Pensions UK has issued a robust defence of the Local Government Pension Scheme (LGPS) after the Reform Party attacked charges and costs across the system.
The trade body has said any changes made to the structure or approach of the LGPS must be supported by evidence and detailed plans. The comments come in response to recent remarks made by Reform UK deputy leader Richard Tice, painting a picture of the industry that the trade body “does not recognise”.
Tice claimed at a press conference on 1 September that the investment fees currently being charged to LGPS funds are “frankly egregious”. He argued that local authorities were paying at least £1bn more than they should in fees to fund managers, while “inadequate performance” was costing between £8bn and £10bn annually over the past five years.
These figures were based on an analysis conducted by the party of the 13 administering authorities where it has more councillors than any other party, using a benchmark of three-quarters invested in passive global equities and the rest in global bond trackers.
By “improving the performance” of these funds, it’s claimed councils could afford to fund “a world-class social care system” or reduce council tax bills “by up to £350”. As part of its plans, Reform will take steps to form its own pool, for which it’s lining up its own “star fund manager”.
“Significant improvements in funding are expected to result in reduced employer contributions. Any savings could be passed on to taxpayers via reductions in their council tax, but these decisions are for individual councils.”
Zoe Alexander, Pensions UK
Pension experts have disputed these claims. John Ralfe, an independent pensions consultant, told the Financial Times that “if you are a defined [benefit] pension scheme, you shouldn’t be investing 75% in equities because you’ve got liabilities to meet”. He added that Reform had used “made-up numbers”.
In its response, Pensions UK’s director of policy Zoe Alexander highlighted the LGPS’s track record and scale in serving almost seven million current and former local government workers.
“It has consistently demonstrated financial resilience and operational stability throughout regular periods of rapid change, capitalising on economies of scale and a collaborative culture,” Alexander said.
“Significant improvements in funding over this valuation cycle are already expected to result in reduced employer contributions. Any savings could be passed on to taxpayers via reductions in their council tax, but these decisions are for individual councils.
“The policy of consolidation, pursued by both the last and current government, has led to considerable savings, estimated at over £1bn. These savings are expected to accelerate as the pooling reforms proceed rapidly.
“The vast majority of LGPS investments are now carried out via FCA-authorised pools, and from spring next year it is expected that all investments in England and Wales will be managed by these large, sophisticated vehicles.
“Like all significant UK pension schemes, the LGPS takes responsible investment seriously and integrates climate considerations into overall risk management.
“The LGPS also has a strong record of investing in local areas – and we anticipate that the latest government reforms, and the devolution bill, to strengthen this further. It has the highest proportion of investments in domestic assets in the UK pension sector.
“Any policy proposing changes to the structure or approach of one of the largest pension funds in the world should be supported by evidence and detailed plans. The duty of LGPS is to look after members’ interests.”
This article first appeared on Pensions Expert’s sister title LAPF Investments.
