NEWS

CIPFA Pensions Panel Meeting 13 October 2011

The CIPFA Pensions Panel met on 13 October 2011. Please click here to download a note of the proceedings.

Collaborative procurement initiatives update

Actuarial/benefit consulting and investment advisory
The actuarial and investment consulting frameworks agreements set up by the London Borough of Croydon continue to attract interest from LGPS funds from across London and the South-east, with strong interest from around seven London Boroughs and an additional two neighbouring County Councils seeking to take advantage of the immediate and long term procurement savings the framework offers. LB Croydon has now also waived the £4,000 joining fee that was originally  planned for any Council wishing to join the framework.

The frameworks are open for use by any local authority in England and Wales upon signing an Access Agreement between the supplier, the participant and the lead authority (LB Croydon) which ratifies the use of the framework.

The participating body may use the Framework Agreement in whole or in part (i.e. may just request core services).

CIPFA Pensions Network members can access more information, including details on how to partake in the framework agreement, at http://www.cipfanetworks.net/pensions.

Further information can also be obtained by contacting Nigel or Freda at LB Croydon (nigel.cook@croydon.gov.uk; freda.m.townsend@croydon.gov.uk).

Custodian Framework
Jill Davys at LB Hackney is undertaking preliminary work on a possible framework agreement for custodian services. Any fund interested in participating or wishing to find out more can contact Jill at jill.davys@hackney.gov.uk.

CIPFA Pensions Panel Guide to Pension Fund Taxation in the United Kingdom

The world of the Local Government Pension Scheme (LGPS) is constantly evolving. Managed effectively, tax can add value to pension funds. Conversely for the unwary, there are both domestic and non-UK tax compliance requirements which pension funds may need to manage. Consequently managing tax risks and keeping them under continual review is a key responsibility for each fund and the importance of specialist advice cannot be over-emphasised.

For further details and to order your copies please click here.

Code of Practice on Public Sector Pensions Finance Knowledge and Skills

In the final report of the Independent Public Service Pensions Commission, Lord Hutton recommended that “every public service pension scheme (and individual LGPS Fund) should have a properly constituted, trained and competent Pension Board”.

Therefore the case for a Code of Practice which embeds the requirements for the acquisition, retention and maintenance of appropriate knowledge and skills has never been stronger – and CIPFA has produced this Code to put these requirements into a formal structure for public sector pension schemes. Click here to view.

Government reveals proposals for public sector pension scheme contribution increases for members

On 19 July 2011, the Chief Secretary to the Treasury set out the latest position on public sector pensions - http://www.hm-treasury.gov.uk/press_83_11.htm.

Following on from that statement, the government has published scheme-by-scheme proposals to increase employee contributions. Details can be found below:

NHS Pension Scheme
Teachers Pension Scheme
Civil Service Pension Scheme
Police Pension Scheme
Firefighters Pension Scheme

In the 19 July statement, the government also confirmed that the funded nature of the LGPS puts the scheme in a different position and that alternatives to the contributions rise may be considered. To that end the Local Government Group has been tasked with conducting discussions with unions “to establish a package of measures to secure the necessary short term savings in the LGPS equivalent to the 3.2% percentage point increase in other schemes”. The outcome of these discussions will be made known by the end of September 2011.

Posted 8 August 2011)

CIPFA Pensions Panel Meeting 19 July 2011
The CIPFA Pensions Panel met on 19 July 2011. Please click here to download a note of the proceedings.

(Posted 8 August 2011)

New framework agreement for investment consulting and actuarial services contracts in the LGPS
The London Borough of Croydon has set up the first two framework agreements for use by local authorities that administer the Local Government Pension Scheme. The framework agreements are for pension fund Investment consulting and actuarial and benefits consulting services:

The new frameworks core focus is: -

• Pension Fund Investment consulting services focus on Provision of Support to Administering Authority and Additional ‘Value Added’ Services
• Actuarial and Benefits consulting services focus on Provision of Support to Administering Authority and Provision of non-Statutory Services.

The framework agreements will provide LGPS administering authorities with a fast and cost effective route to pensions-related services. The suppliers were selected based on:-

• rigorous tendering and evaluation processes
• capability of delivering quality services
• competitive pricing.

Who can use the Frameworks?
The frameworks are open for use by any local authority in England and Wales upon signing an Access Agreement between the supplier, the participant and the lead authority (LB Croydon) which ratifies the use of the framework. The participating body may use the Framework Agreement in whole or in part (i.e. may just request core services).

CIPFA Pensions Network members can access more information, including details on how to partake in the framework agreement, at http://www.cipfanetworks.net/pensions. For any further information please contact Maureen Stewart in Corporate Procurement at Croydon Council by email procurement@croydon.gov.uk.

(Posted 14 April 2011)

New update to AAF 01/06 – Stewardship Supplement
The ICAEW has released an update to AAF 01/06 - Assurance reports on internal controls of service organisations made available to third parties.

Working together with stakeholders including CIPFA, pension funds and third party service providers, the ICAEW has issued a revised version of AAF01/06 which now includes a specific section on gaining assurance to the commitment to the UK Stewardship Code.

