I accidentally posted this link early this morning. The question was to me as I had no idea what the Birmingham Post was basing the view that employers were being screwed for money to pay pensions by the West Midlands Local Authority Pension Scheme.
Here is the article in question, being promoted by Mike Woodall, a man who has been very good to me over the years and Steve Simkins who is a trombonist and (like Mike) an expert on pension funding for the Local Government Pension Fund.
The reason I didn’t mean to publish was that I couldn’t work out whether the author of the paper could be believed. Neither did one reader who tried to find the source for the article.
I couldn’t find the source of the article nor could one of my readers who wrote
Without the Clancy report there is no way of settling anything –
The WMPF annual report and accounts states that employer contributions ranged from 0% – 44%…which is really helpful
It paid £104 million to investment managers which is about 0.5% of assets, which does not hit me as excessive – they have quite a bit of private investments
West Midlands Pension Fund has published an explanation of its situation. It is not apologetic, you can read it here.
The view of my confused reader is based on the lack of availability of information.
It is difficult anyway because the various member employers of west midlands (or any other) will have specific contribution rates demanded by the central fund. But overall WMPF reports a discount rate of 4.3% in its latest report and accounts – which makes the 2% reported in the article look very suspect.
So I can make no comment on the demands of West Midlands on employees or the impact these demands are having on the employers.
I wish I had never got caught up in this, it was only me pressing the “publish” document by myself.
I would very much like a position on the article published by the Birmingham Post or indeed the ITV.
This has the capacity to cause a lot of trouble for West Midlands Pension Fund but right now the source is simply not available. If anyone can share the Clancy Report, we will have something with more basis.
Apologies to those who read this earlier.
At least with DC there is less retrospective legislation, if you ignore IHT and LTA.
If you are to achieve your income for life you need to find a way to satisfy the Treasury and stop talking to quangos.
Maybe “true and fair” to some such as auditors and actuaries, Henry, but palpably unfair to many of the residents within these local authorities?
Good on these individuals for calling out such overfunding and waste.
https://centreforbrexitstudiesblog.wordpress.com/2024/12/03/the-1-2-billion-iceberg-that-sank-birmingham-city-council-who-knew/
I appreciate the re-blog – it touches upon one of the most important current issues affecting our pension community – the effective deployment of money and delivery of pensions under of the LGPSs.
They are over funded on a recklessly prudent basis, and the workers of the West Midlands shouldn’t need to chose between a job or a pension. And anyone with experience of trying to discuss (‘consult on’) contribution rates with them will know they have piously been a law unto themselves with scant regard regard for the effect on local authority employers or local participating businesses for many many years.
It is a fact that West Midlands pays over £100m per annum in management and investment fees, and that is money every year that directly leaves the locality of the Scheme and finds its way to the City. Similarly for the investment assets which provide scant little economic benefit to the people of the West Midlands.
Reckless prudence on these mega schemes such as LGPS and the likes of the USS strip the county of much needed investment capital, and suck up a huge amount of council tax and university fees in (over) funding pension schemes. Its just not necessary.
The Clancy & Bailey research can be found at
https://centreforbrexitstudiesblog.wordpress.com/2024/12/05/action-plan-for-birmingham-city-council-to-recover-the-lost-0-6-billion-and-then-some-unbust-itself-and-send-the-commissioners-packing/
The two professors also draw attention to research by Isio
https://www.isio.com/insights/lgps-england-wales-low-risk-funding-index-30-september-2024-results/
Here are two blogs from Clancy about this
https://centreforbrexitstudiesblog.wordpress.com/2024/12/03/the-1-2-billion-iceberg-that-sank-birmingham-city-council-who-knew/
https://centreforbrexitstudiesblog.wordpress.com/2024/12/05/action-plan-for-birmingham-city-council-to-recover-the-lost-0-6-billion-and-then-some-unbust-itself-and-send-the-commissioners-packing/
Try https://
followed by centreforbrexitstudiesblog.wordpress.com/2024/12/03/the-1-2-billion-iceberg-that-sank-birmingham-city-council-who-knew/
An earlier take on LGPS investment costs was offered by Michael Johnson
for the Centre for Policy Studies in 2017 where he was a research fellow:
https://cps.org.uk/research/lgps-a-lost-decade/
Another example is Kensington & Chelsea’s LGPS featured (no doubt behind a paywall, for which I aopologise) in
https://www.ft.com/content/073e016e-125f-4287-b327-39e62ab92ecb
But does a funding level of over 200% there suggest participating employers may have been paying excessive contributions too?
An earlier take on LGPS investment costs was offered by Michael Johnson
for the Centre for Policy Studies in 2017 where he was a research fellow:
https://cps.org.uk/research/lgps-a-lost-decade/
Another example is Kensington & Chelsea’s LGPS featured (no doubt behind a paywall) in
https://www.ft.com/content/073e016e-125f-4287-b327-39e62ab92ecb
But does a funding level of over 200% there suggest participating employers may have been paying excessive contributions too?
An earlier take on LGPS investment costs was offered by Michael Johnson
for the Centre for Policy Studies in 2017 where he was a research fellow:
https://
cps.org.uk/research/lgps-a-lost-decade/
Another example is Kensington & Chelsea’s LGPS featured (no doubt behind a paywall) in
https://
http://www.ft.com/content/073e016e-125f-4287-b327-39e62ab92ecb
But does a funding level of over 200% there suggest participating employers may have been paying excessive contributions too?
An earlier take on LGPS investment costs was offered by Michael Johnson
for the Centre for Policy Studies in 2017 where he was a research fellow:
https://
cps.org.uk/research/lgps-a-lost-decade/
Another example is Kensington & Chelsea’s LGPS featured (no doubt behind a paywall) in
https://
http://www.ft.com/content/073e016e-125f-4287-b327-39e62ab92ecb
But does a funding level of over 200% there suggest participating employers may have been paying excessive contributions too?
The finding of LGPS has for many years been an exercise in unicorn farming. While in this case there is a ludicrous surplus, presumably put in place and voted for by officers who will benefit at the cost of the community that will be forced to contribute. Meanwhile in other administrations (because of course we can’t have one system of local government one assumes less people understand it an analyse it) you have the situation of huge imbalances on the balance sheet laughably (but of course legally) held against assets such as the Councils offices schools etc, as if one could liquidate the council and the ‘essential’ services could continue to be provided.
“According to Bailey and Clancy, a 2% so-called ‘discount rate’ was used to calculate the fund’s growth over time, and assess what contributions were required to keep the fund solvent. This was a corporate bond rate. They describe it as a ‘ridiculously low figure’. Over the last 25 years, the actual rate they should have used was, on average, about 6%.
Using the discount rate suggested the fund was in a big deficit, and so top up contributions were demanded to keep it solvent….”
This is very similar to the fiasco surrounding USS where the scheme went from huge deficit (and commentators including pension professionals who should have known better calling it a basket case) to big surplus just a few months later (and silence from the pundits) – all due to nothing more than trustees using wrong discount rates.
Here is an explanation (including what a discount rate is for those who are unsure).
https://tinyurl.com/znd7hs43
This is a good read, helped me and I’m sure will help other readers. Thanks Dennis. If you would like me to post this on my blog, I will. I need a word doc to transfer with ease an accuracy. You are a top man- happy 2025
Henry I would love you to reblog my article. I will send it to you by email attachment so that the word formatting is not lost.
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