Steve Simkins

Steve Simkins is a smart actuary who works for Isio but thinks for us all and in this post he asks some questions that I have been asking in my head and asked at a recent Conference mainly delegated by LGPS officials. Steve asks if the pools of the LGPS collectively could be considered a sovereign wealth fund.

My question is whether pools of money larger than £100bn might not offer services to young CDC schemes. looking to be that size by the middle of the century.

That LGPS is overfunded is plain to see. Steve points out that the Government Actuary Department will need to oversee a valuation in England and Wales that must justify more contributions from council tax payers (ultimately) no more justifiable than the levy of the PPF insurance on private DB plans. The main difference is that while PPF has “temporarily” reduced its levy to 0% while Councils look like being charged on average 17% to ensure extreme prudence is maintained.

I would say that the LGPS pools are massively underused

1. Many of the 86 Funds in England and Wales could take on more “business” as some would say “liabilities” as LGPS Officials say. One thought comes to mind, those joining LGPS can bring their DC pots to the party and exchange them for LGPS inflation linked pensions. At the moment , it’s only in the first year and only some eligible take up the offer, why not publicise this a little more so that it’s not just the savvy who consider the deal?
2. Many employers who could join LGPS don’t. It is not made enough of. I don’t get the impression when I attend LGPS events that there is much excitement at taking on more liabilities by promoting the scheme to eligible employers
3. This one I brought up at that recent Conference, why don’t the large well run LGPS pools offer participation to CDC Schemes with the same whole of life ambition to provide pensions to members?

Now back to Steve Simkins who sees the success of LGPS pools as a problem, well I don’t. If there are brilliant people doing brilliant things and getting great results, why aren’t we having a debate that includes the ultimate funders of LGPS, the Council tax payers? I am not entering into a debate now on whether 8 should eventually become 6 or even 1. What I am asking is whether LGPS is going to start to do more with all this excess money they have got.

Will they do what the PPF has done and cut rates charged to overfunded councils to 0%? Or will they see the surplus as a buffer and consider promoting LGPS to all members to take onboard their DC pots to pay more pension, will they promote the scheme to employers who could but choose not to join? Will they operate as commercial fund managers for the new CDC pension schemes that will be too small to invest optimally in the early years on their own?

I put these ideas out there so that those who are CEOs of the pension funds of large authorities who have funds and so those in pools like Border to Coast can reconsider the Government’s “Fit for the Future” policy.

In the past six months I have not had any reason to write to the Pension Commission with an idea on what can better be done for this country’s pensions by Government interventions. Steve Simkins has set me thinking. Perhaps we ought to get LGPS working more as a national pension wealth fund to ensure we all benefit from its pools of excellence.

We don’t need more pots of money, we need instead pensions managed by our best investment managers!

What do you think Steve ?