A commentary on LGC’s Investment Summit.
Today’s big interview: Andy Burnham reveals ‘shopping list’ of more powers
Today’s big dispute #1: County and district leaders at loggerheads over reorganisation
Today’s big dispute #2: Councillors decry ‘vindictive and asinine’ committee changes
Even when local government is optimistic the pessimism is not far away. Thus, in a poll at the start of this week’s LGC Investment Summit, there was an air of surprise when a majority indicated they were optimistic for the future of local government pensions.
The history of the Local Government Pension Scheme (LGPS) has already been a long one, predating the Investment Summit, now in its 30th year. But the past few years have certainly provided an intriguing chapter.
Much of wider local government is of course experiencing its own reorganisation pains, with council mergers brought on by funding cuts widely agreed to be unsustainable. Likewise, the LGPS’s reorganisation into eight large investment pools (albeit with their 88 pension fund component parts still allocating assets themselves) was also driven by cost concerns and economies of scale. The aim is to cut investment fees and open new investment avenues, most notably in infrastructure.
It is too early to say whether the shift is wise, but there is a bolshy mood among the scheme’s champions. As Bob Holloway, pensions secretary of the Local Government Association, put it: “I think a scheme like the LGPS is worth fighting for. There’s no end of battles and skirmishes we have to fight.”
There are currently several potential enemies – known politely as ‘challenges’ – circling the LGPS. Finishing the setup of the pools, through finalising transition of assets and hiring staff, is perhaps the most obvious.
There is also pressure to clean up data on scheme members, the majority of them local government staff past and present, which could reduce liabilities. As Catherine McFadyen, partner and actuary at Hymans Robertson, said by getting a more accurate picture of who worked at the organisation when for what price, actuaries are less obliged to make generous estimates of potential payouts in the future.
And, significantly, there are signs The Pensions Regulator is taking a greater interest in the workings of the LGPS.
Rogers Philips (Con), chair of the LGPS Scheme Advisory Board, told a councillors’ session at the summit: “It can be no surprise to you that with the size of the fund that we are, the amount of members that we have, and the complexity of our governance and funding arrangements we are on their horizons.”
That representatives from both The Pensions Regulator and the Financial Reporting Council, which monitors corporate governance, spoke at the event shows that even as the LGPS retains links to local pensions authorities, national forces are at play.
All the clichés about Westminster politicians and policy wonks being consumed by Brexit remain true – a blessing and a curse depending on how much central government action you want on a given issue.
But this is not stopping the Scheme Advisory Board from dusting off a plan from 2015 to explore separating local government pension funds from their host authorities. The topic was brought up several times during the summit, at one point eliciting what Mr Holloway described an “audible gasp within the audience”.
The board moots two options: one separating the funds within existing structures, and the other to move them into new bodies, albeit while keeping them within local government law. But it stresses that all ideas are up for debate on this matter, and some councillors are clearly sceptical.
Given the friction already generated by the shifting responsibilities under pooling, it can be assumed the next few years of the LGPS will be just as interesting as the last few.
By Jimmy Nicholls, features editor