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Local pension boards: the story so far

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Two administering authorities have set up local pension boards with joint functions as their pension committees and three hold joint boards with other authorities, LGC Investment research reveals.

According to a survey in August 2015, in which 55 funds provided the details of their boards, two funds have been given firm or provisional permission by the Department for Communities & Local Government (DCLG) to form combined boards and committees.

Elsewhere the research revealed the numbers of different representatives on boards, how they were selected, how long they would serve on boards and how unions were represented.

 

Purpose

Despite some opposition to the requirement to create boards due to the cost and extra administration, 75% of respondents said they thought that their fund would benefit from having the new bodies, whereas 25% said it would not.

However, many respondents who said there would be benefits were cautious in their praise, and some said they would have been able to access those benefits in other, more efficient ways.

One respondent said their board would give a voice to employers in the scheme, although they thought that member representatives “will have less impact”.

Another said: “As a single purpose pensions authority which already has a significant layer of governance, some of the work of the board could be a duplication of effort.”

“Initially we expect this to be a useful route for greater engagement with employers over data requirements, but we could have done this using alternative means which would have been much more efficient,” said another participant.

Another respondent added: “This is an additional expense that would be better served by an audit board.”

 

Structure

Boards must have an equal number of employer and member representatives, and have at least two of each. Authorities may decide for themselves to represent active, deferred and pensioner members and union representatives within those board seats.

The research found that 93% of funds had between four and ten people in total on their board, with the remaining 7% saying they had between 11 and 15.

Of these, 93% of funds said they had two or four employer and member representatives each. Just 7% said they had six or eight.

A major gripe of LGPS officers is that turnover of councillors often erodes expertise on committees, so it is not surprising that 45% per cent of respondents have set their board members’ terms at a reasonably lengthy four years.  Twenty-nine per cent said they would last for three years. Only 4% said that board terms could last for five or more years, and 5% said board terms were not defined.

Respondents were split on the issue of paying allowances to board members, with 48% saying they did not pay any allowances, and 44% saying they paid allowances to one or some board members. Just 8% said they paid all members allowances.

Sixty-four per cent said they paid all of their board members expenses, while 19% said they paid expenses to one or some members and 17% said they paid none at all.

 

Selection processes

There was a wide variety of methods for appointing employer and member representatives and a range of levels of interest from prospective candidates in taking member seats.

Several respondents said that low numbers of applicants or nominees meant they did not hold elections or interviews but selected whoever came forward.

One said: “It was our intention to appoint those with the best capacity to represent a wider group of members; however, in the end we had the same number of applicants as places so the applicants were automatically placed on the board.”

This comes after Local Authority Pension Fund Forum officer Keith Bray warned last year that some boards would struggle to recruit people to their boards. However, the difficulty attracting interest was not uniform across the funds.

Two thirds of respondents said they appointed these representatives via an interview-based selection process.

Some funds invited employers and members to submit applications, and then selected representatives using those applications. Others did the same but also interviewed candidates where it was necessary. Some respondents said only candidates for the chair of the board where interviewed.

Other respondents said that they employed different recruitment techniques for employer and member representatives.

One respondent said they requested applications from and then interviewed member representative candidates, but for employer representatives they asked for nominations and then selected candidates based on a fair representation of different employer types within the scheme.

Some respondents said they did not hold interviews because board seats were uncontested. Others said their seats were uncontested but that they interviewed all of the candidates anyway. 

There was a different role for the chair of the board at different funds. One respondent said that the administering authority chose a chair, and then the chair and the section 151 officer chose a deputy chair. The chair and deputy chair then selected the rest of the board via applications.

Other funds (11%) held elections for their board seats, with one fund reporting 1,000 votes in total for their member representatives.

A further 29% of respondents said their funds used other methods to appoint their board members. One fund simply appointed a representative from each of the trade unions representing the authorities’ staff (Unite, Unison and the GMB) and a representative from each of the three large employers involved in the fund.

Another said they allocated nominations to different organisations for employer board seats, giving trade unions, district councils a nomination each, while inviting applications for member seats.

One respondent said member representatives were selected by the administering authority’s policy and resources committee, while admitted body employers drew lots and union representatives nominated their candidates.

 

Trade unions

Earlier this year disputes between administering authorities and unions arose over whether trade unions should automatically get pension board seats, either taking up member seats or having specifically allocated union seats. Some authorities argued that more members of staff were part of the pension fund than of the various unions, and that this meant unions could not properly represent pension scheme members. The regulations, however, are silent on union inclusion.

The scheme remained fairly divided on the issue, with 58% saying they have given unions specific representation on their boards, and 42% saying they had not. Scottish funds, which have slightly different rules, must appoint union representatives to their boards.

Forty-eight per cent of respondents said their fund had specified that one or some of the member seats had to be held by union representatives, while 18% said their board had seats for union representatives outside of its member seats.

Of those that said they had no requirement to include unions, one respondent said: “The trade unions don’t fully represent our members and this would be anti-equal opportunities.”

Several said that although they had not specifically allocated seats to trade unions, union representatives were welcome to nominate their own candidates as member representatives and in some cases were informally invited to do so. Many did, although one or two unions refused to apply for general member representative seats, respondents said.

 

Joint status

Due to fears over the duplication of effort between boards and existing pensions committees, the government has allowed some funds to form single bodies which perform both functions – although only with permission from the secretary of state. Likewise, funds may form pension boards shared between authorities with ministerial permission.

Just two funds have managed to set up joint boards and committees. One fund said it applied for a joint function but was refused, while five funds did not apply but may do so in future. Three funds said they shared their board with another fund, and five said they may apply to do so in future.

 

Training and timetables

Boards must meet at least twice per year in order to comply with regulations, although some officers have warned that this will not be enough for boards to properly discharge their duties. Nevertheless, 33% of respondents said their boards will meet just twice per year. Fifty-three per cent said their board will meet four times per year, with 2% saying their boards will meet five times annually.

In order to get board members up to speed, 67% of respondents said they planned to build board member training into their existing programme for committees.

Fifty-one per cent said they planned sessions on investment for board members, and 69% had planned sessions on governance, administration and regulation.

Fifteen per cent said that they either had no training plan yet, or only planned to provide two sessions at the beginning of board members’ tenure and nothing further. However, several respondents pointed out that each board meeting would incorporate some training. 

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