Policy Lead for LGPS and DB Tiffany Tsang reports from our recent Local Authority Conference on the four things Local Authorities should be thinking about.
There has been rapid change within the LGPS in the last few years and much has been accomplished in a very short span of time – but more change and uncertainty is coming. Our annual three day Local Authority conference this May gave the LGPS community a chance to pause and reflect together on how to collaborate on solutions for the challenges that lie ahead.
The Minister Rishi Sunak, who opened the first official day of the proceedings, acknowledged the excellent work that the LGPS does for its members, identifying four priority areas for his team this year, which are also the areas where we currently face the greatest unknowns.
The Ministry of Housing, Communities and Local Government (MCHLG) held an informal consultation earlier this year on the draft guidance on asset pooling, which the PLSA contributed to following detailed discussions with our members. The Government are reviewing the responses, with an eye to formally consult on the guidance “soon”. The final guidance will need to strike the right balance between providing clarity and consistent direction while also not being overly prescriptive. Flexibility will be key, as rigidity at this early stage of asset pooling could be harmful to investment innovation.
The government’s response to the Fair Deal consultation – which closed in early April 2019 – is scheduled to be out later this year. The consultation created in some ways more questions than answers. For instance, guidance is needed from the Scheme Advisory Board (SAB) on the deemed employer approach, including to provide clarity in complicated scenarios on who is the deemed employer and how funding deficits of failed contractors should be handled, as well as on how accountability of responsibilities across relevant parties can be ensured.
Valuation cycle and related reforms
MHCLG is proposing that LGPS valuations align with that of other public sector schemes, while also hoping that the lengthening of the valuation cycle does not materially increase risks for pension funds and their employers. Some of the key questions are whether the additional flexibility for additional valuations actually cause more confusion over process and responsibility, and how will it interact with McCloud?
Finally, the Minister acknowledged the disruption the McCloud case has caused in the valuation process, but declined to speculate on the potentially seismic outcome of ongoing court cases. We all wait for further clarity on the cost cap determination and on how funds should manage the current uncertainty during the valuation process.