Government rules out LGPS fund mergers “at this time”

The Government has said it does not intend to pursue mergers of Local Government Pension Scheme funds “at this time”.

A consultation published last week by the Department for Communities and Local Government instead puts forward two key proposals as part of a package aimed at saving taxpayers up to £660m over ten years.

These proposals, drawn up following a report by pensions specialists Hymans Robertson, are:

  • A move to passive management of listed assets like bonds and shares, accessed through a common investment vehicle; “this could save £230m annually by cutting investment fees and a further £190m by reducing transaction costs”;
  • Use of a common investment vehicle to invest in alternative assets, “ending the use of high cost ‘fund of funds’ to save £240m a year”.

The consultation also proposes that asset allocation will remain with local fund authorities.

The Hymans Robertson report suggested that the cost of investment in England and Wales was £790m. This was much higher than previously thought, the DCLG suggested.

Local Government Minister Brandon Lewis claimed that under the previous administration, the cost of town hall pensions almost quadrupled to nearly £6bn.

He added: “This government is taking action to reduce the massive and unsustainable cost of state sector pensions. The proposals I am setting out…. will help reduce investment costs by £660m a year. For the first year in recent memory, the cost of town hall pensions to taxpayers is now falling.”

There were 4.68m members of the Local Government Pension Scheme at the end of March 2013.