Audit Commission Pension Scheme
The Parliamentary Under-Secretary of State for Communities and Local Government (Robert Neill)
I want to inform the House of my Department’s intention to provide a guarantee to the Audit Commission pension scheme, ahead of the Commission’s abolition. This statement sits alongside a financial minute I have laid before the House setting out the contingent liability associated with the provision of a guarantee.
The resolution of future arrangements for the Audit Commission pension scheme is an important step in disbanding the Audit Commission. My Department is pressing ahead with plans for the abolition of the Commission and the replacement of the current audit system with a new decentralised regime that will support local democratic accountability and cut bureaucracy and costs. We will introduce the necessary legislation to close the Commission and implement the new audit framework as soon as parliamentary time allows, and intend to publish a draft Bill for legislative scrutiny later this year.
As announced in March, the successful outsourcing of the Commission’s in-house audit practice has already secured significant long-term reductions in audit fees for local public bodies. Working estimates from the draft impact assessment of local audit reforms show that these savings, together with the end of inspection work and the disbanding of the Commission, will save around £650 million over the next five years, compared to costs before reforms were announced. I intend to publish the impact assessment, which will include the detailed workings behind these figures, later this year.
As set out in the financial minute, the Audit Commission pension scheme is a well-funded scheme that will cease to have any active members and close to new entrants when the Commission closes. I am providing a guarantee now to avoid the early crystallisation of pension liabilities, and ensure that the accrued rights of past and present Audit Commission staff are protected.
While it is right that Government stand behind the accrued rights of scheme members, we need to balance this with the financial interests of taxpayers. As the scheme is relatively young and well-funded, I expect there to be no immediate or short-term cost to Government. Subject to future investment returns the eventual cost could be limited, or even nothing if the scheme is able to fully cover its liabilities. Initial results from the March 2011 statutory triennial valuation of the scheme showed that it had assets of £665 million and estimated liabilities of £641 million (104% funded). The guarantee is being granted subject to a number of important conditions, including Government oversight of the scheme’s future investment and funding strategy.