The second half of the marathon days of inquisitions of 23 pension experts began with LGPS – this 2nd Sept. The link to the conversation is here
The conversation between Roger Phillips and the MPs over investments of LGPS, fiduciary duty and the use of pools was brilliantly smooth. This meant a very politic approach towards “benefit” investment.
The conversation was between equals, I can imagine that every MP would want Roger on the team. There was also erudite talk from actuary McInroy, who welcomed the prospect of lower employer contribution following the 2025 valuation by GAD.
The discussion was at a very high level and only focussed on what goes well with local communities without getting down to black bin bags and failing housing. Sensitivities are to the fore at the moment, but to LGPS officers they have been every other moment. It is amazing that LGPS should operate in a goldfish bowl when other schemes don’t – but here is what you get with engagement.
Councillors invest locally in their job and the pensions they look after are also investing in the same areas.We are seeing some understanding of this from the recent attack on LGPS by Reform. But again conflicts on returns are so difficult and this discussion is interesting.
Should investment be local or should consolidation of pooled fund is to diminish these conflicts? Phillips carefully points out that though being the 6th largest funded pension in the world it punches below its weight. This the Pension Schemes Bill and Reform agree. Consolidation of pools assumes that weight may be best punch when working collaboratively together.
Converting funds to pools and pools towards one pool assumes big is best and we are already seeing the collapse of 8 pools to 6. There is considerable discussion about the disruption this would involve as stage one, but I suspect that there is considerable threat not just to the pools but to advisers and Robert McInroy of Hymans Robertson was eager to point out the costs of change.
The direction of travel of the Pension Schemes Bill is towards overall consolidation and it is something that LGPS with its 15,000 employers 80+ funds and multiple investment pools does not behave like one pension. The other threat did not come up in this meeting but could not be far from either Councillor Phillips or Robert McInroy. It is Reforms accusation of “egregious” costs within LGPS which is a lot about there being too many of all of the above duplicating each other.
It looked as if no Reform MPs (least of all Richard Tice) were on the general committee but that is through lack of their MP numbers, not intent which is to shake up LGPS even faster than the Pensions Minister.
I only wish that Britain’s largest funded pension scheme could get on the front foot to help its membership towards the goals of the Pension Schemes Bill and the Pension Dashboard.
Across England and Wales the LGPS currently has 6.7 million members:
- 2.1 million people are currently paying into the LGPS
- 2.1 million people are being paid a pension from the LGPS
- 2.5 million have a pension with the LGPS that they have not taken yet
Every one of those 6.7 million members had or are having the opportunity to swap a DC pot for an inflation protected LGPS pension at neutral cost.
How I wish I was sitting on the General Commission asking Mr Phillips and McInroy whether they’d considered the opportunities to resolve the problems the Pension Schemes Bill is trying to resolve.
LGPS needs forward thinking to get Reform and the Government on their side.