LGPS management costs rise

28 Oct 15

The Local Government Pension Scheme spent a total of £12.1bn in 2014/15 against income of £15.2bn and management costs appear to have risen significantly, government figures revealed.

According to a statistical release issued by the Department for Communities and Local Government today, £8.3bn was spent on pensions, lump sums and other benefits, £3bn on the disposal of liabilities, £689m in fund management costs and £121m in administration costs.

Fund management costs of £689m appear significantly higher than last year’s figure of £449m. However, this is due to a change in the way the costs are reported during 2014/15 following revised guidance from CIPFA.

“This [rise in management fees] is principally a result of greater transparency rather than costs rising, as CIPFA’s reporting guidance on how to properly account for LGPS now requires a much higher degree of disclosure,” said CIPFA chief executive Rob Whiteman.

“As a consequence, through improved transparency and understanding of fee levels, it should now become more possible to assess the relative value of both different assets and different fund managers.”

Elsewhere, the DCLG statistics show that employers’ contributions to the LGPS totalled £6.9bn, while employees’ contributions were £1.9bn. Investment income was £3.3bn and £3bn was received in transfer values.

Expenditure in 2014/15 was 79% of income, up from 77% last year and just 58% in 2005/06.

The market value of LGPS funds in England at the end of March this year was just over £200bn, an increase of 13% on its value on March 2014.

Whiteman observed that employers were taking a responsible approach to deficits and upped their contributions by £800m over 2014/15.

He added: “However in the wider context, as the level of these employer contributions rises, already hard-pressed councils will have even tougher choices to make around areas of discretionary spending.”

The LGPS in England has more than 4.85 million members, of whom 1.8 million are employees still contributing to the scheme, 1.4 million are pensioners and 1.7 million are former employees who are entitled to a pension at some time in the future.

For the first time, data was collected on the 12,603 employers involved in the scheme. Of these, 2,730 are local authorities, 4,278 are centrally funded bodies, such as academies or sixth form colleges, 1,482 are other public sector bodies, such as national park authorities, and 4,051 are private or voluntary sector bodies such as passenger transport executives or urban development corporations.

  • Vivienne Russell

    Vivienne Russell is managing editor of Public Finance magazine and publicfinance.co.uk

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