Today’s  Conference started uproariously at the news that Simon Hoare , the DLUC Minister responsible for LGPS was not available to speak. The failure of Ministers to talk at PLSA conferences has become a standing dish. More is expected from the next Government. Hoare’s excuse (Purdah) was at least plausible.

I’d waited a year to laugh at a PLSA Conference and for a day I never stopped. This was a joyous affair where people with no pensions background mingled with hardened veterans , revelling in the success of the LGPS model.

The PLSA are keen to develop tools to help members of the LGPS to understand what they are getting from their pension relative to the PLSA retirement living standards. This should be a happier experience than for those in the private sector.

The 2025 actuarial valuation for LGPS similarly looks like a happy event with most if not all LGPS’s various funds into surplus.

Productive finance continues to dominate this Conference agenda, not only are LGPS schemes in the happy position to afford to invest in growth assets, the room  was full of people keen to satisfy curiosity and more than happy to accept LGPS money.

State of the LGPS nation

Roger Phillips presented the 11th Annual Report (22/3) of the LPGS Advisory Board .

Here are the selected highlights, recorded as I listened (and as they struck me). You can read it here.  

Membership

Membership grew by 1.6% to 6.49m in 2023 with 51,000 newly retied pensioners

Employers are down from 15,000 to 13,800 – this was down to 8 funds not reporting . It’s a rum show when nearly 10% of  funds can’t be bothered reporting

Members have been growing steadily over the past ten years with the majority of the growth in deferred members and pensioners

Assets

Total assets decreased by £354bn (down 2.6%. Investment returns at  the end of March 2023 was -1.8% down from 8.1% the year before, but the scheme remained cashflow positive

51% of the scheme was invest in equities with a further 8% in private equities.

Infrastructure was the top performing asset class at +1.6%

Over 12% of LGPS assets has moved to illiquids over the past 10 years

Transaction costs for investment increased over the year but overall investment charges fell by 7.6% – due to the reduction in payments of performance fees.

Operations

The cost of admin – reflecting work on Mcloud increased by 12%.

With regards life expectancy, there has been a pronounced bounce back in longevity

Club Vita reckon that the just transition will add 5% to longevity due to us living better.

Camden , Croydon and Islington are the only funds that did not submit any accounting  data.

This data is important to us all and especially to a new Government keen to get its head around LGPS.

Around the United Kingdom

Roger had reported from England and Wales, further reports were received from Scotland and Northern Ireland

David Murphy of NILGOSC reported from Northern Ireland that funding levels at 114% today. The low risk strategy is also in surplus. Here a debate is ongoing as to whether  now is the time to take more risk.

Staff retention is an issue, we heard later in the day that some LGPS funds are considering full or partial outsourcing to break away from restrictive practices within the local government framework which restrict pay and retentions in contracts.

LGPS in Scotland

Richard McIndoe delivered another gruff no nonsense report on behalf of Strathclyde and Scotland

Big picture, the scheme in Scotland is similar to England and Wales but in detail it differs. Scottish LGPS  regulation is made in Scotland.

Strathclyde showed a 9.9% returns for 2023/5 . Strathclyde now has a 147% funding level. The highest funding level ever on the most prudent basis ever. This is a quite incredible number.

As a result of the valuation , employers pay 6% this year and next with a long term contribution rate of 17%/ Well done Strathclyde for tying employers into a long term funding deal by offering considerable jam today – I call that smart.

The argument against cutting contributions is cashflow. McIndoe reported that Strathclyde was cashflow negative last year  to the tune of £4m. This will increase this year with the cut in income, drawing down on the 47% excess buffer (from a £30bn fund).

Employers leaving today get exit credits when they leave. 7 out of 150 employers have left (and had planned to leave when they could)  – total exit credits were less than £5m but new employers asking to leave are bigger and more opportunistic. Good luck to an employer leaving LGPS at a 6% funding rate and replacing the benefit withe a DC plan – I’m not sure how that will go down with staff or their representatives

Unlike NILGOSC, where the talk is of re-risking, Strathclyde is seeing the surplus as an opportunity to take risk off the table. 7.5% of the fund was taken out of equities into gilts.

Is this the right time to be de-risking? I heard some heated exchanges on this in the hall with opinions divided between those who pointed out that the surplus happened because funds were bold while others (mainly consultants) pointed to prudence.

Employers are apparently driving the push for more de-risking .  One employer had reported having LGPS at the top of its risk register for 10 years. I can see the concern for the employer’s balance sheet, but in the context of the Conference, such caution seemed out of place.

My comment to myself was that LGPS should be singing its praises to employers and members and encouraging them to get behind the scheme (rather than consider getting out while the going’s good). My pitch….

You are getting a great scheme for staff morale, for 6% for the next two years and you are getting it because unlike private pension schemes , you didn’t de-risk.

This was an excellent session which ended with Roger Phillips rallying the Conference with the call

Message to incoming Government – “leave us alone”

The setting of the Conference – like no other