LGPS knowledge strongest in 'traditional areas' - Hymans Robertson

Levels of knowledge in the Local Government Pension Scheme (LGPS) are highest in traditional areas such as financial markets and product knowledge, with an average score of 83 per cent, Hymans Robertson’s National Knowledge Assessment has found.

The level of knowledge dipped in less traditional areas, with an average score of just 53 per cent for the actuarial methods, standards and processes, and 59 per cent for pensions administration.

The report flagged that these lower scoring sections would typically have less time spent on them at committee and board meetings, arguing that this “poses as a challenge”, and that “concerted effort to develop knowledge” in these areas is needed.

However, the firm clarified that whilst overall scores were lower in these non-traditional pension committee areas, individual fund results still showed a good spread of knowledge on all topics assessed.

Furthermore, it stressed that informed decision-making and informed scrutiny had been “evident” from participating funds, which it stated bodes well for the continued governance of the scheme.

Overall, the assessment revealed high levels of knowledge across the LGPS with an average score of 67 per cent, although chairperson results were typically higher on all topics, with an average score of 72.7 per cent, compared to 66.3 per cent.

The report stated that the overall knowledge levels of the board were “marginally higher” than those of the committee, although this varied by section.

It also clarified that this was “not altogether unexpected”, considering the typical roles of both bodies, with the committee members’ area of outperformance relating to investment performance, which it emphasised was in keeping with its broader role.

Commenting on the findings, Hymans Robertson head of LGPS consulting, Catherine McFadyen, stated: “It’s really encouraging to see such high levels of knowledge demonstrated by funds of all sizes.

“The expertise evidenced by chairpersons in particular shows both leadership and commitment in this area.

"For pension committees and boards in the LGPS, acquiring, developing and maintaining a good level of knowledge is key to carrying out their role effectively and ensuring the successful running of a fund.

“Having an understanding of where there are high levels of knowledge, and where the gaps lie, will be vital to ensuring this is done to the highest standards."

McFayden added that whilst it is good to see that areas that are crucial to the successful running of funds, such as investment, have been prioritised, it is important that other areas aren't neglected.

She continued: "The last few years have been incredibly challenging for the public sector and a number of events have seen an increase in the scrutiny of public service pension schemes.

“This has reaffirmed that LGPS funds should evidence the training provided and the current knowledge and understanding levels retained within their committee and pension board.

“The impact of Covid-19, will also have been felt deeply and so we are conscious that there is enormous pressure on funds.

"Using these findings, funds will be able to develop and evolve how their governance and training structure delivers the best standards for the scheme, acknowledging that training must be topical and engaging.”

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