Local Government Pension Scheme (LGPS) funds should start preparing now for the introduction of an “outcomes-based” approach to improve fund governance standards, according to investment consultant Hymans Robertson. The proposal, which has been adopted by the LGPS Scheme Advisory Board (SAB), reflects the responses to the firm’s recent industry-wide Good Governance survey of LGPS stakeholders.
Hymans Robertson said that, following an extensive industry consultation which included 140 responses to an online survey and more than 150 separate conversations and engagement at related events, it became clear that moving to an outcomes-based approach would be the most effective solution. This will allow funds to continue doing what currently works well while still ensuring the highest governance standards across the scheme.
The report recommends introducing key benchmarks that will be used to assess each fund, these include: evidencing robust conflict management, providing sufficient administration capabilities and resource, having a clear and inclusive policy on employer and scheme member engagement and holding regular, independent governance reviews.
Catherine McFadyen, head of LGPS actuarial, benefits and governance at Hymans, commented: “From the survey’s outset we have been committed to working with as many stakeholders as possible to ensure we arrive at the most practical and beneficial solution for all.” She added that it was crucial that pension funds take this opportunity to review what they currently do and assess how they would stand up against this approach if it was introduced today.
“This will allow them to address any areas where improvement or change may be required and ensure they are in the best position moving forward,” McFadyen said. Pension funds will “need to think carefully about how they plan to evidence the approach they are taking in key areas and to show they are willing to learn from the experience of others,” she continued, adding that this will ensure that every fund in England and Wales is working together to continue to drive governance standards higher.