The long-awaited investment regulations for the Local Government Pension Scheme are “pretty close” to completion, a senior civil servant says.
Speaking at the LGC Investment Summit, Bob Holloway, head of workforce, pay and pensions at the Department for Communities & Local Government, said that the long delay to the government publishing final regulations was due to the “sensitive” nature of the rules.
The government’s consultation on the regulations closed ten months ago. Some LGPS funds have complained that parts of their pooling plans cannot go ahead without certainty on the new rules. However, some of the proposals in the draft regulations were highly controversial; Mr Holloway said the government had received more than 24,000 responses to its consultation.
The regulations will remove many of the restrictions on the assets in which LGPS funds can invest, giving them the freedom similar to that afforded to private sector pension funds.
However, they would also introduce a wide-ranging power for the communities secretary to intervene in a fund’s investment decisions if deemed necessary, which has proved unpopular.
Separate guidance has been mooted that would ensure that LGPS funds’ environmental, social and governance policies mirror UK foreign policy. This, combined with the communities secretary’s new power, have given rise to fears that the government will seize an inappropriate level of control over funds’ investment strategies.
Despite the controversy, Mr Holloway said civil servants gave an “in-principle submission” of the regulations to the communities secretary this week and that they would be given an indication to go ahead and submit the regulations formally next week.
Ministers could sign off the regulations within two weeks and, provided there are no further objections, take effect 21 days after that.
Mr Holloway said that the regulations “could be prayed against” in parliament and that there is a possibility of attempts to have them annulled but that this was unlikely. “We are pretty close,” he said.
Mr Holloway is due to retire from DCLG and take up a position at the Local Government Association, working on pensions with the LGPS Advisory Board.
He hinted at a stronger role in policy-making for the board in future because of staff reductions at DCLG.
“DCLG will no longer have the capacity to do what it has done in the past,” Said Mr Holloway. “We need clarity about who does what.”
He said that the board could support DCLG. “Only DCLG can make regulations but what I envisage is a small technical team [as part of the board] that will do policy formation,” he said.
Mr Holloway also said there could be further work on local pension boards, which were introduced in 2015. The boards are meant to provide oversight of the funds, similar to those set up at the same time for other public sector funds as part of the government’s broader reforms.
The boards did not replace LGPS funds’ existing committees and some in the sector remain confused about the role of the boards and their relationships with committees or even believe them to be unnecessary.
“Local pension boards are a curate’s egg,” said Mr Holloway. “There are excellent examples out there and in other areas it’s not so good; there’s a feeling that [boards] are an irritation. Some still wonder what their role is.
“The LGA is going to do more work on this. We will go back to the Treasury and say either it is working or it isn’t.”