27 October 2006
The administration of London boroughs' pension funds is inefficient and millions of pounds could be saved each year if they streamlined their processes, the Audit Commission said this week.
The 32 boroughs and the City of London all have separate pension funds, totalling £11.8bn with 414,000 members. The average annual administration cost per member is £126 compared with £44 for metropolitan council funds.
According to the commission, London councils could save £34m a year if they reduced their administration costs to the level of the average metropolitan fund.
Efficiency challenge: costs of administering local government pension funds in London, the commission's report published this week, suggested the creation of one London-wide pension fund and pension authority as a possible way forward. Other options included mergers and partnership working.
The higher administration costs were partly due to the higher costs of salaries and office accommodation in the capital but also because the 33 schemes do not benefit from the same economies of scale as other councils.
Audit Commission chief executive Steve Bundred said: 'London pension funds cost significantly more to administer than the national average. Our study has identified the reasons for the higher costs, and some of the options for securing significant savings.
'We hope that the 33 London boroughs, with the support of London Councils and the Department for Communities and Local Government, will use this report to move towards a more efficient system for the benefit of all their members and taxpayers.'
The October 24 report was welcomed by London Councils, formerly the Association of London Government. Chair Merrick Cockell said work was already under way to look at options for increased partnership working.
'Any study of this complex area needs careful consideration and we will want to examine in detail the conclusions of the report,' he said. 'We will want to work closely with boroughs, the DCLG and the Audit Commission to find the most appropriate, cost-effective way of administering pensions in London.'
Mike Taylor, chief executive of the London Pensions Fund Authority, said the authority would issue a formal response after it had consulted stakeholders.
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