Tiffany Tsang , Head of DB, LGPS and Investment, introduces a PLSA project on the LGPS of tomorrow.
The Local Government Pension Scheme (LGPS) has shown its mettle over the last year and a half with its resilience in navigating through the impact of the global pandemic. But we can never rest on our laurels for too long. The PLSA was pleased to launch, at its annual Local Authority Conference in May, a research project dedicated to bolstering the LGPS of tomorrow: ‘Landscape and Future Challenges’. At its core, the work seeks to find sensible ways to mitigate risks we can see coming down the track, and maybe some that we can’t, through futureproofing. So, what do we really mean by this?
What’s this research project about?
The purpose of this project is to draw on qualitative and quantitative evidence provided by our LGPS members in order to:
- Develop a comprehensive understanding of the major issues and challenges facing the operation of the scheme;
- Establish a baseline of data and information to measure against in future years;
- Identify best practices or gaps in effective operations; and
- Identify where additional clarity is needed in guidance from the regulators and the government.
We’ll be organising our work around the key themes of People, Frameworks and Tools, and by the end of the project, we should be able to:
- Identify how the scheme may evolve in the future; and
- Begin to evaluate how futureproofed we are as individual funds and as a collective entity.
Areas to be explored include the long-term sustainability of the LGPS, data standards, budgets and resources, administration, LGPS employers, scams, reconciling differing positions on net zero, and talent management.
Policy context of the research project
There’s been a lot of change, and the LGPS has been under pressure for a long time. In recent years, we’ve seen pooling in England and Wales, pay freezes, the transition to the (CARE) pension scheme, and an increasing number of employers. The longer-term impacts of these developments are of course compounded by the overlay of new and emerging challenges such as the implementation of the McCloud judgment, expectations for responsible investing, talent management, and evolving administration issues.
There’s a third strand to this mad complexity. The developments exist within a changing external context where trends like increasing digitisation, demographic shifts and changes to working practices in response to the pandemic highlight the need for organisations of all kinds to ensure that their People, Frameworks and Tools remain operationally robust and coherent.
We’ve been working with our Local Authority Committee to ensure that the right issues are being given the proper spotlight in this piece of work. We have in this instance deliberately chosen to steer the focus away from pooling and governance structures, as these issues are too big and complex to look at properly alongside everything else identified, plus they are being picked up elsewhere, like by the Good Governance Project from the Scheme Advisory Board for England and Wales.
The PLSA invites its LGPS members to participate in this piece of work, and we hope very much that as many of you as possible can join in the roundtables in July and in completing the survey in September. The ultimate success of this project depends on our members coming out to contribute their views and best practices.
The LGPS has shown itself to be robust during the COVID-19 crisis, and a key question now is whether funds within the scheme can maintain their resilience. The answer to this will come down to so many factors, such as investment strategy, administrative efficiency, resources, the success of pooling – the challenges will differ for each fund. There won’t be a magic silver bullet, but hopefully this piece of work will help to identify what might go wrong, what lessons we can collectively learn from one another, and how we can mitigate risks from the unknown.
For further information, please get in touch with [email protected]