Agenda item
General Update on Emerging and Developing Pension Fund Issues
To consider the report at item 5.4
Minutes:
Mr Shonola presented the report circulated as agenda item 5.4 which advised the Committee of emerging issues affecting the pension fund. He advised that, further to the findings of the Hutton commission on public sector pensions, the Government enacted new legislation to impose changes on Local Government pension schemes. These proposals (Local Government Pension Scheme 2014) were given at paragraph 6 of the report. The following points were also noted:
- Accrued rights would be protected
- A pensions board would be established, although guidance was still awaited on this
- conflicts of powers
- Complaints from academies that contribution rates were too high and the guarantee including caveats offered by the government
- The more admitted bodies admitted into the scheme escalates the risks of failing academies to which the fund might be exposed
In response to Members’ questions the following information was provided
Concerning the Academy's pension fund deficit guarantee councillor Gardner stated that the Council should endorse its current approach to admitted bodies because of the level of risk being taken on.
Concerning a likely publication date of Government guidance relating to the powers and constitution of local government pensions boards, the Committee was advised no date had yet been indicated.
Councillor Gardner noted that the administration of an independent board or panel would add costs to the pension fund and suggested that a combined pension body approach would be a preferred option.
Concerning the degree of Fund exposure to bankruptcy risks, Mr Shonola advised that were several admitted bodies to become insolvent, the risks of failure would be borne by the remaining solvent bodies and ultimately by the Council therefore the risk to the Council was the greater. It was noted that these risks related to non-teaching staff as teachers’ pensions were covered by other schemes.
Noting the proposed transition to an average contribution arrangement and higher contribution levels, Councillor Jackson argued that these had contributed to the higher opt out rate and suggested that in future the fund will find it more difficult to generate income because the Fund cash or value base would be degraded. Mr Holme advised that the forthcoming actuarial assessment would consider this matter and to counteract decline it was necessary to continue to promote the Fund. Mr Woodman noted that because the accrual rate would be higher, conditions would remain consistent in the main.
Mr Gray noted that, compared to other pension schemes available, local authority schemes still offered better benefits to low paid and part-time workers and was advised that the contribution rate was variable depending on the earnings of each member of the fund.
Concerning future fund structure, Mr Shonola advised that there might be a Government call for merger to form a super fund. In view of this the London Councils undertook a survey of interest in the possibility of setting up a common investment vehicle that would enable London boroughs to pool assets while retaining local accountability. Mr Holme advised that, on the whole, London boroughs were not in favour of pension funds mergers and were working together to investigate the possible advantages of a common investment vehicle.
Councillor Aston requested a report on how the Hutton proposals would work and possible options to address issues around governance and powers, duplication. Mr Holme advised that an update would be provided at the next committee a report would presented once Government guidance had been issued.
RESOLVED:
1. That the report noted
2. That an update on how the Hutton proposals would work and possible options to address issues around governance and powers, duplication be provided at the next committee and a report presented once Government guidance had been issued.
Action by:
OladapoShonola, Chief Financial Strategy Officer – Resources
Supporting documents: