UK - Local authority pension schemes will be forced to set out their funding policies if new government proposals go ahead.
The Office of the Deputy Prime Minister – which lays down policy for the £83bn Local Government Pension Scheme – believes a new “funding strategy statement” will increase transparency for employers contributing to the scheme.
The measure mirrors the “scheme-specific funding standard” which is likely to be introduced as part of the government’s reform of occupational pensions.
Under the proposals, individual LGPS pension funds would be required to establish a clear and transparent strategy that “identifies how its pension liabilities are to be met going forward”.
The ODPM consultation paper says: “It is believed that the preparation of an FSS document would also ensure pension funds consider and develop investment and risk strategies to best meet the liabilities of the fund and for all those employers contributing to it.”
The funding strategy statement will have to:
- State the purpose, aims and target solvency rate of the fund.
- Show the approach to balancing solvency and smoothing and the identification of risks.
- Explain what course of action would be required in response to adverse/positive outcomes.
- Outline the monitoring arrangements that are in place.
Each FSS would be reviewed every three years – but would also be regularly monitored in the interim period to ensure that it was still accurate. This consultation document is the third of four discussion papers that have been issued since a local government stocktake review exercise held in May 2002.
The first two papers – on more flexible LGPS benefits and the simplification of the legal framework of the scheme – were issued at the end of last year.
The final discussion paper on LGPS administration is being prepared for consultation in autumn.
Comments should be sent to the Local Government Pensions Division of the ODPM by September 22.
Trustees lack expertise, time and resources to develop effective communications on technical pensions issues and need professional help, a major review of the British Steel saga has concluded.
In this week's Pensions Buzz, we want to know if you think trustees should consult directly with members before agreeing to a DB superfund buyout.
Thousands of savers taking tax-free lump sums ahead of retirement are at risk of a pensions shortfall in later life due to neglecting their remaining pot, Zurich has warned.
Professional Pensions is looking to update its list of pensions master trusts in the UK ahead of authorisation. Can you help?