Future-proofing the LGPS

Future-proofing the LGPS: readying for the next decade

Tiffany Tsang , Head of DB, LGPS and Investment, introduces a PLSA research project aimed at identifying and tackling the challenges facing Local Authorities.

A glance back over the last 10 years of the LGPS reveals how much has happened in just one decade. The Great Recession set off a series of austerity measures that had an impact on Local Authorities. From there, a series of pension reforms came barrelling towards us: the LGPS became a CARE scheme for future accrual; the number of employers joining the LGPS increased in record numbers; and the transitioning of LGPS funds’ assets into pools began. Rounding out the decade in review, we saw the steep rise of responsible investment landing at the centre of funds’ agendas, the McCloud judgment, and of course the impacts of the global pandemic. A conclusion from all this might well be that uncertainty is a necessary part of ‘business as usual’ thinking. Recognising the need for continued preparedness, the PLSA launched the ‘LGPS Landscape and Future Challenges’ research project at our Local Authority Conference in May 2021. The key aim is to help future-proof against emerging risks to the LGPS, by identifying challenges and sharing views on how they can be tackled. 

The project has given people working within LGPS funds opportunities to discuss how changes to the future landscape might affect their strategic and operating environments. Four workshops were held in July 2021, which considered the impact of regulatory frameworks and reporting requirements, strategic and operational relationships with employers who contribute to the LGPS, the potential and impact of tools and technology, and the longer-term issue of operational sustainability. There was representation from across the country and from both large and small funds, which helped to foster some lively discussions. Common themes were found in all sessions, reflecting the cross-cutting nature of many of the issues discussed. 

The first session set the scene, tackling the complex regulatory and reporting landscape. Just days prior to the first workshop, Pensions Minister Guy Opperman was quoted in the media, commenting on the fact that the LGPS is not under his department, but instead the MHCLG – that this is “a slight anomaly”. He is quoted as also saying, “I personally think that’s wrong. It would be my view that it would be better to have all such schemes under one house... and that the LGPS would be run by DWP1.”  While there were no takers in the virtual room of the PLSA research workshops for a proposal to move the LGPS to DWP from MHCLG, there was recognition that the current frameworks certainly leave room for improvement. Many reported their experiences of increased reporting requirements, for multiple entities, with little clarity as to where they should place their priorities. This pointed to larger issues such as whether key stakeholders truly understand the profile and needs of the LGPS. The general view was that at best the LGPS is conflated with other public sector schemes and at worst ignored, despite its overall size, impact, and the profile of savers that it looks after.  

Recognising the key role that the LGPS will play in securing the financial futures of local authority workers, some of whom are low-paid and financially vulnerable, it was concluded that further work urgently needed to be done to ensure that governance frameworks and communications with LGPS savers are fit for purpose.   

Later sessions focussed on the broader and changing landscape, with many indicating that employer affordability is increasingly an issue, particularly for smaller employers. The sessions highlighted many areas of good practice with employers. However, there was a general view that long-term affordability was not historically considered at the point of transferring into the LGPS. 

Many shared how they used both new and existing technologies to provide efficient services in an often very resource-constrained environment. Existing talent management challenges persist, particularly around staff retention in the face of complexities arising from the McCloud judgment implementation looming. There is of course continued competition for pensions talent outside LGPS walls as well. Questions of operational sustainability went beyond issues of budget constraints and participants spoke of changing views of how success could be defined and how the LGPS could be rebranded, to showcase just what an exciting place it could be to work in. 

These rich discussions raised important and often challenging issues and we encourage our LGPS membership to continue to share their thoughts with us, which will enhance our findings for the final report. The project is due to wrap up at the end of the year. 

1. Mallow Street, ‘Opperman: LGPS should be under DWP’. Available here.

For further information, please get in touch with [email protected]