Current Issues and Future Work
Smaller employers, typically outwith the public sector, are members of various LGPS funds in Scotland. They typically have weaker covenants than local authorities, and therefore are at higher risk and have to pay higher contributions. In addition, when they no longer have any active members, the employers are required to address any funding deficits. These arrangements vary by fund.
At the request of Scottish Ministers, the SAB convened a working group to explore guidance to address the differences in the treatment of different employers in different funds and ensure a fair, consistent and transparent approach to cessation issues.
The SAB is currently considering the outcome of the Cessation Working Group’s work and is advising SPPA accordingly (see Future work below).
Employment Tribunal (McCloud)
The SAB has been keenly aware of the December 2018 Court of Appeal ruling on transitional protections in the Judicial and firefighters pension scheme, which it found unlawfully discriminated against younger workers. However, the specific protection in the LGPS differs from the other public service pension schemes –the statutory underpin in the transitional regulations applies only to those within ten years of retirements on 31 March 2012. The UK Treasury is taking forward work on this, and the SAB will consider proposals from the SPPA in due course. Uncertainty around the implications of this judgement, and especially any costs involved, has also led to a delay in considering the valuation of the Scottish LGPS scheme and if the cost cap has been breached.
The latest position is covered in Future Work below.
As part of taking forward the outcomes of its governance review, the SAB has sought updated information from Pension Boards on training for board members. It considered the training requirements and good practice for board members, and SAB members and agreed that links with Boards needed to be strengthened. A training programme has been developed in conjunction with SAB advisers and was brought forward during 2019/20. In more general terms, the SAB has considered what advice it needs to take forward its work and how best to utilise the skills and experience of its advisers.
The Board plans to progress the areas set out above. This includes work to further scope work to assess options under the structure review; work to further develop transparency of investments; responsible investment transparency; to consider the outcome of the work of the Cessations Working Group and advise SPPA accordingly; and work on training for board members. The Board also expects to receive recommendations from the Government Actuary Department (GAD) on the 2016 Cost Cap Valuation, in the first half of 2021.