LGPS market value falls by £14.8bn amid Covid-19 uncertainty

The market value of Local Government Pension Scheme (LGPS) funds in England and Wales decreased by £14.8bn over the last financial year, falling 5.1 per cent to £272.4bn.

A statistical release from the Ministry of Housing, Communities & Local Government said this decline, which is the first drop in value for five years, reflected “the uncertainty seen in the financial markets at the end of financial year due to Covid-19”, and noted that the funds’ like-for-like income had increased by 2.6 per cent to £16bn.

This outstripped the £13.4bn expenditure for the 2019-20 tax year, which was an increase of £0.7bn or 5.6 per cent on the 12 months prior.

The bulk of this expenditure was benefits, which accounted for £10.9bn and had increased by 4.9 per cent since the previous tax year.

Employers’ contributions amounted to £7.7bn, up 7.7 per cent on 2018-19, while employee contributions increased by 5.5 per cent to £2.3bn, with both reaching five-year highs.

These accounted for 48 per cent and 15 per cent of income respectively, with a further 28 per cent stemming from investment income and the remaining 10 per cent consisting of transfer values and other income.

In another hint of Covid-19’s impact, 88,232 members retired from the LGPS in 2019-20, an increase of 4,724 or 5.7 per cent compared with 2018-19, as the number of employees having their deferred benefits paid early rose by 13.8 per cent.

This portion of the retirees accounted for over half (58.6 per cent) of the total employees retiring.

Conversely, the number of people leaving the LGPS because of normal retirement decreased by 2.0 per cent from 2018-19, dropping to 25,820, while the number leaving due to redundancy reduced by 12.8 per cent to 7,679.

Total membership of the LGPS increased by 1.9 per cent to 6.1 million, with 2 million of these being employees who are still contributing to the scheme, 1.8 million being pensioners and 2.2 million being former employees who are entitled to a pension at some time in the future.

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