First 100 days of government: support the Local Government Pension Scheme

The Local Government Pension Scheme is a unique player in the UK pensions market. With assets totalling more than £425 billion, the LGPS is the largest DB pension scheme in the UK and one of the biggest in the world. Not only is it unique in size, but also in its regulatory setting. Whilst most pension schemes in the UK are principally regulated by the DWP and its arm’s length bodies, the LGPS is overseen by the Department of Levelling Up, Housing and Communities (DLUHC) in addition to other regulatory complexities which are outlined in our Regulatory Map.

Given the size and complexity of the LGPS, good governance is vital in ensuring the long-term stability of the scheme and the security of member benefits.

LGPS pooling in England and Wales has been a successful endeavour, with net savings so far of over £380 million and a forecast of over £1 billion by 2025.

The PLSA believes the focus of the LGPS should always be on ensuring there is an effective and sustainable scheme which delivers for its members, employers and the local taxpayer who ultimately underpin the scheme. We recognise consolidation is part of this; indeed, a recent survey found that among LGPS funds, the main benefits of consolidation are seen to be overall lower costs (60%), better administration (47%), governance improvements (44%), better delivery of member services (44%) and improved investments (42%).

Government has set the LGPS the task of pooling all listed assets by April 2025, and, while there are a number of key governance and administration issues that must first be addressed, the sector has frequently shown in the past that it has the enterprise, capability and will to design solutions to policy challenges.

However, Government has an important role to play here in supporting transition plans for the orderly transfer of assets and in providing sufficient funding to support work by the LGPS Scheme Advisory Board on the Good Governance project.

Recently, there has been a discussion about the ideal number of funds in the LGPS in England and Wales, which currently are 86, due to high costs in managing investments, administration, governance and oversight. Half of of respondents to the survey believe that there should be fewer funds as now with around a third believing there should be the same number of funds.

The PLSA is supportive of change that is demonstrably in the interests of members and employers in the scheme.

We are therefore calling on the government to encourage the long-term stability of the LGPS in the following way:

• LGPS good governance review: Put into action the recommendations from the LGPS Scheme Advisory Boards’s ‘Good Governance Project’ to develop a common standard on governance, and foster effective relationships between pensions funds and asset pools with a focus on the type and quality of outcomes administering authorities should aim to achieve. Support the success of current pools and work towards greater collaboration of pools.
• Evidence based efficiencies: Further research into potential efficiencies in the LGPS is needed before any changes are proposed to the structure of the scheme in England and Wales.

Click here to read what other action the PLSA is calling on the next Government to enact in its first 100 days to help everyone achieve a better income in retirement.

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