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Autumn Statement 2015

Reform of the Local Government Pension Scheme (LGPS)

In line with George Osborne's comments at the Conservative Party conference, a key reason for removing existing restrictions is in order to make it easier for them to pool their investments and access the benefits of scale.

 

The consultation on the proposed changes can be found here.

 

The Government has also published an excellent paper on the technical aspects by my former PwC colleague Amanda Rowland, which can be found here.

We have been covering the proposed changes to the LGPS in previous newsletters. This week, the Government published a document on proposed changes "Local Government Pension Scheme: Investment Reform Criteria and Guidance" which can be found here.

 

This includes draft regulations that propose to remove the existing limitations on investments. Instead authorities will be expected to take a prudential approach, demonstrating that they have given consideration to the suitability of different types of investment, have ensured an appropriately diverse portfolio of assets and have ensured an appropriate approach to managing risk. This is in line with the EU IORP Directive that governs private sector schemes, changes to which we have also been following in this newsletter.

 

Authorities will be required to prepare and publish an investment strategy statement. This must cover:

 

• A requirement to use a wide variety of investments.

 

• The authority's assessment of the suitability of particular investments and types of investments.

 

• The authority's approach to risk, including how it will be measured and managed.

 

• The authority's approach to collaborative investment, including the use of collective investment vehicles and shared services.

 

• The authority's environmental, social and corporate governance policy.

 

• The authority's policy on the exercise of rights, including voting rights, attached to its investments