Aon has worked with the Chartered Institute of Public Finance and Accountancy (CIPFA), to revise and update ‘Managing Risk in the Local Government Pension Scheme’. The guidance explores how risk manifests itself across the broad spectrum of activities that constitute LGPS financial management and administration. The publication then explains how, by using established risk management techniques, these risks can be identified, analysed and managed effectively.
Alison Murray, partner at Aon and Head of Public Sector Actuarial, said: “Effective risk management stands at the heart of sound corporate governance across all organisations and functions and the LGPS is certainly no exception.
“We believe that many LGPS funds already have well developed and effective risk management strategies in place. However, in supporting CIPFA in relaunching this publication our intention is to encourage administering authorities to step back and to review their approach to all aspects of risk management – something which is particularly important given recent changes to the operation and governance of the LGPS and the changing circumstances of (Tier 3) scheme employers.”
Neil Sellstrom, Pensions Network Advisor, CIPFA, said: “The introduction of new governance requirements in the LGPS in 2015, specifically the Pensions Regulator’s new role and the establishment of local pension boards, reflects the increasing importance of risk management. It also reinforced the need for administering authorities to focus their risk management activities on all areas of scheme management and not just investment.
“Risk mitigation and control is well established in private sector schemes but in producing this guidance, we were keenly aware of the special nature of the LGPS as a funded public service scheme, most of whose participating employers are likely to have a greater capacity to absorb risk than their counterparts in the private sector. It is important therefore to strike the right balance between risk control and being too risk averse. Our guidance aims to help administering authorities to develop a risk management framework which will enable them to decide which risks can and should be controlled, and where the upside potential justifies taking the risk.”
‘Managing Risk in the Local Government Pension Scheme’
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