Tiffany Tsang applauds the resilience of the LGPS in the face of the pandemic.
The year 2020 will be remembered as the one in which Covid-19 stitched itself into the fabric of all areas of human existence. Unsurprisingly, its impact on the LGPS will directly inform our work for some time.
The effects of the virus will vary for administering authorities across the country, but based on the PLSA’s membership engagement thus far, as well as on two PLSA surveys conducted in March and April 2020, the LGPS is faring very positively under such difficult financial circumstances.
Three common themes have surfaced in our discussions with our LGPS membership: all will require careful monitoring in the coming weeks and months, even after the virus crisis begins to abate.
- Administration: The LGPS is able to continue paying pension benefits to members, which is the key metric for success at the moment. In fact, 100% of LGPS survey respondents said they are confident in meeting payment obligations to members over the coming months. The same percentage also said that their contingency plans are going well. The Pensions Regulator (TPR) urged for business continuity to be a priority across the LGPS before Covid-19, and those preparatory measures have now paid off. However, challenges remain: 57% of LGPS respondents report pressures with remote working, including difficulty with serving member requests; 40% are experiencing a shortage of staff; and 38% have funding concerns.
- Cash flow: For the immediate to medium term, cash flow will not be an issue. However, the full impact of Covid-19 on LGPS employers, and thus cash flow, remains unclear. The April 2020 survey found that 50% of LGPS respondents were only slightly concerned about employer strength. Particular attention will be paid in the coming weeks to the emerging situation facing colleges and universities, charities, leisure centres, housing associations, and other community associations with historical ties to local authorities.
- Investment strategy: The LGPS has thus far fared well with Covid-19 impacts. Forty per cent of LGPS respondents have decided not to change their investment strategy, suggesting that many are indeed well positioned for the long term; while 20% have yet to review their investment strategy. As always, the LGPS remains vigilant, with 90% of respondents “very” or “fairly” concerned about Covid-19 impacts on investments – though 40% of respondents do not know yet how their strategy will change. Value for money through transparency of costs will become even more important. If cash flow becomes problematic, a few may consider selling off assets, though this appears to be far from becoming a reality.
The PLSA will continue to work with our members on what we can do to help during this extraordinary time, and we’ll be following up on a variety of regulatory requests and queries. In the PLSA March 2020 survey, LGPS respondents said that the most important things for the PLSA to ask government and regulators for are:
- Eased LGPS regulatory controls to reflect the short-term market turbulence
- More flexibility on valuations and funding
- Extensions to statutory timescales
- Reduced administrative complexities.
The impacts and aftermath of the virus crisis will need to be reviewed in detail, and it will be an opportunity to make some strategic changes to LGPS processes and strategies where any weaknesses in administration and investment approaches have emerged. But for now, the resilience of the LGPS is something to be celebrated. The disciplined approach the LGPS has adhered to on good governance measures has stood the scheme in good stead.