05.08.16
Wandsworth and Richmond open consultation on pension fund merger
Wandsworth and Richmond Upon Thames local authorities are proposing merging their pension funds as part of a cost-saving measure.
The two London boroughs announced in January 2015 that they were planning to enter shared staffing arrangements, with an aim of achieving £10m savings.
They now argue that one fund under one administering authority is needed to enable appropriate cost allocations and financial accountability for the pensions of staff under the shared staffing arrangements.
Under the merger, all the assets and liabilities owned by Richmond’s pension fund and any associated responsibilities will transfer to Wandsworth.
Pension costs that accrue from staff service under the shared services arrangements will fall to the borough which commissioned that service.
Alternative solutions include maintaining the separate funds or allocating the staff employed under the shared staffing arrangements to one or another of the shared funds.
However, the two councils said: “The merged fund approach benefits from producing outcomes which would be legal from an accounting and actuarial perspective and avoid any risks of challenge to each authorities’ annual accounts.
“Any other approach lacks legal certainty and creates risks and insurmountable overheads that mean we do not believe that there is any other choice but to merge the two pension funds.”
The proposed new pension fund will continue even if the shared staffing arrangements end. It will be administered by a committee containing six members from Wandsworth and three from Richmond.
Cllr David Simmonds, chair of the LGA’s improvement and innovation board, recently said that shared services are now “standard practice”, with the majority of councils deploying them in some form.
Sharing pension funds is also increasingly common – for example, the London Pensions Authority and Lancashire County Pension Fund have joined together at estimated savings of £30m, and eight West Midlands councils and other organisations have also agreed to pool their funds.
The government has recently proposed reforms to the Local Government Pension Scheme (LGPS), including requiring funds to invest in ways which reflect the UK government’s foreign policy and allowing employees to remain in the fund if they stay in the private sector.
Unison has raised concerns that the changes will allow the government to use pension fund money to support national infrastructure projects.
Last year the Centre for Policy Studies called the LGPS “a national embarrassment” in a report saying it was poorly governed and at risk of running out of money.
Despite this, its membership has grown to over 10,000 organisations.
The latest edition of PSE features an article by Joanne Segars, chief executive of the Pensions and Lifetime Savings Association, about the challenges and opportunities facing the LGPS.
The consultation is open until 15 September. To take part, click here.
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