Governance in the LGPS
How is the LGPS governed and run?
The Local Government Pension Scheme (“LGPS”) is one of the largest public sector pension schemes in the UK. It is a nationwide pension scheme for people working in local government, or working for other types of employers who are authorised to participate in the scheme. It is a defined benefit public sector pension scheme governed by the Public Services Pensions Act 2013 [1]. Furthermore, the LGPS in England and Wales is an occupational pension scheme registered under section 153 of the Finance Act 2004 [2].
At a national level, the LGPS is governed by the Ministry for Housing, Communities & Local Government [3], and the LGPS Scheme Advisory Board [4].
The LGPS in England and Wales is administered through 86 local pension funds. The Cheshire Pension Fund is one of these funds.
The legal and regulatory evolution of the LGPS
The LGPS began life in 1844 when a scheme was drawn up for the London Poor Law Commissioners. It was not until the Superannuation (Union Officers) Act 1864 that the scheme gained ‘legal’ status.
It was the Local Government and Other Officers’ Superannuation Act 1922 that gave local authorities the power to provide pensions for certain of their employees.
The LGPS as we broadly know it today was established under section 7 of the Superannuation Act 1972 [1] (although changes have been made to the LGPS in line with more recent legislation, eg the Public Service Pensions Act 2013).
Section 7 of the Superannuation Act 1972 provides that the Secretary of State may, through regulations, make provision for pensions for persons employed in local government service. Under these powers, a variety of Scheme Regulations have been issued since the 1972 act:
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Local Government Superannuation Scheme Regulations 1974 [2]
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Local Government Superannuation Regulations 1986 [3]
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In Schedule 1, these define an ‘administering authority’ as “a body required to maintain a superannuation fund under these Regulations”.
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Local Government Pension Scheme Regulations 1995 [4]
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At paragraph L1, these altered the description of LGPS funds from “superannuation funds” to “pension funds”.
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Local Government Pension Scheme Regulations 1997 [5]
The 1997 Regulations were then replaced by three sets of regulations effective from 1 April 2008:
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Local Government Pension Scheme (Benefits, Membership and Contributions) Regulations 2007 [6]
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Local Government Pension Scheme (Administration) Regulations 2008 [7]
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Local Government Pension Scheme (Transitional Provisions) Regulations 2008 [8]
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Parts of these regulations are still in force, despite the subsequent regulations listed below being issued.
With effect from 1 April 2014 the LGPS is now regulated, in the main, by three statutory instruments:
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· Local Government Pension Scheme Regulations 2013 [9]
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Sometimes referred to as ‘the Scheme Regulations’
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Local Government Pension Scheme (Transitional Provisions, Savings and Amendment) Regulations 2014 [10]
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Sometimes referred to as ‘the Transitional Regulations’
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Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009)[11] – subsequently amended by Local Government Pension Scheme (Management and Investment of Funds) (Amendment) Regulation 2013 [12]
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Sometimes referred to as ‘the Investment Regulations’
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The current regulations, along with a range of other legal and regulatory information, are available via the LGPS Regulations and Guidance website [14], maintained by the Local Government Association.
[1] Superannuation Act 1972 (legislation.gov.uk)
[2] The Local Government Superannuation Regulations 1974 (legislation.gov.uk)
[3] The Local Government Superannuation Regulations 1986 (legislation.gov.uk)
[4] The Local Government Pension Scheme Regulations 1995 (legislation.gov.uk)
[5] The Local Government Pension Scheme Regulations 1997 (legislation.gov.uk)
[7] The Local Government Pension Scheme (Administration) Regulations 2008 (legislation.gov.uk)
[8] The Local Government Pension Scheme (Transitional Provisions) Regulations 2008 (legislation.gov.uk)
[9] The Local Government Pension Scheme Regulations 2013 (legislation.gov.uk)
[13] Scheme regulations (lgpsregs.org)
[14] The Local Government Pension Scheme (Amendment) (Governance) Regulations 2015 (legislation.gov.uk)
Cheshire West & Chester Council as Administering Authority for the Cheshire Pension Fund
The Cheshire (Structural Changes) Order 2008 [1] wound up and dissolved Cheshire County Council (until then, the administering authority to the Cheshire Pension Fund) as at 1st April 2009.
The Local Government Pension Scheme (Administration) (Amendment) Regulations 2008 [2] provided that from 1st April 2009 Cheshire West and Chester Council became the administering authority for Cheshire East Council, Halton Borough Council and Warrington Borough Council.
