Yesterday I blogged about the failure of LGPS to win the hearts and minds of many in Birmingham, Wolverhampton and West Midlands in general by sharing their £11bn pension fund surplus with the councils and council tax payers. The West Midlands LGPS scheme is run out of Wolverhampton (referred to as the Wolverhampton hoard)
I shared some of the blogs and Linked in Blogs from the Blackstuff.
I did not know that Reform UK would use the anger of many outside the pension bubble to launch a proposal to convert the £500bn LGPS into a wealth fund by Reform UK.
But I had warned LGPS last summer that it needed to work hard to avoid just this happening. Last June I was at the Pensions UK Conference of LGPS folk and there was talk amongst the Reform UK councillors recently elected to post and to office at LGPS that things were going to have to change.
I argued then that LGPS could not sit back on dormant assets and would have to get on the front foot, offering their expertise in investment and administration to the private sector. I also argued that the LGPS could act as a DC consolidator, converting DC pots into LGPS index linked pension using a facility it had in place but did too little advertising.
There were one or two people I spoke to who I have met since but no enthusiasm for change. Why should the LGPS change, it was sitting in such a comfortable position with huge surplus and jobs for lives.
Pensions UK, who are major beneficiaries of LGPS support and who run these conferences have sprung to action within hours of this news
When the news broke, I was with Unison’s pension people (who I have considerable respect for). We were exploring how LGPS could take on new workers and pay them DB pensions , agreeing that some employers can enter LGPS but have not the strength to do so. Ironically we were thinking about a CDC scheme for some workers. I was not aware of Reform’s plans at that time, here laid out by the FT
As part of the pension plans, Reform said that new workers joining the LGPS would be offered a defined contribution pension, with the defined benefit element to be closed to new members. The pensions of existing council fund members would be unaffected.
These changes are part of a range of changes, including the “de-woking” of the £500bn fund in a language that reminds me of Donald Trump. Unsurprisingly, the Pensions UK has now jumped into action.
No doubt we will not have to wait till June when the next LGPS conference organised by the Pensions UK for LGPS to discuss the threat to it. They will have several sections in Edinburgh at the Pensions UK Conference in March.
The reality that Pensions UK and the pensions bubble see is not the reality which Reform councillors and the millions who have voted for them so far see. In May there are more elections and Reform are predicted to take a number of Local Authorities and with them power in the management of LGPS. If Reform were to become our next Government it is clear that change will not be from within but exposed from outside the bubble.
I do not agree that LGPS should be converted from what it is , because it is a success and as Glyn Jenkins of Unison described pension reform
“change is rarely beneficial and very expensive to implement”
I think that LGPS has been complacent and frankly lazy in its working with the employers and most of all the councils that have paid heavily into it when liabilities appeared expensive and contribution rates were demanded that crippled councils and participating employers in it.
It was eager to demand money to get out of deficit but LGPS in its 100+ schemes (if you include Scotland) is not showing the same vigour in keeping the employers and councils out of deficit. It can and it doesn’t and that is what has allowed Reform UK to make political capital out of demanding that LGPS ceases to be DB for new entrants and stops providing support for what it terms “woke” investment measures.
I don’t support Richard Tice but I admire his populism. Reform UK are popular among working people who don’t get pensions (just pots) and who see LGPS as a gravy train for those who run it. It is time for LGPS to show some leadership and engage with the country Reform’s Richard Tice points out Reform’s proposal
would enable councils to cut existing employer contributions to about 10 per cent, “saving councils millions and millions every year”.
The average employer contribution in the LGPS is about 21 per cent of pay.
The pooling structure of LGPS would be scrapped and LGPS managed as one fund
The reform of LGPS proposed by Reform UK will be very popular with the country though not with the pension industry. It is what I warned would come, now LGPS must get out of its comfort zone and prove it is worth the money it has demanded and now sits on.