From :
Bob Holloway
LGFPS2 - ODPM
Zone 2/F6,
Ashdown House
SW1E 6DE
To All Addressees on attached sheet
Dear Colleagues
THE LOCAL GOVERNMENT PENSION SCHEME (AMENDMENT) (No.2) REGULATIONS 2005
SI 2005 No. 3199
1. With Ministers’ agreement, I enclose a copy of regulations which amend the Local Government Pension Scheme Regulations 1997 ("the main regulations").
2. Briefly, the new regulations require each pension fund administering authority to prepare and publish and maintain a policy statement on governance, and a policy statement on its communications strategy
3. The
amendments apply to LGPS administering authorities in
Background
4. Following
a limited informal consultation early in 2004 on the issues of representation and
communications, a statutory consultation paper was circulated on
Governance Policy Statements
5. Authorities are asked to note that
the policy statement described in the statutory consultation paper as a
“representation policy statement” is called a “governance policy
statement” in the regulations. This change has been made for technical
drafting reasons but also because it better reflects the fact that the policy is not just
about representation but about the whole approach towards the governance of LGPS pension
funds. The regulations also include some other limited changes. Attention is drawn to these at the relevant points
below.
6. The governance policy statement requirement is made under the Local Government Pension Scheme Regulations 1997 rather than under the Local Government Pension Scheme (Management and Investment of Funds) Regulations 1998 (“the investment regulations”) as proposed in the statutory consultation paper. The change reflects concerns that the Statement of Investment Principles could become overloaded and unwieldy if further extended.
7. Regulation 3 of the SI inserts new regulation 73A into the main LGPS regulations. This requires each administering authority to publish, after consultation with those persons they consider appropriate, a statement setting out the authority's policy on pension fund governance, including issues concerning the representation and participation of key stakeholders on pension/investment committees.
8. Regulation 73A(1) makes
it clear - by mentioning possible delegation of all/part of the function to a committee,
subcommittee or officer of the authority - that an authority’s statement should
provide information about all relevant governance
structures and arrangements which would, of course, include delegation to a specified
officer.
9. If an administering authority does not delegate any part of the pension fund function, it would still be in the spirit of the regulation for the policy statement to describe and explain the authority’s approach to governance.
10. More
generally, if administering authorities wish to go beyond these parameters in any way,
they are encouraged to do so.
11. Regulation 73A(1)(b)(iii)
makes it clear that the term “employing authorities” includes
non-Scheme employers. This is already the position legally, but the point is clarified. An
authority’s policy statement should therefore include information on the
representation of any admitted body.
12. For the
avoidance of doubt, the word "members" is defined in Schedule 1 of the main
regulations and, in turn, by section 124(1) of the Pensions Act 1995, to include active, deferred and pensioner members.
13. By
virtue of regulation 73A(2) authorities will have
until
14. Administering authorities not
constituted as local authorities may deal with their pension fund governance function otherwise than by
delegation to a formal committee. They should provide sufficient information about their
decision-making and stakeholder representation/engagement arrangements to ensure equal
transparency with local authority administering authorities.
15. The CIPFA Pensions Panel expects to publish initial guidance soon to assist authorities in implementing this regulation. The Panel’s existing guidance on the Myners Principles includes material on pension management/investment committees in its discussion of Principle 1 (effective decision-making).[1]
16. The composition of relevant committees and subcommittees is for individual administering authorities to consider. But, in exercising their discretion on this matter, it is important that they recognise the desirability of achieving an effective and comprehensive level of stakeholder representation within the LGPS.
17. Administering
authorities will be required to submit a copy of their policy statement after
18. The
data in the statements will help ODPM to assess the overall position on democratisation,
note examples of good practice, and identify examples of effective governance across the
LGPS as a whole. There might, for instance, be a role for further good practice guidance
and/or regulatory provision.
19. As part
of the outcome of discussions about the longer term future of the LGPS overseen by the
framework of the Deputy Prime Minister’s Tripartite Committee, further work on
governance issues in the Scheme is thought desirable. Discussions are to begin on how best
to take this initiative forward in terms of greater degrees of “trusteeship”,
alternative best practice structures to aid participation in its widest sense within the
statutory framework of the Scheme, and the need for training and development of those
non-elected participants. ODPM wishes to see a fully participative forum to take these
matters forward.
Communication Policy Statements
20. New
regulation 106B of the main LGPS regulations is
added by regulation 4 of the SI. This requires each LGPS
administering authority to prepare, publish and review a policy statement setting out its
communications strategy for communicating with members, members' representatives,
prospective members and employing authorities; and for the promotion of the Scheme to
prospective members and their employing authorities.
21. Under regulation 106B(3),
the first such policy statement must be published on or before
22. For the
avoidance of doubt, the word "members" where it appears in new regulation 106B(1)(a),
is defined in Schedule 1 of the principal regulations and, in turn, by section 124(1) of
the Pensions Act 1995, to include active,
deferred and pensioner members.
23. Regulation
106B(5) explains that “employing authorities” where
it appears in regulation 106B includes non-Scheme employers. This is already the position
legally, but the point is spelt out for the avoidance of doubt. An authority’s policy
statement should include information on communications with admitted body employers
employing scheme members or prospective members.
24. Along
with any other planned methods of publication, administering authorities are encouraged to
consider including both statements on their websites where suitable. There is nothing in
the regulations to prevent an authority from choosing to publish their governance and
communications statements together.
25. ODPM
will expect administering authorities to submit a copy of their policy statement after
Explanatory Memorandum
26. HM
Stationery Office now publish an Explanatory Memorandum
alongside new Regulations. The Memorandum briefly describes a statutory instrument and its
purpose, and is prepared for the information of Parliamentary Committees which examine
proposed regulations.[2]
The Explanatory Memorandum for these Regulations can be found in the statutory instruments
section of the Stationery Office website at www.legislation.hmso.gov.uk
Yours faithfully
BOB HOLLOWAY
ADDRESSEES
The Chief Executive of:-
County Councils (
District Councils (
Metropolitan Borough
Councils (
Unitary Councils (
County and County Borough
Councils in
Tameside Metropolitan Borough Council
Wirral Metropolitan Borough Council
Environment Agency
Town Clerk, City of London Corporation
Clerk,
Clerk,
Police Authorities in
Fire and Rescue Authorities in
The Secretaries of:-
Local Government Association
LGPC
SOCPO
SOLACE
ALACE
CIPFA
New Towns Pension Fund
Trades Union Congress
UNISON
TGW
GMB
UCATT
NAEIAC
Amicus
Audit Commission
UCEA
National Association of Pension Funds (NAPF)
Society of
Society of
Society of Welsh LA PF Treasurers
CIPFA (
LAPFF
Government Departments:-
GAD
DOE (NI)
SPPA
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