LONDON, 21 June 2013 – Aon Hewitt, the global talent, retirement and health solutions business of Aon plc (NYSE:AON) has commented on the Discussion Paper issued by the Department of Communities and Local Government which highlights how certain elements of the Public Service Pensions Act 2013 would be incorporated into the Local Government Pension Scheme (LGPS) and asks a range of questions on how these provisions should be implemented. The changes will affect 89 local authorities responsible for running LGPS Funds.

Looking at the key challenges for local authorities implementing new governance requirements in the LGPS, Karen McWilliam, head of Public Sector Benefits Consultancy at Aon Hewitt, said:

"There are a number of LGPS funds that already have robust governance arrangements in place but the additional scrutiny through the new local Pension Boards will provide greater transparency and confidence that all funds are being well managed. Assuming these Pension Boards will be separate from existing Pension Committees, even for those LGPS funds which are already well run, the changes will present a challenge in ensuring that Pension Board members (in addition to Pension Committee members) not only have the appropriate knowledge and skills, but can demonstrate this.  Further, even though relatively small Pension Boards could be established, securing appropriate scheme member and employer representation may not be easy.

"We welcome the greater focus on conflicts of interest and hope that one of the outcomes of this Discussion Paper is a commitment to provide national guidance on managing conflicts in the LGPS.  We also hope any guidance can be expanded to apply to existing Pension Committees, which will continue to be the decision-making body and hence arguably have a greater need to understand and manage potential conflicts.  Similar guidance should be applied to the National Advisory Board too."

The LGPS Regulations will include a national requirement on whether this Pension Board 'scrutiny' function should or should not be carried out by existing Pension Committees responsible for managing and administering the LGPS at a local level.  The Discussion Paper highlights a number of reasons why this may not be practical, not least the Act's requirement to have equal numbers of scheme member representatives and employer representatives (which is typically not the case in existing Pension Committees) and the difficulty in performing scrutiny on itself.

Karen McWilliam said:
"The new role of the national Scheme Advisory Board is already being trialed via a Shadow Board by the Local Government Association and Trade Unions.  We believe the Scheme Advisory Board's potential further advisory role to local LGPS funds could be invaluable in articulating what good practice looks like and for developing national solutions.

"The timing of the introduction of these governance changes is also still open but likely to be after the new benefit structure for the LGPS which will be in place from 1 April 2014."

Media Contact:

Colin Mayes                                     Giles Abbott
 Aon Hewitt                                       Capital MSL
 01372 733689                                   020 7307 5340
 colin.mayes@aonhewitt.com              giles.abbott@capitalmsl.com
 

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The Aon Hewitt Public Sector Actuarial and Benefits team

The Aon Hewitt Public Sector Actuarial and Benefits team is a well-established team specialising in advising managers and employers of the largely statutory public sector pension schemes. It comprises individuals with a diverse range of skills and experience including former local government practitioners, qualified and trainee actuaries, and technical support staff.  The team ensures quality and efficiency across all our public sector clients. Each of our clients has access to all of our specialist public sector actuarial and benefit consultancy capabilities covering statutory and non-statutory services and ranging from actuarial valuations and accounting disclosures to cashflow or workforce modeling and bespoke consultancy projects such as assistance with auto-enrolment, governance reviews and help with annual or lifetime allowance calculations.

About Aon Hewitt
Aon Hewitt empowers organisations and individuals to secure a better future through innovative talent, retirement and health solutions. We advise, design and execute a wide range of solutions that enable clients to cultivate talent to drive organisational and personal performance and growth, navigate retirement risk while providing new levels of financial security, and redefine health solutions for greater choice, affordability and wellness.  Aon Hewitt is the global leader in human resource solutions, with over 30,000 professionals in 90 countries serving more than 20,000 clients worldwide.  For more information on Aon Hewitt, please visit www.aonhewitt.com.

About Aon
Aon plc (NYSE: AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 61,000 colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit www.aon.com for more information on Aon and www.aon.com/manchesterunited to learn about Aon's global partnership and shirt sponsorship with Manchester United