I’m heading west this morning – hiring a car to get to the Cotswolds Water Park where the PLSA is hosting its LGPS conference.
I am going for three reasons
- I am interested in reform to the shonky state of LGPS AVCs and shared cost AVCs
- I want to understand the mood of LGPS after their rather good 2022.
- I’m keen to understand how what LGPS is doing right in the private markets, can transfer into private pensions, especially into workplace DC.
There was a time when the private sector looked down on LGPS as a weak purchaser of all kinds of rinky dink niche asset management products, too easily influenced by certain – ahem – marketing incentives. That view should not persist today.
As Chris Sier has pointed out on this blog, the investment capability of some parts of the LGPS – he focusses on Border to Coast, can be world class.
The LGPS pools are now delivering scale in a way that many would like to see the private sector emulate. I want to find out how LGPS manages liquidity, delivers to its ESG targets and values its increasingly large exposure to private markets
LGPS by and large avoided LDI and the over-loading of gilts that has created such damage to both DB private pensions. As the ONS reported last week , LGPS had a relatively good 2022.
Across 2022, the market value of private sector defined benefit and hybrid (DBH) schemes fell by £591 billion (32%), while the market value of public sector DBH and private sector defined contribution (DC) schemes combined fell by £50 billion (7%). Greater exposure to gilts (UK government bonds) mostly explains the larger percentage fall in the market value of private sector DBH schemes during 2022. Global bond yields rose as large, developed economies transitioned away from historically low interest rates with a series of interest rate rises by central banks.
And crucially, LGPS delivers pensions and continues to offer accrual to its members, turning today’s contributions into an income for life which is predictable and valued.
But there are areas of LGPS which remain in a pension backwater. LGPS does not do DC but its members do. The mismatch between members’ appetite to top up their pension using AVCs and the LGPS’ procurement of good quality DC services, is one area that LGPS could and should improve on.
Another is LGPS’s voice. Like many other areas of Local Government, LGPS struggles to compete with the private sector’s relentless marketing of itself, so that the good that it does is ignored.
What to expect?
LGPS is not in my comfort zone, I don’t expect to speak with other delegates as I would at other PLSA conferences and I expect to find it hard to get under the skin of this event.
But I’m determined over the next two days to find out what the private sector can learn and to promote what the private sector does better.
I hope that I can report back on the Conference with an independent pen, not fighting the corner for any vested interest but genuinely intrigued by a part of pensions that has shifted from “Cinderella” to “Princess”.