13-2015: Pension Scheme Governance – Local Government Pension Scheme and Police Pension Scheme – 22 September 2015

Executive Summary and Recommendation:

The Public Service Pensions Act 2013 introduced a formal framework for the governance and administration of public service pension schemes. This includes the creation of pension boards for public service pension schemes.

This paper provides an overview of the processes North Yorkshire Police (NYP) have engaged in regarding the pension board arrangements for the Local Government Pension Scheme (LGPS) 2014 (the police staff pension scheme) and the Police Pension Schemes for Police Officers.

This paper recommends that the PCC’s responsibilities and duties as Scheme Manager, with regard to the Chief Constables’ pension arrangements, are delegated to the Chief Executive Officer. It also confirms the delegations with regard to all other Police Officer pensions.

Decision

Police and Crime Commissioner decision: Approved

Signature:
Date: 22 September 2015
Title: Police and Crime Commissioner

1. Introduction and Background

Legislative Background

1.1 In June 2010 Lord Hutton was appointed by the Government to chair the Independent Public Service Pension Commission, which undertook a fundamental review of public service pension provision. Lord Hutton published his final report in March 2011. As well as making recommendation regarding the reform of pension schemes such as the Local Government Pension Scheme (LGPS) and Police Pension Schemes, the report also made recommendations regarding stronger emphasis on the governance of those pension schemes.

1.2 The Public Service Pensions Act 2013, which built on the recommendations of the Hutton report, introduced a framework for the governance and administration of public service pension schemes and provided for an extended regulatory oversight by the Pensions Regulator. Section 4 of the Act requires that regulations for each pension scheme must provide for a ‘scheme manager’. Section 5 of the Act requires the creation of a pension board for each pension scheme.

1.3 The Act also introduced changes to the LGPS and Police Pension Scheme (PPS). These changes were introduced to ensure that these pension schemes remained affordable and sustainable in the future. The LGPS 2014 and the PPS 2015 are both Career Average Revalued Earning (CARE) schemes rather than final salary schemes, in response to the above act.

1.4 The following publications, which relate to the LGPS and PPS, provide legislative information and guidance regarding the changes required as part of the Police Pension Act 2013;

The Pension Regulator: Governance and administration of public service pension schemes (Code of practice no. 14)
The Local Government Pension Scheme (amendment) Regulations 2014: draft Regulations on scheme governance
LGPS guidance on the creation and operation of local pension boards in England and Wales
Police Pensions Regulations 2015
Home Office Circular 16/2014: Police Pension Governance Arrangements
National Police Chief’s Council (NPCC) Guidance on Police Pension Governance Arrangements

NYP Pension Schemes

Local Government Pension Scheme (LGPS) 2014
1.5 Police Staff within NYP can join the LGPS. The LGPS 2014 is a CARE scheme and this commenced on 1 April 2014, it is a funded public service pension scheme. All members of the LGPS were moved into the LGPS 2014 on this date. The LGPS 2014 is split into local pension schemes. NYP contributes to the North Yorkshire Pension Fund (NYPF) and NYP is one of the 108 employers who pay into this scheme. The NYPF is administered by the pensions section of North Yorkshire County Council.

Police Pension Schemes (PPS)
1.6 Due to the creation of the PPS 2015 there are now 3 police officer pension schemes which NYP work with. All 3 schemes are unfunded public service pension schemes. The PPS 1987 and 2006 are both final salary scheme and are now closed to new members. The PPS 2015 commenced on 1 April 2015 and is a CARE scheme. All new police officers will be able to join this scheme. An officer’s move to the PPS 2015 is dependent on their age and service. Therefore some existing officers were moved across to this scheme on 1 April 2015. NYP has a contract with Kier Business Services (formally Mouchel Business Services) to administer all 3 police pension schemes.

Pension Scheme ‘Scheme Managers‘ and their responsibilities
1.7 The Scheme Manager is the person who is responsible for managing or administering the pension scheme. Pre-existing duties of the Scheme Manager included dealing with pension deductions and all pension payroll activities, management of ill health and injury benefit procedures as well as dealing with the pension complaints process and the publication of pension scheme information. The Pension Act 2013 creates an additional duty required of the Scheme Manager to establish a pension board. Within the establishment of the pension board, the Scheme Manager will have responsibilities to appoint a Chair and Deputy Chair of the board and approve of other members of the board. The Scheme Manager should also publish information about the pension board and keep this up to date. This includes publishing the details of the members of the board and matters which fall within the board’s responsibility. Scheme Managers can delegate these functions if it is felt appropriate.

Scheme Managers for the North Yorkshire Pension Fund (NYPF) and Police Pension Scheme (PPS)

LGPS 2014
1.8 The Scheme Manager for the NYPF is North Yorkshire County Council as they are the administrating body. Overall responsibility for governance of the NYPF is placed within the Pension Fund Committee. This is a committee of North Yorkshire County Council. The Pension Fund Committee has delegated authority for the following powers which have not changed with the requirement to establish a pension board;

To exercise the powers of the Council to invest monies forming part of the pension fund
To exercise all the Council’s powers as administering authority
To carry out the Council’s function relating to local government pension scheme (LGPS) under the LGPS regulations.

