To consider an update on recent developments in respect of the Local Government Pension Scheme.

The Committee considered a report which provided an update on recent developments with regard to the Local Government Pension Scheme (LGPS).  The Head of Financial Control advised the meeting that a similar report had already been submitted to the General Purposes Committee (minute GPC/14/34 refers).

The report before Members provided information on the following:

·         The development of mechanisms for cost capping across public service pension schemes

·         The implementation of Local Pension Boards

·         The Bedfordshire Pension Fund’s asset management.

With regard to the Fund’s asset management the Head of Financial Control referred to the implementation of an investment strategy and benchmark that sought, over time, to provide less volatile investment returns when compared to the average Local Authority Funds which tended to allocate a higher weighting to equities.  Following an extended bull market in equities, comparing the Bedfordshire Fund to the average local authority would show the Fund to be performing below the local authority average.  The Head of Financial Control stated that it was important to recognise that the role of the Bedford Borough Council’s Pensions Fund Committee was to balance both risk and return by developing and implementing an appropriate investment strategy.  He advised that the next update report on the LGPS to the General Purposes Committee and, eventually, the Audit Committee would include an explanation of the ways that the Bedford Borough Pension Fund Committee sought to manage the various risks that a funded defined benefit pension scheme faced.

A Member commented on the need to ask Bedford Borough Council to contact all major employers in the future to enable their participation in changes to the administration to the LGPS.  The Head of Financial Control advised that the initial consultations in respect of changes to the LGPS were issued to all local authorities by the Department for Communities and Local Government (DCLG).  Responses to the LGPS consultations were prepared by the pensions team at Bedford Borough Council for comment and approval by the members of the Bedford Borough Council Pension Fund Committee which included representatives of the major scheme employers.  In respect of the introduction of the Pension Boards, the Pension Fund Committee had responded to the DCLG that the additional costs of introducing a further layer of governance required more justification.  Whilst the degree of local authority influence on central government’s proposed changes was sometimes limited the Pension Fund Committee had responded to consultations and had sought to engage with the various scheme employers.  There were over 130 employers participating in the Bedfordshire LGPS and it had been an ongoing challenge for the Pension Fund Committee to facilitate engagement with all the employers.  The Head of Financial Control would feedback the Committee’s comments to the Head of Pensions at Bedford Borough Council.

The Member also referred to the need to take and manage risk in order to improve Fund performance together with a need for the correct skillsets and attitudes to be in place to achieve this.  In response the Head of Financial Control indicated that the Pension Fund Committee had in place a number of mechanisms to ensure an appropriate investment strategy was maintained and that the various skills and advice required for this purpose were available to the Pension Fund Committee.  The next update report to the Audit Committee would explain how the various pension fund risks were managed and explore the investment issues in more detail alongside risks associated with the scheme’s liabilities.  The Head of Financial Control referred to the impact on the Fund’s financial position of not just investment returns but also the unprecedented low levels of interest rates arising in part from the degree of quantitative easing by central banks which would have the effect of significantly increasing the valuation of the Pension Fund’s liabilities.

The Chairman took the opportunity to remind the meeting that the Audit Committee’s role focused on governance and it was the General Purposes Committee that considered the human resources aspects of the LGPS.

A Member referred to the forthcoming introduction of Local Pension Boards and, in view of their governance role, queried whether a mechanism should be introduced to enable the local Pension Board to report to the Audit Committee.  However, this was felt to be unnecessary and the Head of Financial Control indicated that the Board’s role was to assist the Bedford Borough Council Pension Fund Committee, in an advisory capacity, to secure best practice and it could not over rule the Pension Fund Committee.  Its role would be similar to that of the existing national LGPS Pension Board.  The Chief Finance Officer added that a member of the Audit Committee sat on the Bedford Borough Council Pension Fund Committee as Central Bedfordshire Council’s representative.  The Head of Financial Control stated that as there was still ongoing consultation in respect of the governance arrangements for Pension Boards he would be able to confirm the arrangements in the next update report.

NOTED

the report of the Chief Finance Officer and Head of Financial Control on recent developments with regard to the Local Government Pension Scheme.