Agenda item

To consider a report providing an update on the latest Scheme, Legal, Regulatory and Fund developments for the Board’s information.

Andy Cunningham, Head of Pension Administration and Relations, updated the Board on the various Scheme, Legal, Regulatory and Fund developments.

Reforms to public sector exit payments were highlighted as being particularly challenging in respect of the proposed changes to the primary legislation. This meant that the Fund could be legally required to follow two pieces of legislation that contradicted one another for a period of time, in regard to the payment of exit and pension packages in line with the LGPS regulations. It was noted that as this was a national issue, and not one that just affected the Wiltshire Pension Fund, advice was being sought from the Scheme Advisory Board, LGA and MHCLG with updates and further information provided on a regular basis. It was noted that further clarity was needed to enable Fund officers to understand how best to administer the issues correctly and form subsequent operational actions to minimise the impact on scheme members. However, these issues were commented upon as being short term until the solution was formed.

In response to a question, officers clarified that the changes were twofold, with the first stage having been approved by Parliament. It was confirmed that once the legislation had been signed off then the changes would take 21 days to be applied and this 21 day ‘countdown’ would signify the start of the contradictory legislative position.

Members of the Board questioned the national impact and what actions could be taken by the Board to support the concerns already discussed, to which officers clarified that they were pursuing all options in regard to seeking advice from national pension bodies and putting appropriate policies in place. From an employer perspective it was noted that it was complicated for them to communicate with scheme members about the changes, and that timing in the short term was the biggest issue as organisations could be looking at redundancy exercises and this would cause a barrier to undertake such analysis due to the complexity of the legislative position. It was confirmed that officers were taking a cautious approach until more information was gleaned and were not providing any redundancy estimates to larger employers at present to mitigate the risk of providing incorrect figures.

After a question from the Chairman, Andy Cunningham confirmed that this topic would remain on this agenda item and would be brought forward to all future meetings until the issues were resolved. However, it was reiterated that once the reforms were fully in place and the transition phase settled, then business as usual would return in the long term.

Employer risk management was discussed, and it was noted that the Government had made changes that applied from 23 September 2020 and that the Fund needed to implement policy changes to reflect these (mainly to the Cessation Policy and Funding Strategy Statement). This had led to newly available options, notably employer contribution rates can change inter valuation as long as certain conditions were met, such as material changes in circumstances specific to an employer. These would be requested by an employer subject to the Fund’s agreement, or the Fund could insist on a change in employer contribution rate.

The changes to the LGPS Regulations enabled the Fund to implement a more flexible approach. An example of which was the ability to allow employers leaving the Fund to enter into an agreement to spread any cessation debt across a specified period of time. Additionally, the possibility to allow employers to delay the crystallisation of the final calculation was discussed.  

It was confirmed that draft changes to the Cessation Policy was being undertaken and any proposals would be brought forth to the next Wiltshire Pension Fund Committee (WPFC) meeting. Once these changes had been examined by the Actuary, any feedback would be collated, and a revised version would be brought forward to the Board and WPFC for approval.

The McCloud case was explored, and it was confirmed that further analysis was being undertaken to provide a targeted, proportional administrative approach to the issues faced. It was clarified that although the McCloud rulings would ultimately affect only a small number of members, these members needed to be identified to avoid unnecessary administrative work in relation to members which would not have been impacted. The cost impact was expected to be relatively small compared to the Fund as a whole, but it was reiterated that these were estimations due to the McCloud case’s focus on the future circumstances of the members.

The Goodwin Case was introduced to the Board; it was noted that it was similar to McCloud in so much as it was a discrimination case but instead related to sexual orientation, and was not legally as far advanced as the McCloud case. Although this would mean changes to the legislation the funding, administration and communicative costs were expected to be smaller than McCloud. It was confirmed that as soon as the case developed, and more information was available, updates would be circulated to the Board.

The Vice-Chairman questioned a figure presented in the McCloud analysis table on page 39 of the agenda pack; specifically, 45% of active members under the ‘Rectified’ column, and sought an explanation. Officers confirmed that this table was an estimate of how many members they believed would be affected and how many members’ cases and records had been prepared for the McCloud changes. It was noted that for active members, the main task was ensuring that Fund officers have the relevant members’ hours histories up to date on the system, as this process was stopped in 2014 due to the introduction of a new CARE system. It was explained that as employers were onboarded onto i-Connect, Fund officers were backtracking and updating these histories from 2015 as part of the new process which had been completed for 45% of active members. It was noted that once the legislations and systems were place and when the active members leave it would then be an automatically programmed system that would ease administration work for the long term.

The Chairman raised a question in relation to the Fund update concerning the employer ill health insurance policy review and asked when the proposed review would be completed and to confirm if it would also be brought forward to the Board as well as the WPFC. In response, officers confirmed that work was being undertaken with the Actuary to provide firmer clarity on costs and approaches in order to limit the risk for employers but to provide similar cover that was more cost effective.

It was noted that the impact on the Fund’s budget was neutral as the external insurers charged a large premium cost that was passed onto the employers themselves. The current administration was highlighted as being quite complex, particularly the financial aspects, but that this would be explained in more detail in the future paper brought forward to the Board. A further question as to if the current arrangement required certain categories of employers to have the insurance, officers clarified that it was optional, but it would be assumed that all the current insured employers would wish to continue to be covered by any replacement product. It was noted that the Fund’s largest employers decided to not take part in the cover because they felt they could self-insure, which was commented upon as being common within larger employers in comparison to the smaller employers who had all bought it.

Resolved

The Board noted the noted the scheme, legal, regulatory and Fund update.