The Stewardship Supplement is intended to assist asset managers to obtain an independent assurance report on their commitment to the UK Stewardship Code based on the framework set out in AAF 01/06. The UK Stewardship Code was issued by the Financial Reporting Council in July 2011. This guidance on assurance reporting is focused on Principles 1, 2, 6 and 7 of the Code that are considered ‘objectively verifiable’ at present.

The full version of AAF01/06, including the Stewardship Supplement, is available from the ICAEW website. There is no change to the main body of the guidance.

AAF 01/06 was first issued in March 2006 and is designed to help reporting accountants to issue assurance conclusions in their reports on the control procedures of financial service organisations. The guidance also helps service organisations identify gaps in their control environment by highlighting the importance of considering operational, as well as reporting, risks. The assurance reports, prepared by independent reporting accountants, provide comfort that the controls established by the service organisations have been subject to rigorous external examination. Activities also covered in the guidance include custody; investment management; pension administration; property management; fund accounting; transfer agency; information technology; investment administration; private equity and hedge fund management.

(Posted 13 April 2011)

CIPFA launches consultation on a Code of Practice for Knowledge and Skills in Public Sector Pensions Finance
In December 2010, CIPFA published an interim compliance statement that public sector pension funds were encouraged to adopt to demonstrate their approach to providing practitioners and members with the training and skills required to carry out their roles as the financial managers and decision-makers in public sector pensions finance.

In this compliance statement, CIPFA set out its intention to formalise the requirements set out in the statement as a Code of Practice and committed to consulting with stakeholders in the process.

We are now pleased to invite stakeholders to comment on the draft Code of Practice.

(The consultation draft is provided as a PDF file for which you will need Adobe Acrobat reader version 8 or later to view. The reader can be downloaded free at http://get.adobe.com/uk/reader/).

We would be grateful for your comments on the draft Code of Practice by Friday 10 June 2011. Comments should be sent by email to nigel.keogh@cipfa.org.uk

(Posted 12 April 2011)

CIPFA Pensions Panel Meeting
The CIPFA Pensions Panel met on 5 April 2011. Please click here to download a note of the proceedings.

(Posted 11 April 2011)

Budget 2011 – implications for public sector pension schemes

Independent Public Service Pension Scheme final report
The Chancellor announced that the government had accepted the findings of the final report of the Lord Hutton’s Pensions Commission (www.hm-treasury.gov.uk/indreview_johnhutton_pensions.htm) as a basis for consultation with stakeholders, with a commitment not to “cherry pick” from the 27 recommendations. However there remains a considerable amount of work to do to, especially in terms of the fine detail of accrual rates and cost control mechanisms, in order to meet the Chancellor’s stated target, also set out in the budget, of having proposals to in place by the autumn Spending Review.

Public Sector Discount Rate
On 9 December 2010, the Treasury launched a review into the way in which the discount rate for the unfunded public sector pension schemes is determined (www.hm-treasury.gov.uk/consult_unfunded_pensions.htm; CIPFA response at www.cipfa.org.uk/panels/pensions/consultations.cfm).

In his budget speech the Chancellor announced that, following this consultation, in future the discount rate for public sector pensions would be based on long-term GDP growth forecasts. Based on current forecasts this change will have the effect of reducing the discount rate by 0.5%.

This reduction will lead to an increase in the contributions required across the unfunded public sector schemes (such as those for the NHS, teachers, police and firefighters) of something in the order £3 billion to £4billion per annum. However there is no indication in the Budget papers if or how the increase will be split between employers and employees.

The timing for the implementation of this change as set out in the Budget will mean that any increases in contributions arising from the change will not take effect before 2014-15. This will avoid overlap with the employee contributions increases previously announced in the 2010 Spending Review and avoid further pressures on the departmental budgets set out in the Spending Review.  

Contracting-out rebates to be phased out
Members of defined benefit pension schemes, which are contracted-out of the second state pension and their employers, receive a rebate on the rate at which they pay National Insurance contributions. Currently these stand at 1.6% for employees and 3.7% for employers. From April 2012 these rebates will fall to 1.4% and 3.4% respectively (see item below posted on 6 February 2011).

In the Budget however the government formally committed to reform the state pension potentially along the lines of the widely-trailed Universal Pension, a single contributory, flat-rate pensions set above the level of the current minimum income guarantee (currently estimated at £140 per week), which would replace the exisiting basic state pension, second state pension (S2P) and reduce the need for means-tested top-up benefits such as pension credits.

However the government has made it clear that moving to this form of single tier provision would end signal the end of contracting out for defined benefit pension schemes (contracting-out for defined contribution schemes is already set to end from April 2012).

Such a move will result in increased National Insurance contributions for employees and employers (although in the public sector, the effect on employers should be revenue-neutral). Consequently the government has committed to “investigate the potential impact on employees and schemes in both the private and public sectors.”

The Department for Work and Pensions will shortly publish a Green Paper to consult on the options for reforming the state pension, which will include the above proposals.

(Posted 23 March 2011)

More news from the CIPFA Pensions Panel
For more news from the Panel please refer to the News.