The chair of the Local Government Pension Scheme’s (LGPS) advisory board has urged local councils not to cut the budgets of their pension teams as officials come under pressure to cut costs.
Councillor Roger Phillips wrote to finance leaders at administering authorities last week urging them to retain their pensions teams because they may suffer consequences if they fail on service delivery.
It comes as cost pressures are mounting on local authorities. A survey by the Local Government Association (LGA), published in October, reported that one in four local councils in England could be forced to apply for emergency government bailout agreements to avoid bankruptcy in the next two years.
In the letter, Phillips warned that failure to adequately fund pension teams could cause LGPS funds to fall foul of the Pensions Regulator.
“I know that now is the time when local authorities are considering the budgets available for service delivery for the coming year,” Phillips said.
“The acknowledged pressures on council service delivery more generally should not influence the approach taken with regard to setting the budget for pensions administration and governance.”
Proper resourcing ‘vital’ for LGPS funds
He said the Scheme Advisory Board was aware that councils sometimes cut pension teams’ budgets even though LGPS funds have a separate source of funding.
Rule 4(5) of the LGPS Investment Regulations 2016 states that administration and governance costs should be met from the pension fund maintained by the administering authority and not from that authority’s general fund.
“It is vital that appropriate resources are in place to ensure service delivery by the pension fund,” Phillips said.
He urged councils to “take a longer-term approach” by setting budgets and resource requirements “for the next few years, with all necessary parties agreeing a plan to ensure the fund can meet the current and future operational challenges effectively”.
Phillips added that administering authorities also need to be mindful of the need to retain key pensions staff and knowledge when setting salary scales and staffing levels for the pension fund.
“Ensuring pension funds can offer attractive career paths is essential in retaining key staff and an area which the pensions team within the LGA are contributing to by developing and delivering pension qualifications for the sector,” he said.
Phillips also reminded finance chiefs that failure to sufficiently resource the pension fund can lead to censure by the Pensions Regulator for non-compliance with the requirements of the Public Service Pensions Act 2013 and other legislation.
It could also lead to findings against the authority by the Pensions Ombudsman.
The government is currently considering responses to its ‘Fit for the future’ consultation about the LGPS, considering costs and efficiencies across the system.