Part 2 of the Scheme Regulations is entitled ‘Administration - Administering authorities’. Regulation 53 (“Scheme Managers”) sets out the role of an administering authority, and paragraph 1 of that regulation states that “the bodies listed in Schedule 3, referred to in these Regulations as “administering authorities”, must maintain a pension fund for the Scheme”. In Schedule 3, Cheshire West and Chester Borough Council is listed as being an administering authority.
Further legal and regulatory evolution
- Local Pension Boards
Subsequently, building on the provisions of the Public Service Pensions Act 2013, a further set of amendment regulations, Local Government Pension Scheme (Amendment) (Governance) Regulations 2015 [1], were issued. These inserted a number of additional regulations to the Local Government Pension Scheme Regulations 2013 with regard to Scheme governance, specifically matters concerning the establishment and membership of local Pension Boards and the role of the national Scheme Advisory Board.
The new Regulation 106 within these amendment regulations deals with the establishment of a Local Pension Board which, from 1 April 2015, became responsible for assisting the administering authority:
“a) to secure compliance with:
(i) these Regulations;
(ii) any other legislation relating to the governance and administration of the Scheme, and
(iii) requirements imposed by the Pensions Regulator in relation to the Scheme; and
b) to ensure the effective and efficient governance and administration of the Scheme.”
[1] The Local Government Pension Scheme (Amendment) (Governance) Regulations 2015 (legislation.gov.uk)
Cheshire West & Chester Council’s Constitution
Cheshire West & Chester Council’s Constitution [1] states in Section 9 that “the Council is the statutory Administering Authority for the Cheshire Pension Fund. In its capacity as Administering Authority the Council fulfils the role of Scheme Manager for the Cheshire Pension Fund.”
In its capacity as Scheme Manager, the Administering Authority is authorised to manage the Pension Fund’s assets and liabilities, and to carry out any other specified activities associated
with the operation of the Scheme. The Administering Authority is not authorised to give investment advice [2]. Due to this status, Cheshire Pension Fund is not required to be regulated by the Financial Conduct Authority (FCA) in order to operate its business.
Role of the Section 151 Officer
Cheshire West & Chester Council’s Constitution states in Section 9: “The Council has delegated responsibility for the management and administration of the Cheshire Pension Fund to the Chief Operating Officer who is also the Council’s Section 151 Officer.” (Section 151 of the Local Government Act 1972 [1] provides that “every local authority shall make arrangements for the proper administration of their financial affairs and shall secure that one of their officers has responsibility for the administration of those affairs.” This statutory role is known as the Section 151 Officer.)
The Constitution continues: “The Chief Operating Officer has established an advisory panel known as the Pension Fund Committee. The committee is convened as necessary by and to advise the Chief Operating Officer on matters relating to the administration of the Fund. The Pension Fund Committee’s key responsibilities are to advise the Chief Operating Officer on the management of the Cheshire Pension Fund, including the management of the administration of the benefits and strategic management of Fund assets, taking advice from an actuarial and strategic investment advisor.”
The LGPS Senior Officer
In 2019 the Scheme Advisory Board (SAB) commissioned the actuaries Hymans Robertson to undertake the Good Governance review across the LGPS. After two earlier reports, the “Phase III final report and action plan” [1] was published by SAB in February 2021, which set out seventeen recommendations.
One of the recommendations of the report was that “each administering authority must have a single named officer who is responsible for the delivery of all LGPS related activity for that fund (“the LGPS Senior Officer”)”. The report goes on to state that the purpose of this role is to “lead and take responsibility for the delivery of the LGPS function”. The core requirements of the LGPS Senior Officer are described in detail in the “Further Discussions” section of the report.
While awaiting further guidance on the implementation of the Good Governance review’s recommendations, Cheshire Pension Fund have determined in lieu of such guidance that the LGPS Senior Officer role will rest with the Head of Cheshire Pension Fund.
In the absence of formal guidance, no changes have been made to Cheshire West & Chester Council’s Constitution to reflect this new role. Overall responsibility for the Fund remains with the Chief Operating Officer. However, the Chief Operating Officer, and the Pension Fund Committee, are supported by the Pensions Service, being the officer team led by the Head of Cheshire Pension Fund. Therefore, while responsibility for the Fund rests with the Chief Operating Officer, day to day delivery of the Fund’s functions are supported by an officer team led by the Head of Cheshire Pension Fund, who fulfils the role of the LGPS Senior Officer.
This approach will be reviewed in light of any formal regulation or guidance issued by the Ministry of Housing, Communities and Local Government, following the anticipated formal implementation of the Good Governance review outcomes.
[1] Good_Governance_Final_Report_February_2021.pdf (lgpsboard.org)
