The Local Government Pension Scheme (LGPS) could face reputational damage or legal action as a result of regulatory and legislative delays, industry experts at the Pensions and Lifetime Savings Association (PLSA) Local Authority Conference have warned.

Speaking at the conference, LGPS England and Wales Scheme Advisory Board chair, Roger Phillips, highlighted delays in a number of areas, suggesting that "we have been sitting on so much".

Phillips confirmed that he had raised concerns around these delays with the Minister, highlighting particular concerns around the "potential reputational damage that the delays are having to our scheme, and to the department itself, not to mention the pressures that it is putting on individual funds because of the resourcing and the planning of the challenges we have ahead, and the uncertainty that creates".

In particular, Phillips noted that work on good governance has been delayed until early 2024, while updates on climate risk reporting have been delayed until "at least" 2024, with further clarity also awaited on pooling and levelling up.

Indeed, LGA head of pensions, Joanne Donnelly, revealed that the board had received confirmation that there would be no legislation on Taskforce on Climate-related Financial Disclosures (TCFD) reporting for the LGPS this year, with the earliest date for TCFD reporting for the LGPS to be "next April".

However, Donnelly warned that "even that is a tight timetable", stating that while funds will have to see, confidence currently is “not sky-high”.

Phillips also pointed out that these delays around climate risk reporting places the LGPS "two years at least behind the private sector" on climate reporting, stressing that this is "not where we want to be, or ever wanted to be".

"We need some real speed on this issue" he continued. "It is a highly competitive market, and living in a very open goldfish bowl, we are subject to many challenges and questions, so we need to have assurance of consistency across the funds in how that is recorded. The pools can help, but not all the momey is in pools."

However, Strathclyde Pension Fund director, Richard McIndoe, said that he was less concerned with delays around TCFD, confirming that the Strathclyde Pension Fund has "just got on with it" in the meantime.

And while McIndoe acknowledged that it is "still unsettling" as the fund's TCFD process may have to be revised following government legislation, he added that he had "no faith in any of the timelines published for legislation".

Phillips also agreed that schemes do not have to wait for legislation, and can "just get on with it", particularly in relation to good governance.

He stated: "All funds need to be constantly looking at their governance, improving their governance, seeing what is best practice and dealing with it.

"Don’t wait for legislation, just get on with it. That’s important for the continued reputation we have to rise our standards all the time."

However, Phillips acknowledged that there are areas where further clarification from government is needed, noting that while an "overwhelming majority" of funds are up for local investment, there is an issue about the appropriate vehicle, the level of returns needed, understanding the risks, and ensuring there is proper and transparent process of investments.

Phillips also warned that these upcoming challenges will require a greater focus on smaller funds, noting that LGPS funds currently vary "considerably" in size and scale.

"Given the challenges ahead there will be an issue with smaller funds, about their capacity and how they will manage and deliver the rising standards that we require, and we need to be mindful and watch that."

In addition to reputational concerns, Donnelly suggested that some of the delays could result in legal action, particularly in relation to the Goodwin ruling on survivor benefits.

Donnelly argued that it is "unacceptable" that the LGPS doesn't have amended regulations reflecting the outcome of this case, despite being a "number of years on from the court decision".

She also revealed that unions have been repeatedly raising this as a concern for "months and years", confirming that while it is hoped that the department will act before the end of the year, unions have suggested that this might be too late.

"Unions will have to bring legal action on behalf of their members, because they are entitled to benefits they aren't getting,” she explained. “And it’s understandable that that potentially will result in legal cases for the LGPS, which we always wanted to avoid and have largely, but may not be the case for much longer."

And whilst this is an area that Scotland may be ahead of England and Wales, McIndoe pointed out that there are a number of other legislative areas where Scotland is waiting to see what transpires in England and Wales, warning that "however long it takes here, it will take us longer there".

Adding to this, Northern Ireland Local Government Officers' Superannuation Committee (NILGOSC) chief executive, David Murphy, pointed out that it is "not just LGPS regulations" but also broader regulatory and legislative updates.

For instance, Murphy said that "we've been waiting forever" for The Pension Regulator’s combined code, or general code, also noting that all public sector schemes have a valuation dated March 2020 to consider.

"It's 2023, and that hasn’t been completed yet and that has potential to change scheme benefits," he added, "so we're waiting for that as well".

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