22.12.16
Wandsworth and Richmond pension fund merger authorised
The government has confirmed that it will lay regulations to enable Wandsworth and Richmond Upon Thames councils’ proposal to merge their pension funds as part of a cost-saving measure.
The two London boroughs announced in January 2015 that they planned to enter shared staffing arrangements with the aim of achieving £10m savings and the government opened a consultation regarding the topic in August.
After consulting the LGA and three local authorities directly affected by the proposed merger, the government has proposed minor amendments to the draft regulations, largely to clarify the transitional arrangements.
“In light of the responses received the government has … agreed to require the statement of allocation of assets and liabilities, and the respective responsibilities of each borough tobe made within three months of the regulations being made, rather than from the mergerdate as originally proposed,” the government responded.
“One response requested that the regulations clarify the appropriate accounting treatment of the merger. However it was felt that this went beyond the scope of the power under which these regulations were being made.”
Under the merger, all the assets and liabilities owned by Richmond’s pension fund and any associated responsibilities will transfer to Wandsworth.
Even if the shared staffing arrangement ends at a later date, the merged fund would continue with each local authority placing into it as separate employers.
“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,” the two councils said at the time of their decision,” the government stated.
“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.”
Shared pension funds between councils is becoming increasingly common, with the London Pensions Authority and Lancashire County Pension Fund joining together at estimated savings of £30m, and eight West Midlands councils also agreeing to pool their funds in the last year.
The new regulations for the Wandsworth and Richmond Upon Thames merger will now come into force on 26 January 2017.
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