Fewer than half of LGPS professionals support consolidation
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Local Government Pension Scheme representatives remain unconvinced by asset pooling as just two in five support it and a third oppose it, a recent survey by the Pensions and Lifetime Savings Association has found. Many also feel regulation should be changed so there is one regulator for all pension schemes.
In November last year, the government said it expects LGPS asset pools to reach £200bn or more by 2040, when the LGPS could reach total assets of about £940bn. In March 2023, combined assets stood at about £354bn, according to the LGPS Advisory Board’s latest annual report, published on Tuesday
However, nine years after it was first announced and six years since the deadline for starting to pool assets, the government’s LGPS consolidation agenda still does not find wholehearted support. Among 57 LGPS members of the association surveyed last month, just 43% said they support consolidation, and nearly a third (32%) said they oppose it.
Perhaps paradoxically, the results, presented at the PLSA’s Local Authority Conference this week, also suggest a quarter (24%) of respondents think there should be about half of the 86 funds that currently operate in England and Wales and a similar proportion feel there should only be about a quarter.
The main benefits of consolidation are believed to be lower costs (60%), better administration (47%), governance improvements (44%), better delivery of member services (44%) and improved investments (42%), according to the PLSA’s survey. On the other hand, lack of control (54%) and lack of accountability (54%) were cited as the main downsides.
The PLSA also surveyed respondents on how they are regulated. A majority (67%) want to see LGPS funds become separate legal entities from the administering authority. Only half (52%) think pension boards should remain as part of LGPS governance.
Who should regulate LGPS funds was a further question where many would like to see change. The LGPS is currently within the remit of the Department for Levelling Up, Housing and Communities, while the Pensions Regulator looks after administration and governance standards. Six in 10 respondents (62%) believe there should be a single regulator for private and public sector pension schemes.
There seemed to be less agreement on who would be best placed to take on this role. Slightly fewer than a third (29%) believe LGPS funds should be regulated by TPR, while 23% said the Department for Work and Pensions should regulate the LGPS by 2035. Only 19% thought DLUHC should regulate and supervise the LGPS by 2035.
The PLSA’s deputy director of policy, Joe Dabrowski, said: “The LGPS operates in a complex regulatory environment with different parts of the LGPS required to report to a number of disparate bodies. We have called for the new government to put into action the recommendations from the LGPS Scheme Advisory Board’s ‘Good Governance Project’ to develop a common standard on governance and foster effective relationships between pension funds and asset pools, with a focus on the type and quality of outcomes administering authorities should aim to achieve.”
Overall, LGPS professionals see government demands to invest more in the UK (38%), pensions dashboards (38%), the green transition (35%) and LGPS consolidation (29%) as the initiatives with the greatest impact over the next 10 years.
