At some stage over the emotional past three days, I submitted an attempt to win a WTW journalistic award. I know I won’t win it but I do think that people who make an effort to explain themselves , have the right to competed against proper journalists and I am sure that the people on the WTW board get satisfaction at knowing that they are measuring against the benchmark I offer, on the basis of “proper journalism”, my efforts are pretty lousy, indeed they are knocked out between 5 am and 8 am when I’m full of pixels.
At some point over the past few days, having written articles about Birmingham (which apparently pays 38% into the Local Government Pension Scheme) and Kensington and Chelsea (which pays 0% into LGPS), I asked a question at the end of the blog “what dictates what a Borough should pay?).
LGC is Local Government Chronicle that the actuaries and the local officials are complicit in manipulating rates. I know that because Toby Nangle has worked with a bunch of FT analysts to produce a definitive account of the madness of LGPS funding. He spots this statement in Local Government Chronicle (LGC)
[a] senior officer told LGC “a lot of funds” try to tweak actuarial assumptions to “hide” large surpluses that might lead councillors to demand a cut to their council’s contribution rate to free up money for other services.
Having us poking graphs and graphs showing us how funds that invested in real funds are looking good against funds that invested in debt (bonds and gilts).
And then showing how on a risk-adjusted basis , the funds that insist on investing are marked down (by Isio), we get to the bit you’ll be reading if your local authority is higher or lower than the one next door (as happens all over the place).
The average secondary contribution rate for West Midlands is 1.9 per cent of salary. But as our searchable dataviz showing the data for all 787 employers in the scheme illustrates, employers could be paying anything from zero to half of salary, largely due to the variation in secondary contribution rates.
And these will vary within a fund for a bunch of reasons. Our guess is that much of the variation is probably because some employers will have joined the scheme when assets were flying high (and their performance subsequently underperformed modelled assumptions) or when financial markets were in the doldrums (and the fund’s subsequent outperformance of modelled assumptions mean they have more than enough to pay future benefits).
In other words, having taken up an hour of my morning trying to work out what Toby’s going on, I get to the bit that answers my question to find that contribution rates are nothing to do with logic but everything to do with the “timing and incidence” of the borough’s history of contributions. Timing and incidence is a phrase that was used by actuaries when I worked “with profits”. An actuary told me to use these words so some people would assume I was an actuary and not ask any more questions on the basis I understood more than they did (which I didn’t).
Having read the lately published article by Toby Nangle, I am no clearer about what actually happens borough to borough but I am clear that some LGPS funds take the view that investment is the thing to do and some regard “taking the risk off the table” as the good thing to do and most are “balanced” and sit on the fence.
I have no idea why someone has inserted Angela Rayner’s face into the picture but I think that Toby has pulled off something I was going to get from Joanne Donnelly of LGPS, an explanation of the craziness.
But back to WTW and its media awards. I am quite sure that Toby will win more awards and of course his article is much more journalistically brilliant (and more funny) than my blogs.
But bottom line, he concludes what I conclude, that we aren’t getting any reason for why someone in Birmingham is paying a council rate that includes a 38% contribution rate while someone in Kensington is paying a council rate with a 0% contribution rate. Nor does he really explain why Steve Simkins (who works for ISIO and pays a mean trombone) is telling us all that LGPS funds that invest rather than de-risk should be marked down.
I should win a WTW award for failing to answer questions in 75o words while Toby ends up giving up after 3000 words and 30 graphs.