Local Government Pension Scheme (LGPS) independent governance review requirements could well have “teeth” that “bite”, meaning that compliance must be more than just a “tick-box exercise”, South Yorkshire Pensions Authority director, George Graham, has warned.

In its response to the LGPS Fit for the future consultation, the government confirmed that it will require Administrating Authorities (AAs) to participate in independent governance reviews and, if applicable, produce an improvement plan to address any issues identified, with the Pension Schemes Bill to include the provision for this.

Speaking at the PLSA’s Local Authority conference, Graham stated that “the teeth that the government are putting alongside the independent governance reviews could really bite, and that means that compliance is not just a tick box; compliance actually becomes something real that we have to evidence”.

“We're moving to a regime that will have a much harder edge to compliance, and that's going to be quite difficult, I think, for a lot of funds that aren't necessarily terribly well resourced,” he warned.

Graham highlighted how his fund’s governance team is in regular contact with its managers, so that it can evidence robust processes for its independent governance review.

However, he clarified that “we can do that because we have got a reasonable level of resource”.

Yet some LGPS funds will also be subject to local government reorganisation and the introduction of the new strategic authorities, along with a potential change in their AA, as well as implementing the LGPS governance requirements, he added.

The government’s consultation response also requires LGPS funds to have a ‘senior officer’, which, Graham warned, is not just a “rebadging of the head of treasury and investments”.

“This is a senior role, such as the director of the pension fund, or the chief executive of the pension fund – whatever you want to call it – it is a role that has that status and that responsibility,” he said.

“Most of your funds have a bigger balance sheet than your host council, and that carries a significant responsibility and responsibility to your many 1,000s of members. So, the LGPS senior officers should not generally be repurposed accountants. Ideally, they should be people who know, who knows something about pensions to start with,” he explained.

Graham recommended mentoring schemes “to bring in that next generation of senior LGPS officers”, with recruiting people from the private sector to fill the role in the meantime.

“We can learn a lot from what the private sector is doing, the way they run some of the schemes, but those people will also have a learning curve, as working with elected members is very different to working with trustees,” he added.

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