Govt giving 'serious thought' to cutting number of LGPS funds

Local Government Minister, Simon Hoare, has said that he is giving “serious thought” to the prudence of retaining as many as 87 Local Government Pension Scheme (LGPS) funds, suggesting there could be a "better way”.

Speaking at a Local Government Authority (LGA) conference, the minister acknowledged that proper governance and management of investments comes with significant costs, with data showing that more than £1.7bn was spent on managing investments in 2022-23, and over £280m was spent in total on administration, governance, and oversight.

However, Hoare pointed out that whilst this is similar to the previous year, costs have been continuously rising over the past five years, representing an increase from £1.12bn and £194m respectively since 2019.

Whilst Hoare acknowledged that this level of expenditure is commensurate with the size of the LGPS and the investments managed by LGPS funds, he stressed the need to ensure that this money is spent "wisely", against the need to provide pension funds with the resources they require to offer and efficient and resilient service.

“I am giving serious thought to, and would value your opinions on, the prudence of retaining as many as 87 funds," he added. "I’m convinced there’s a better way."

LGPS funds have been facing renewed pressure to consolidate, as the government recently confirmed plans introduce a March 2025 deadline for the accelerated consolidation of LGPS assets, in a move that is expected to help unlock £25bn by 2030.

However, industry experts have expressed concerns about the impact of the proposals, with particular concerns emerging that the proposed transition deadline could create unnecessary risks” and substantial operational challenges.

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