LGPS Section 13 review published

The four recommendations that GAD make are also largely achievable for the imminent 2022 valuations:

1. The Scheme Advisory Board should consider the impact of inconsistency on the funds, participating employers and other stakeholders. It should specifically consider whether a consistent approach needs to be adopted for conversions to academies, and for assessing the impact of emerging issues, including McCloud.

A consistent approach for schools to convert to academies remains the most controversial recommendation as, in our view, this recommendation doesn’t fall under the remit of Section 13. However, we appreciate the desire to find some consistency in the treatment of academies in the LGPS and we are working with GAD to explore the various options to try and achieve this. Similarly, there was insufficient information regarding McCloud at the time of the 2019 valuations to ensure a consistent approach, and our approach was discussed with GAD at the time. We are engaging with GAD in advance of the 2022 valuations to understand their views on McCloud, however in the absence of new regulations and the Universal Data Extract not able to produce the data we need, we are in the same place as we were in 2019.

2. We recommend the Scheme Advisory Board considers how all funds ensure that the deficit recovery plan can be demonstrated to be a continuation of the previous plan, after allowing for actual fund experience.

Information regarding recovery plans has been a long-standing conversation with GAD as we disagree with GAD’s interpretation of the CIPFA guidance in relation to deficit recovery periods. GAD’s view is that they would not expect to see funds reducing contributions and extending recovery periods. Our continued interpretation of the guidance is that the focus shouldn’t be on a fixed end point, rather a period over which it is appropriate to fund any appearing deficit. If a recovery period is too short then there could be unnecessary burden placed on tax payers and it is more important to focus on the stability of contributions for affordability and cashflow reasons.

3. We recommend fund actuaries provide additional information about total contributions, discount rates and reconciling deficit recovery plans in the dashboard.

The dashboard, which was introduced in 2019, has proved useful in providing information in a consistent way. Conversations have already started between the four actuarial firms and GAD for the 2022 valuations, and we do not foresee a significant number of changes.

4. We recommend the Scheme Advisory Board review asset transfer arrangements from local authorities to ensure that appropriate governance is in place around any such transfers to achieve long term cost efficiency.

Although we do not agree with some of the terminology and references made by GAD regarding asset transfers, we appreciate the overriding desire to ensure that appropriate governance and paperwork is in place when additional contributions are made. This is an action that is becoming more prevalent in LGPS Funds and therefore having a clear reporting process in place is welcomed.

You can read the review here.