Torstein Bell or Toby Nangle?
The final talk at this year’s LGPS event was from the newly appointed FT Editor Toby Nangle who delivered a set of slides that can be shared below or downloaded from this link.
I will be drawing heavily from these slides. not only are they very cleverly constructed (feeding into the FT systems) but they are an outpouring of Toby’s viewpoint, which is that Britain must make maximum use of its success stories and LGPS is just that.
The overview is very simple.
I managed to cadge a lift from Toby back to North London and so to the City. I learned that he is not a stooge for Torstein Bell and the Chancellor, but he has grown his thinking close to Resolution. Not only does he have the same look as Bell, he has the same mindfulness.
The embarrassment of riches available to LGPS is down to the low cost of meeting liabilities in a high interest world and a lot of money in funds which have done well.
This analysis was a little simple for of Barnett Waddingham and I suspect others in the room, for whom such an analysis is “too simple”. “Risk” is by her name on her Linked in Profile and I suspect that few people are going to take such an extravagantly optimistic view of LGPS’ position as Toby.
I was sitting next to the GAD actuary who will ultimately have some say in the strategic direction of LGPS, if only because the Treasury of whom GAD are part of, influence the choices. Nangle laid them out
The surplus provides a cushion — to take more risk, less risk, or different risks
Nangle’s argument is that Britain can learn from the experience of Canada’s Maple 8 which has adopted pooling to get value out of private markets in a way that Reeves and Bell believe LGPS could do – and therefore do better.
The primary complaint against Private Markets in the UK is the cost of accessing them. Doing so through fund of funds is expensive. The costs of outsourcing are in the red ellipse
The cost of investing directly are in the rectangular boxes. The immediate reaction to those brought up to think “value for money” is that LGPS must invest directly and not through fund of funds.
We must have scale and we must see pensions invest internally rather than rely on a fund of funds system that can find added value but is simply too expensive
Nangle argues that LGPS funds and pools are “on the small side” and consolidation needs to happen if we are to make a Canadian-style move into private markets, especially UK private markets. But Nangle made a compelling argument for just such a movement, based on both the economic needs of Britain (the ultimate sponsor of these plans) and of members and employers, who need to spend more money on council services other than pensions.
Nangle’s conclusion is a simple one. It did not win the heart of Melissa and I could see Garth from Gad and Stephen Simkins of Isio, looking at the argument with a little scepticism. Risk is important to consider but reducing it is not necessarily in the interests of pensions. The low dependency of DB schemes in the private sector over the past twenty years compares badly with the achievements of LGPS, who have avoided de-risking and so avoided the 2022 disaster where private sectors lost one third of their assets in protecting notional funding positions which never materialised.
Nangle argued that LGPS was a splendid success story that could do much more for Britain than what remains of Britain’s private pension system, which has nowhere near the capacity to invest in the nation’s growth. I do not see this as “over-simple” and disagree with the critics, I am with Nangle and I suspect his arguments encouraged self-confidence in the hall.
In my view , LGPS can and should encourage good practice in our private pension system, not least our growing DC savings system which can move much more to being a DB system if it adopts the default decumulation put forward by the Pensions Bill. Much of the DC money could be absorbed into LGPS using the existing joiners privilege of swapping pots for pensions .
I hope that actuarial assessments due for publication later this year will lead to a more confident approach to assisting members with their private pots and I hope that the incredible capacity of LGPS to administer DB benefits can be put to work if we do push forward with CDC style pensions in the second half of this decade.
Toby Nangle left the PLSA event with a confident message.Making my way down the A1 with him, I realised that he is a man who properly understands the messages in the Pension Schemes Bill for LGPS and for the private funded pension schemes both DB – and let’s hope DC!
Here are his conclusions , as laid to us yesterday.
