Further clarity as to the purpose of the Local Government Pension Scheme (LGPS) independent governance reviews is required, West Sussex County Council pension fund governance manager, Vickie Hampshire, has warned, suggesting that their success is dependent upon how they are framed and implemented.

Speaking at the Pensions UK Annual Conference, Hampshire stated that, while most LGPS funds have been working to implement the changes proposed within the Pension Schemes Bill, “independent governance reviews are one of those recommendations that funds have been waiting for further clarification or guidance on”.

In May, the government responded to its LGPS ‘fit for the future’ consultation, outlining its intention for the Pension Schemes Bill to include a provision for LGPS independent governance reviews to take place once every three years rather than every two years.

According to Hampshire, “whilst the inclusion of independent governance reviews in the Pension Schemes Bill makes a welcome step forward, their success will depend on how they are framed and implemented, with a review process that is both independent and informed; one that respects the diversity of the LGPS and engages with meaningful stakeholders”.

“It has the potential to drive genuine improvement, but to achieve this, we must move beyond compliance and embrace a model of governance that is flexible, supportive and rooted in the realities of local government. Only then can we ensure that these reviews contribute to raising standards in a way that's both credible and constructive,” she explained.

For the independence governance review to be a success, Hampshire recommended that there be further clarity regarding its purpose.

“Is it to promote uniformity, which could potentially reduce the process to a tick-box exercise where people are driven to work to standards rather than beyond them? Or is it to further raise standards across the LGPS while respecting the unique circumstances of each fund?”, she asked.

“While we don't know what sanctions may follow a ‘fail’ review, we do know that support is often more effective than punishment, and the focus should be on enabling improvement, not enforcing compliance for its own sake,” Hampshire added.

According to an event poll, ‘good governance’ means ‘clear accountability and transparency in decision-making’ for 60 per cent of attendees, whilst for 20 per cent it means ‘putting scheme members’ interests at the heart of all actions’.

Twelve per cent considered it to mean ‘effective risk management and long-term financial sustainability’ and just 8 per cent thought it means ‘strong compliance with legal and regulatory standards’.

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