MHCLG is not consulting publicly on pooling and investment guidance
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A closed consultation is underway with the 86 authorities in the Local Government Pension Scheme in England and Wales about statutory guidance accompanying new pooling and investment regulations, despite the LGPS Advisory Board recommending a public consultation. SAB will share its response ahead of the deadline of 12 January.
The draft guidance was distributed by the SAB on 8 December on request of the Ministry of Housing, Communities and Local Government. The guidance accompanies the revised Pooling, Management and Investment of Funds and LGPS Amendment Regulations currently under consultation until 2 January.
These draft regulations give ministers new powers to force a fund to change its investment strategy if it has failed to comply with guidance, to join a particular pool or to direct an asset pool to carry out certain investment management activities in a particular way.
“As such, the guidance will have substantial operational and governance implications for administering authorities, and the Board would have preferred a public consultation and did recommend to MHCLG that it take this course of action,” SAB said.
The Scheme Advisory Board is prevented from publishing the draft guidance but said LGPS funds will in practice need to share it with their advisers to get input on the consultation response. The Advisory Board will make its own draft response public in early January.
Board secretary Clair Alcock noted that SAB’s response will make clear the Board thinks that any guidance which LGPS funds are legally bound to follow should be subject to public consultation.
“This is essential to avoid any perception that the current or future secretaries of state could effectively rewrite regulations without proper scrutiny,” she said.
SAB’s response to the guidance consultation will welcome both the guidance and the direction of travel in the objectives set by the Fit for the Future consultation, but it will also highlight a need for stronger procedural protections and greater clarity within the guidance, said Alcock.
The practical challenges administering authorities face in making significant changes to comply with the guidance within the timescales proposed will also feature.
As well as sharing the draft response to the guidance, the Board will publish its response to the open consultation on draft regulations by the end of this week.
An MHCLG spokesperson said: “We are consulting with all administering authorities on Local Government Pension Scheme proposals and will consider responses carefully before reviewing next steps.”
The spokesperson said new powers for ministers to enforce compliance are being introduced “to safeguard the scheme”.
Funds in the Access and Brunel asset pools have already been told to move their investments to other pools, as the government has said the two pools cannot continue. The transfer means funds will incur costs when exiting and joining – which central government has not offered to pick up.
The MHCLG spokesperson said the cost of consolidation will be offset “through long-term savings and improved investment performance”.
The draft guidance was distributed by the SAB on 8 December on request of the Ministry of Housing, Communities and Local Government. The guidance accompanies the revised Pooling, Management and Investment of Funds and LGPS Amendment Regulations currently under consultation until 2 January.
These draft regulations give ministers new powers to force a fund to change its investment strategy if it has failed to comply with guidance, to join a particular pool or to direct an asset pool to carry out certain investment management activities in a particular way.
“As such, the guidance will have substantial operational and governance implications for administering authorities, and the Board would have preferred a public consultation and did recommend to MHCLG that it take this course of action,” SAB said.
The Scheme Advisory Board is prevented from publishing the draft guidance but said LGPS funds will in practice need to share it with their advisers to get input on the consultation response. The Advisory Board will make its own draft response public in early January.
Board secretary Clair Alcock noted that SAB’s response will make clear the Board thinks that any guidance which LGPS funds are legally bound to follow should be subject to public consultation.
“This is essential to avoid any perception that the current or future secretaries of state could effectively rewrite regulations without proper scrutiny,” she said.
SAB’s response to the guidance consultation will welcome both the guidance and the direction of travel in the objectives set by the Fit for the Future consultation, but it will also highlight a need for stronger procedural protections and greater clarity within the guidance, said Alcock.
The practical challenges administering authorities face in making significant changes to comply with the guidance within the timescales proposed will also feature.
As well as sharing the draft response to the guidance, the Board will publish its response to the open consultation on draft regulations by the end of this week.
An MHCLG spokesperson said: “We are consulting with all administering authorities on Local Government Pension Scheme proposals and will consider responses carefully before reviewing next steps.”
The spokesperson said new powers for ministers to enforce compliance are being introduced “to safeguard the scheme”.
Funds in the Access and Brunel asset pools have already been told to move their investments to other pools, as the government has said the two pools cannot continue. The transfer means funds will incur costs when exiting and joining – which central government has not offered to pick up.
The MHCLG spokesperson said the cost of consolidation will be offset “through long-term savings and improved investment performance”.
