Time to make a change

Laura Blows speaks to the LPFA’s Susan Martin about the changes within the pension fund, and the Local Government Pension Scheme

What are the key issues you have had to deal with since taking over the LPFA deputy chief executive role in 2011, and indeed since taking the interim chief executive role a couple of months ago?
Since taking over as interim chief executive my focus has been on a number of areas, firstly, finalising the LPFA’s submission for the call for evidence on the future structure of the LGPS. The LPFA is calling for the creation of ‘super pools’ to ensure the latest asset and liability management techniques are used to understand the true liabilities of all local government pension funds, so that clear headway can be made on reducing deficits. I have also met with many of our fund members at our annual Fund Member Forum, which was held at the beginning of September. It was enlightening to see the interest that fund members take in the future developments of the LGPS and the importance they place on the need for sustainable pensions for future generations. Finally, I have been meeting other LGPS funds to see how we can work in collaboration to achieve our mutual objective of delivering sustainable pensions to the public sector.

What do you consider to be the biggest challenges in managing such a diverse organisation as the LPFA?
One of the biggest challenges I have is finding enough time to meet with other LGPS schemes and other public sector organisations to discuss the benefits of assets and liability management, which I believe is fundamental to the future success of the LGPS and to see if there are opportunities for us to work together to achieve this.

The LGPS is currently under much scrutiny. What are your views on the current focus on improving efficiency of the LGPS?
The LGPS is in need of change, which – according to research from KPMG – could have a combined deficit of more than £80 billion. It is, of course, not alone; almost all pension funds are facing enormous challenges at the moment, thanks in part to improvements in healthcare and life expectancy, as well as demographic factors that now see the large ‘baby boom’ generation reaching retirement, reducing the working age population as retirees rise in number.

The ultimate objective of pension scheme investing is to ensure that there are sufficient funds to pay the liabilities, so clearly assets and liabilities must be run together, with assets falling more slowly than liabilities over time. This is easier said than done, but with a greater emphasis on collaboration, LGPS funds could put this objective at the heart of every scheme’s investment strategy.

What are your views on The Pensions Regulator setting the standards for governance in the public sector from 2015?
The regulator will have a key role working with the National Shadow Board to ensure high standards of administration and governance are introduced and maintained across the LGPS, and their experience of working with private sector schemes may help identify further areas of best practice. It is important that the regulator works closely with LGPS funds to understand the differences between the public and private sector and that their role is clearly defined to ensure there is no overlap or potential clash with the Department for Communities and Local Government in their role as the ‘responsible authority’ for the scheme.

What is your vision for the development of the LPFA? How do you expect the authority to look in, say, five years?
We will have successfully launched the new LGPS in 2014 and other public sector funds in 2015. I believe that the current communications programme together with the flexibility of the new LGPS such as the 50/50 option and auto-enrolment will have encouraged many more members to save for their future. More LGPS schemes will be working together through super pools, benefitting from in-house expertise on asset and liability management and the access to a wider range of asset classes that meet the long term nature of the schemes, leading to improved returns and lower costs.

Written by Laura Blows

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