Minutes:
In updating the Sub-Committee, the Director of Finance highlighted a number of matters including those summarised below.
Local Government Pension Scheme: Fair Deal – Strengthening pension protection - Policy consultation
The Government had sought views on proposals to make amendments to the LGPS in England and Wales requiring service providers to offer LGPS membership to individuals who have been compulsorily transferred from an LGPS employer. The proposed reforms would mean that independent providers no longer have the option of providing transferred staff access to a broadly comparable scheme. Instead, employees would always have continued access to the LGPS.
A L B Bromley response had been sent to the Ministry of Housing, Communities and Local Government (copy at Appendix A for information). The requirement would be a disincentive to businesses looking to compete for outsourced Council services. The requirement would, in effect, mean the LGPS being transferred to an independent provider who would then become an admitted body to a local Fund. The requirement, and a provider having to take on LGPS liabilities, is not sustainable in the longer term.
Changes to the Valuation Cycle and Management of Employer Risk
Within this Government consultation is an intention to change the LGPS valuation cycle from three to four years, bringing the cycle in line with other Public Sector schemes. The consultation also refers to reviewing the risk that employers have in LGPS pension funds and looking at how this is assessed and managed. Currently, when a last remaining member retires it is necessary for an admitted organisation to pay the Council a cessation fee to represent liabilities to the Council. However, what would not be welcome is Councils having to accept such a liability when an organisation goes out of business.
L B Bromley Pension Fund Audit Plan Report for 2018/19
The Director advised Members that the External Auditors will report to the Audit Sub-Committee on planning arrangements for the 2018-19 audit of the Fund.
Local Pension Board (LPB) Membership
For the LPB member representative vacancy, a nomination for appointment would be considered at the General Purpose and Licensing (GP&L) Committee meeting on 16th May 2019. (Democratic Services Note: Lesley Rickards and Vinit Shukle were appointed by GP&L Committee on 16th May 2019 as LPB member representatives for a four-year period from 1st July 2019 and Emma Downie and Pinny Borg were appointed by Full Council on 22nd May 2019 as LPB employer representatives for a four-year period from 1st July 2019).
McCloud judgement
This relates totransitional protections given to scheme members in the judges and firefighters schemes as part of public service pensions reform who in 2012 were within 10 years of their normal retirement age. Tapered protections were provided for those 3-4 years younger. On 20th December 2018 the Court of Appeal found that these protections were unlawful on the grounds of age discrimination and could not be justified.
In all public service schemes, protections were applied to members of the schemes within 10 years of retirement. The form that protection took varies from scheme to scheme. Although the case only directly relates to two schemes, it is anticipated that the principles of the outcome could be accepted as applying to all public service schemes. If the protections are unlawful then members found to have been discriminated against will need to be offered appropriate remedies to ensure they are placed in an equivalent position to the protected members.
Government are expected to appeal to the Supreme Court (as final court of appeal) but should the Government lose, the decision could potentially cost the Council between £1m to £2m per annum which will be dependent on the implications of resultant changes to LGPS. It was understood the matter can take up to 12 months afterwards to remedy and in either case of the Government winning or losing, a valuation would be needed.
Exit Cap of £95k
The Director also explained a Government proposal on exit costs for staff which will be capped at a maximum of £95k, including pension strain costs (where there is a clear shortfall in the assumed level of funding needed to provide benefits - often occurring when benefits are drawn by Fund members earlier than expected). On behalf of the Sub-Committee, the Director would support the change.
Draft Service Level Agreement (SLA) between L B Bromley and LCIV
Concerning the LCIV’s proposed SLA with each London borough, the Director referred to a change in the LCIV service(s) to boroughs.
Good Governance Survey
Governance proposals in the Government survey centred on the following options:
· Option 1 - Introduce guidance or amendments to LGPS Regulations 2013 to enhance the existing arrangements by increasing the independence of the management of the fund and clarifying the standards expected in key areas;
· Option 2 - Greater ring-fencing of the LGPS within existing structures - greater separation of pension fund management from the host authority, including budgets, resourcing and pay policies;
· Option 3 – Use of new structures: Joint Committees; and
· Option 4 -An alternative single purpose legal entity that would retain local democratic accountability and be subject to Local Government Act provisions. This might be through a combined authority route or through a public body established by statute.
The Director indicated that the Scheme Advisory Board is concerned about conflicts of interest. For L B Bromley, the options could mean the Director of Finance role being separated from the Sub-Committee’s role in view of the Director being seen to support the Council’s Executive function as well as the Sub-Committee. As such, a separate Section 151 (S.151) officer would need to be in post to support the Sub-committee. In addition to L B Bromley, Treasurers in other authorities were also taking a robust view on this that such changes are unnecessary.
A Member could understand why it seemed necessary to create the separation but a certain level of staff is needed to manage a separate entity. A need could be seen where Councils are merging and he indicated that the concept is worth considering in a proportionate manner. However, the Chairman saw another S.151 officer as expensive with no evidence to suggest the current system is not working. The concept was also opposed by another Member and the Director suggested the actuary’s role for L B Bromley is helpful in this regard. It would also be difficult to recruit the necessary staff – a significant proportion of S.151 positions in London have interims; additionally, the Chartered Institute of Public Finance and Accountancy (CIPFA) has also expressed concerns that many of the options are not necessary and could become unnecessarily costly. However, CIPFA has written to Finance Directors about the need to ensure there are adequate staff resources for administering authorities of the LGPS, with the many changes taking place.