1.9 The pension board has replaced the Advisory Panel, which was established to provide an opportunity to widen representation amongst the Fund’s stakeholders. These governance arrangements are provided with the North Yorkshire Pension Fund: Governance Compliance Statement (appendix A).

Police Pension Scheme
1.10 The Scheme Manager for the Police Pension Scheme is the Police Pensions Authority. For the vast majority of members of the scheme this will be the Chief Constable of each Force. The Scheme Manager for a Chief Constable is the PCC for that Force. Kier Business Services and the NPCC Guidance on Police Pension Governance Arrangements have confirmed that a separate pension board is not required for Chief Constables.

Requirements of all Pension Boards
1.11 The role of public service pension boards are to assist the Scheme Manager (in the role of scheme manager) to secure compliance with;

the scheme regulations
other legislation relating to the governance and administration of the scheme (and connected schemes)
requirements imposed by the Pension Regulator in relation to the scheme (and connected schemes)

1.12 Members of the pension board are required to have ‘knowledge and understanding’ of the rules of the particular scheme and other matters relating to pensions. To assist with this, the Pension Regulator has developed on line training resources such as the trustee toolkit and the public service toolkit. The pension board is required to manage conflicts of interest and risks within the board. As good practice each pension board should draft their terms of reference (to include management of conflicts of interest and risk). The Scheme Manager is required to approve these terms of reference.

2. Other Options Considered

2.1 Scheme Managers have a legislative requirement to establish pension boards, however how these boards are established is a decision for the Scheme Managers.

LGPS 2014
2.2 As stated above, North Yorkshire County Council is the Scheme Manager for the NYPF. The decision has been taken by the Council that the Pension Board will replace the Advisory Board and will be part of the Council’s committee structure.

Police Pension Scheme
2.3 The regulations and guidance do not stipulate that a Scheme Manager must establish a pension board for their own force or that Scheme Managers should join together to share a pension board. Home Office circular 16/2014 suggests that a shared board can be created if the Scheme Manager considers this the ‘most appropriate arrangement and the best way of securing the level of knowledge and experience required of board members.’

2.4 Within NYP a separate pension board for NYP was considered but it was felt that a shared pension board would provide economies of scale and the opportunity to collaborate with other police organisations. Kier Business Services administer police pensions for a number of Police organisations as well as NYP. It was suggested that Scheme Managers of these organisations may wish to share a pension board where Kier would provide a secretariat function, provide update and training to board members. The Chief Constable of NYP, as well as 11 other Chief Constables, made the decision to use this pension board; therefore the Joint Police Pension Board was created

3. Contribution to Police and Crime Plan Priorities

3.1 Whilst the requirement for the establishment of pension board is set by the Pension Act 2013, the decision to establish a shared police pension board contributes to the Business Plan priorities – Transforming the Organisation: Collaborative Services – in that it is a partnership approach for the police organisations taking part in the Joint Police Pension Board.

4. Implementation and Resourcing Implications

Current Activity

LGPS 2014
4.1 As stated above North Yorkshire County Council has established a pension board which will replace the advisory board which previously existed. As the pension board replaces a previous board the decision has been taken that, in year 1, costs will not be passed into employers and they will be paid for by the County Council as they did with the advisory board. The first NYPF pension board meeting took place on 30 July 2015. At this meeting the terms of reference, as approved by the Council, were discussed and will be ratified at the next meeting scheduled to take place on 15 October 2015 (appendix B). As the pension board is part of the Council’s Committee structure all meetings dates and documents for discussion are published on the County Council’s Committee website.

Police Pension Scheme
4.2 As stated above the Chief Constable has taken the decision to collaborate with other police organisations and share a pension board. The Joint Police Pension Board is the pension board for 12 police organisations that have a contract with Kier Business Services to administer their police pension schemes. The 12 police organisations are as follows;

Cleveland Derbyshire Humberside

Leicestershire Lincolnshire National Crime Agency

Norfolk North Yorkshire Nottinghamshire

Suffolk Thames Valley West Yorkshire

4.3 Board Members were selected through nominations from Chief Constables as employer representatives (from the police organisations with a contract with Kier) and member representatives (these included active members and retired members of the police pension schemes). All scheme managers approved the suggested members of the Joint Police Pension Board. The membership is made up of 3 employer representatives and 3 member representatives.

4.4 It was agreed that the charges made by Kier Business Services for the first year of the Joint Police Pension Board will be £900. This is on a non-profit making basis and costs will be drawn at the time of each meeting. At the end of the first year the budget will be reviewed with the Joint Police Pension Board, in order to set the fees for year 2. Any surplus or deficit from year 1 will be included in that review. For those Forces with representatives on the Board – North Yorkshire Police has an employer representative – a £100 per representative discount was applied on the proviso that the Force covers any expenditure incurrent by their representative(s) for attending the meetings, for example travel.

