Local government pension schemes are the only public service schemes which have investment funds. The framework for investment is set out in specific regulations by:
- the Secretary of State for Communities and Local Government in England and Wales
- the Department for Communities in Northern Ireland
- Scottish Ministers
We have no role in regulating what investment decisions are made.
In local government pension schemes, scheme managers are responsible for administering, investing and managing the pension fund. In almost every case this is delegated to a ‘pension committee’ (also known as an ‘investment committee’). This is typically made up of councillors with investment experience or interest.
Specific investment decisions are outside the pension board’s remit. However, there are a number of areas that pension boards need to look at. For example, effective investment governance arrangements need to be in place and suitably documented.
Scheme managers should have robust arrangements in place for managing outsourced providers and advisers. This includes investment managers and investment consultants. They should also keep appropriate records of decisions and transactions.
Pension boards have a role to play in advising whether the right governance and administration processes relating to funding and investments are in place.
Most public service pension schemes are ‘unfunded’, ie they operate on a ‘pay as you go’ basis. Contributions from those paying into the scheme today pay the benefits of those currently retired. The exceptions to this are the local government pension schemes.
Public service pension schemes are not eligible for the Pension Protection Fund and we have no role in regulating their funding.
Areas of governance and administration you need to focus on if you are involved in running a public service pension scheme.