position will need be considered as part of the 2014/15 Budget process including reporting to the Executive and E&R PDS Committee.