The foundations are in place for the scheme to be a model of excellence, says the shadow scheme advisory board’s chair
Data, data everywhere but none of it makes sense. This is the somewhat adapted line from The Rime of the Ancient Mariner, which springs to mind whenever I think of pensions and data, and never more so than with the local government pension scheme.
Putting in place radical changes for the LGPS, the world’s fifth largest pension scheme with 4.6 million members and nearly £180bn of assets, is no small task. Assessing the health of the scheme and answering the question, ‘what does good look like?’ relies heavily on ensuring we have decent data.
This is why earlier this year the then-minister for local government Brandon Lewis asked the shadow scheme advisory board to help produce an annual report for the LGPS, bringing together data from all the 89 funds in England and Wales, in one place.
I’m pleased to say that we are on the brink of publishing the LGPS Annual Report 2013, but for now, here’s a sneak preview of what to expect.
Some 9,340 employers participate in the LGPS across England and Wales covering 4.8 million people – as at 31 March 2013. The average age of an LGPS active member is 47 and the average age of an LGPS pensioner is 67.
The LGPS covers a total of £180bn assets under management and its liabilities are estimated at £227bn, indicating an overall funding level of 79%.
As you will know from the consultation launched in May 2014, Local Government Pension Scheme: opportunities for collaboration, cost savings and efficiencies, the board is actively looking at solutions to tackle the estimated funding deficit of £47bn to ensure that we have a sustainable LGPS for future generations.
In terms of investments, LGPS assets are invested across the globe with a return of +12.5% after fees for 2012-13. Forty-one per cent of assets are in pooled investment vehicles, 38% are invested directly into equities and the remaining 21% is split across other asset classes.
There is plenty more information in the LGPS Annual Report 2013, so watch this space.
Following publication, the next step for the board will be to start working on the Annual Report 2014 and a suite of LGPS ‘health’ indicators, which will enable us to assess and benchmark the overall shape and condition of the scheme against other large pension schemes, as well as the relative health of each LGPS fund.
Once these are in place, for the first time we will have a true picture of how well individual funds are performing across a range of factors, such as funding levels, governance, investment strategies and administration costs.
So there’s still more work to be done, but we have come a long way in putting the foundations in place for the LGPS to be a model of excellence.
Joanne Segars, chair, shadow scheme advisory board, and chief executive, National Association of Pension Funds