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Local government pensions in 'strong financial position'

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A government review of the Local Government Pension Scheme has judged the scheme to be in “a strong financial position”.

The government actuary found total assets in the scheme grew from £180bn in market value to £217bn between March 2013 and March 2016, while aggregate funding levels rose from 79% to 85%.

The review, published yesterday, attributed the improved funding to “significant financial contributions from LGPS employers” and “better than expected returns on assets”.

“On our best estimate basis, the LGPS was in surplus in aggregate at 2016 (funding level approximately 106%), and around 60 of the 91 individual funds were in surplus,” it said.

“This means that we expect there is, on average, a greater than 50% chance that existing assets would be sufficient to cover benefits in respect of accrued service when they fall due.”

The review’s traffic light system for rating solvency and cost efficiency risks also showed improvement, with 70 out of 89 funds tested returning green flags across all metrics, up from 52 out of 90 based on 2013 valuations.

Although consistency between fund valuation reports was found to have improved, the review recommended that the Scheme Advisory Board looks into a standard for disclosures and into boosting the clarity and consistency of actuarial assumptions, with a view to reporting back to government.

A Local Government Association spokesperson said: “We look forward to working closely with MHCLG, the Government Actuary’s Department and local fund actuaries over the coming weeks to assess the impact of this first report under Section 13 of the Public Service Pensions Act and whether any recommendations to government should be made to ensure that future reports remain fair to those being judged.”

 

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