I have interest in Surrey’s pension affairs, Surrey is a neighbour to Berkshire and the City of London and many of my family and friends live and pay council tax and business rates there.

Its Pension Fund has helped my business understand the pension systems members take when in LGPS and I am interested in the substantial changes it is going through. This is my analysis of the Surrey Pension Fund Committee Report delivered to Surrey Council earlier this month.

It is important for Surrey but also for other LGPS Funds who may be going through or will be going through reconstitution of their pension fund function.

How does Surrey’s Pension team adapt to change in its Authority.

I am pleased to read that Surrey’s Pension Team have put forward a solution to the tricky problem facing them.  Government’s reorganisation will  dissolve  Surrey County Council next year.  The Government’s  considering two proposals submitted in May of this year:

a) Two unitary councils: submitted by Surrey County Council (SCC), Elmbridge Borough Council and Mole Valley District Council.

b) Three unitary councils: submitted by nine District and Borough councils.

Both proposals support the creation of a Mayoral Strategic Authority (MSA)
covering the county of Surrey.

Confusing as this sounds, the situation was and is complex. Clearly there are plenty of options for this pension fund going forward.

Boiling many options to one – a summary of what has happened

These options have been boiled down to one, one that to some extent replicates what London did with the London Pension Fund Association (LPFA) and what South Yorkshire Pensions (SYP) did. Both chose to be single purpose pensions authorities and have given Surrey’s pension team the confidence to stick their hands up to do it themselves.

Their proposal needs to be agreed by Surrey County Council in December , assuming it is, then Surrey’s local Government pensioners will be looked after by a dedicated fund. This makes sense and may create momentum for other funds to reconstitute as independent in pension purpose.

Surrey has some £6bn under management, larger than average in this £400bn scheme with 86  funds in England and Wales. It has 600 employers connected with Surrey.

The government is looking at ways to make it easier to setup standalone pensions authorities, which it anticipates may be useful in cases of Local Government Reorganisation where new authorities do not map straightforwardly to underlying administering authorities.

The key for the Surrey Pension Fund was “democracy”, the Surrey Pension Fund must represent the people it pays pensions to and must be democratic. In my conversations with them, the fear that pensions could be captured by those with narrow interests, the pension scheme could not be captured by any group and find it conflicted in acting for one interest over another.

The choices considered  thoroughly

They are five with the fifth the one that has been chosen

   “SPPA” has been chosen

This choice lines up with the government’s direction of travel and strengthens the steps already taken by the Surrey Fund to stay independent from the administering authority. The pension team reckons it

“Good Governance” as  the LGPS Scheme Advisory Board recommend Single Purpose Pension Authorities as does  the Government’s “Fit for the future” consultation response.

So what does this add in terms of changed behaviour for the pension team and management? Back to the Surrey Pension Team who are confident on three counts.

Administering authorities must make investment and governance decisions free from undue political or employer influence.

External or independent reviewers and advisers should play a formal role, for example in undertaking governance reviews or advising committees.

Officers with delegated authority (e.g. the senior LGPS officer) should have clear operational independence and the ability to act without inappropriate external or internal influence

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A comprehensive analysis confirms the choice

Surrey has commissioned a report on the matters that will determine of the option chosen. These are the objectives agreed for the analysis

This is the analysis of Option 5, using the “Single Purpose Pensions Authority” (SPPA)

And this is how  the Single Purpose Pensions Authority option (5) compares with others analysed.

It is good when the objectives of Government, those agreed by Surrey’s Pension Team and the analysis of an external actuarial consultancy find one option to go forward with.

While this is yet to be agreed by Surrey County Council, it would be surprising if any conclusion was reached than that the  Single Purpose Pensions Authority be adopted to support pensions for those currently in the Surrey Pension Fund.

Why this is important

This is obviously important to Surrey, but also to England and Wales and by extension Scotland and Northern Ireland. Putting the management of pensions in the hands of those with the single purpose of pensions looks like the template for others/

Joining, as Surrey would, South Yorkshire and London Pension Fund Association would substantially improve the perception of an independent pension authority, uncompromised by political whim , focussed on maximising pensions for as little financial strain on the Council Tax payer and Business Rate payer.

Why this is not estimated to increase costs to Surrey

The detailed analysis of the cost savings from the Pension Team on Surrey County Council is likely to be achieved if Surrey’s pension team are given their autonomy.

For 2024/25  the Fund’s contribution to the corporate overhead was £0.832m based on 92
FTE and the below table sets out what this comprised of:

Service Cost

Democratic Services                     £0.020m
Internal Audit                                £0.008m
Treasury & Tax                              £0.001m
Insurance                                        £0.034m
Human Resources                         £0.117m
IT & Digital                                     £0.300m
Legal                                                £0.065m
Procurement                                  £0.041m
Land & Property                            £0.245m
Total                                                 £0.832m

The ongoing cost  in total would reduce from …to

This estimate proving accurate, an autonomous pension team for the Fund would be less of a financial strain to Surrey County Council while improving the service offered,

Pensions is  a difficult subject for Councillors, one that could be democratised by taking it away from politics and giving it to current and future pensioners.