4.5 The first Joint Police Pension Board meeting took place on 29 July 2015. Again, at this meeting the draft terms of reference, as approved by the scheme managers, were discussed. These terms of reference will be ratified at the next board meeting, to be scheduled for January 2016, subject to the scheme managers’ approval (appendix C).

4.6 The Joint Pension Board agreed that, whilst the PCC does not require a pension board for the Chief Constable’s pension, it is important that they are aware and able to comment on the Joint Police Pension Board activity and discussions. Therefore all agendas and minutes will be provided to all participating Force PCCs as well as Chief Constables. It was suggested at the meeting that Joint Police Pension Board agendas, minutes and policies will be made available on the proposed pension board section on the Kier police pension website – myownpension.co.uk.

Recommendations

Delegated Authorities
4.7 To ensure business continuity and governance arrangements, delegations are often put in place to ensure day business is maintained.

PCC as Scheme Manager for Chief Constable
4.8 One of the practical implications of the governance framework introduced by the Pension Act 2013 is that the PCC is the Scheme Manager for the Chief Constable. It is noted that the contract with Kier Business Services, as administrator of NYP Police Pension, also covers the Chief Constable’s pension. It is recommended that the PCC’s responsibilities and duties as Scheme Manager are delegated to the Chief Executive Officer.

Chief Constable as Scheme Manager
4.9 It is recommended that the delegations already in place with regard to the management and administration of the Police Pension Scheme remain in place. The Deputy Chief Constable (DCC) has delegated authority to refer a police officer to the Selected Medical Practitioner (SMP) for consideration of permanent disablement. The DCC also has delegated authority to refer an ex police officer to the SMP for consideration of an injury award. There is a contract with Kier Business Services to administer the Police Pension Scheme and provide the service for NYP. Therefore pension activities are undertaken by Kier and the responsibility to ensure those activities take place remains with the Chief Constable.

Communication
4.10 Within NYP, to further provide oversight, it is recommended that discussions take place with the Chief Constable and Chief Executive Officer to ensure that issues to be discussed by the relevant pension boards are reviewed with NYP before the pension board meetings take place, as appropriate.

4.11 NYP would also be seeking to secure the provision of an annual report update from both the NYPF Pension Board and the Joint Police Pension Board to assist in the effect discharge of the requirements of governance and oversight.

5. Consultations Carried Out

Name (Collar Number)	Department	Comments
Joanna Carter (3594)	Office of the PCC	Executive Group Sponsor
Jane Osborne (4293)	Financial Services	This reflects the requirements of the Public Service Pensions Act 2013. The small additional cost for the new Police Pensions Board can be met from existing budgets
Rosemarie Holmes (4647)	Human Resources	14^/09/15
Charlotte Clarke (3655)	Joint Corporate Legal Services	Consulted 20/08/15
Louise Wood (4206)	Corporate Communications	No comments to make re wider communication

6. Compliance Checks

Financial Implications/Value for money:
The financial implications from the decision are small. The collaborative solution to meet the requirement from the new legislation provides value for money from both a financial perspective but also from a efficiency perspective. The amount of time, effort and resources to deliver a standalone pensions board should not be underestimated.

Given the contents of the document this is an appropriate financial decision for the Commissioner to make with costs to be met from within existing budgets.

Legal Implications:
Having read this report and having considered such information as has been provided at the time of being asked to express this view, the Acting Force Solicitor and Head of Legal Services is satisfied that this report does not ask the PCC for North Yorkshire to make a decision which would (or would be likely to) give rise to a contravention of the law.

Human Resources Implications:
This document, as stated, provides a clear overview of the processes North Yorkshire Police (NYP) have

engaged in regarding the pension board arrangements for the Local Government Pension Scheme (LGPS)

2014 (the police staff pension scheme) and the Police Pension Schemes for Police Officers. In

consideration of options available, it seeks to provide clear proposals for the governance requirements of

pension schemes going forward.

Public Access to information

As a general principle, the Commissioner expects to be able to publish all decisions taken and all matters taken into account when reaching the decision. This Notice will detail all information which the Commissioner will disclose into the public domain. The decision and information will be made available on the Commissioner’s website.

Only where material is properly classified as Restricted under the Government Protective Marking Scheme or if that material falls within the description at 2(2) of The Elected Local Policing Bodies (Specified Information) Order 2011 will the Commissioner not disclose decisions and/or information provided to enable that decision to be made. In these instances, Part 2 will be used to detail those matters considered to be restricted. Information in Part 2 will not be published.

All decisions taken by the Commissioner will be subject to the Freedom of Information Act 2000 (FOIA).

Part 2

Is there a Part 2 to this Notice –NO

Report Information

Author: Sarah Mekins, HR Consultant
Head of Department: Rosemarie Holmes, Head of HR and Training

Executive Group Sponsor: Joanna Carter, Chief Executive Officer

Date created: 21 August 2015

Background documents:

I confirm that all the above advice has been sought and received against this and any associated Part 2 information and I am satisfied that this is an appropriate request to be submitted for a decision

Signature: Sarah Mekins Date: 21 Aug. 15

Published on: 22nd September 2015

Jo Coles - York and North Yorkshire Deputy Mayor for Policing, Fire and Crime