Where to do with the financial strength of Local Government Pension Funds?

Let’s not be shy about this. LGPS employers have put a lot of money into their schemes over the past 20 years to keep their pension obligations. It is not as if they had a choice, they are obliged to pay pensions even if there isn’t money in the fund. 

Because there is no “end game” for councils as there is in private pension schemes, they did not embrace leveraged LDI and so remained unharmed by this time three years ago. They have now the assets and the reduced liability valuations that mean on average the funds are nearly 150% in surplus.

This surplus does not exist in a silo. The councils who put in that money need help. Council Tax payers and payers of Business Rates are facing inflationary costs , high interest rates and struggle. It is not in the scales of fairness, that pensions are in surplus while those who pay the council bills struggle and the councils often struggle to deliver simple services like rubbish clearance.

What Steve Simkins is saying is that pensions could be delivering a good news story to councils and so to all of us.

Why are we not considering the implications elsewhere?

I know of a number of private pension schemes who have managed their affairs so well that they have surpluses and surpluses that could be used not just to improve pensions but to improve the capacity of the employer to make money to help shareholders and help more find gainful and more gainful work.

I hope that as we hone in on what is being labelled a “bad news budget”, Torsten Bell – advising the Chancellor, can remember the good news stories of pensions. LGPS is not just an example of a well run open DB pension scheme, it is a source of health around the country.

It is 30 years that I went to a meeting in Oxford where Frank Field declared pensions Britain’s “economic miracle”.

And “like magic”,  Oxford’s LGPS fund appears on my line of sight! One of those followers as the page goes up is now me!

This morning I am going to Oxford again, this time to meet alumni of Said Business School who want to do great things for British pensions and so for Britain.

Tomorrow I am going to sit at a table with more than 100 others to discuss the implementation of the new pensions, collective, DC with pensions driven by investment.

I wish LGPS well and Steve Simkins for making a point that should be made more loudly. British pensions can be our “economic miracle” again, as long as we recover our courage!

LGPS stayed a pension with guaranteed income to members increasing each year with inflation without restriction. It has shown us all that where there is trust, confidence and a mighty strong covenant, funded pensions can work.