Since 2018 training in the Local Government Pension Scheme (LGPS) for committee and board members has been progressing. Andrew McKerns discusses what has influenced this change, what progress has been made and what the future holds for training requirements.
In the years since the 2018 National Confidence Assessment and the 2020 National Knowledge Assessment, training in the LGPS has been gathering momentum. Building on the 2018 self-reporting confidence assessment, the 2020 assessment was the first attempt to actually measure the knowledge of committee and board members across the LGPS. One of the key themes that emerged from that work was the confirmation that, in general, committee and board members were more comfortable with the “traditional” topics of investments and financial markets, but less familiar with areas such as administration.
At present pension committee members do not have a statutory requirement to acquire knowledge and understanding in the same way their pension board counterparts do. This has always felt like a bit of an oversight and it was something that was picked up by the Scheme Advisory Board (SAB) in England and Wales as part of its Good Governance Review of the LGPS. This included as one of its recommendations that those sitting on pension committees should be subject to a similar requirement to attain the necessary skills.
The recommendations of the Good Governance Review currently sit with government as they decide how to take them forward, but even without an explicit knowledge and skills requirement I would argue that there is, in effect, a de facto prerequisite. This comes from a number of sources, for example:
- The Markets in Financial Instruments Directive II (Mifid II) requirement to evidence, knowledge and skills at funds in order to be classed as professional investors and not retail investors.
- The Pensions Regulator‘s (TPR) recent 21st Century Trusteeship campaign was just as applicable to public sector decision makers as it was for the private sector schemes.
- The existing member and scheme employer expectations for the pension committee.
- Pressure from pension boards to ensure that decision makers have the requisite knowledge and skills.
- The general public law principle that those responsible for the administration of public funds should demonstrate reasonable care, skill and caution.
It is this narrative that has led many LGPS funds to take a proactive stance with their training plans and training expectations for their committees and boards. These funds recognise that work in this area ultimately benefits the fund and helps them meet their objectives. It also highlights the good governance measures to any external scrutiny that LGPS funds may face.
So, what have funds done?
Fundamental change has taken place in the past few years, driven not only by expectations but also by funds adapting to different ways of working, which was accelerated by the COVID-19 pandemic.
Some of the key changes and actions have been:
- Access to online training material such as videos, quizzes and other resources.
- Benchmarking the fund’s committee and board knowledge levels in order to gauge training plan effectiveness and identify gaps in knowledge.
- Increasing the frequency and diversity of training engagement with the committee and board.
- Assessing the effectiveness of training and governance at funds.
- Monthly focused meetings on training progress, monitoring, recording and updating of plans.
All of this has added up to officers having better management information on training progress but also has provided committee and board members with a clearer picture on training expectations.
Fundamental change has taken place in the past few years, driven not only by expectations but also by funds adapting to different ways of working.
What will the future hold for training requirements?
The LGPS is a huge scheme, with over six million members, over one-third of a trillion pounds in assets, and more than 14,000 contributing employers. It is a realistic expectation that the governance standards at each fund should demonstrate strong combined knowledge levels within the committee and board.
On that basis, we expect further progress to be made with:
- Induction documents for newly appointed members – ultimately setting clear expectations to new committee and board members for their roles and responsibilities.
- Further utilisation of online training tools to provide the fundamental knowledge requirements.
- Face to face training being the place for fund specific training and more scope for question and answers.
- Appropriately recording and monitoring the training provided and training plan progress.
- Evidencing knowledge attainment to TPR and SAB.
- Utilising benchmarking data to provide indicators of training progress and importantly motivation at funds.
One key component of future improvements will be training engagement. An engaged committee and board will have a far greater chance to meet its objectives than those that have not yet realised these requirements. Engagement is the next great challenge for LGPS funds who, with the provision of online training, knowledge assessments and monthly tracking, have “laid the table” to success but ultimately can’t provide the successful meal if no one is there to eat it!
Good momentum
So, the momentum has been very good in this area and in many ways the LGPS can confidently say that it is meeting its training expectations. At Hymans Robertson we will soon be launching the 2022 National Knowledge Assessment for pension committee and pension board members, so that funds will again get that chance to benchmark their position against other participating funds.
With the upcoming Single Code of Practice requirements and expected SAB Good Governance recommendations added to LGPS governance life, the expectations for committee and board knowledge and skills continue to grow. Luckily, we already have seen that funds are motivated to meet this challenge and the LGPS will demonstrate it is more than capable of showcasing the success of its training.
Andrew McKerns is a senior governance and administration consultant at Hymans Robertson
—————
FREE weekly newsletters
Subscribe to Room151 Newsletters
Room151 LinkedIn Community
Join here
Monthly Online Treasury Briefing
Sign up here with a .gov.uk email address
Room151 Webinars
Visit the Room151 channel
