PLSA LA Conference: LGPS assets increased by 23.4% in 2020/21

The Local Government Pension Scheme’s (LGPS) total assets increased by 23.4 per cent year-on-year to £342bn, as at 31 March 2021, the Scheme Advisory Board’s (SAB) annual report for the LGPS has revealed.

During a session at the PLSA Local Authority (LA) Conference, SAB chair, Roger Phillips, outlined the key findings from the report.

Of the £342bn in assets, 66.2 per cent were invested in pooled investment vehicles, 13.4 per cent were invested in public equities, 4.6 per cent were in bonds and 2.3 per cent were invested in direct property, with 8.7 per cent invested in ‘other’ asset classes.

Total membership of the LGPS rose by 1.08 per cent to 6.226 million members, with over 1.8 million pensioners being paid during the year.

The Local Authority net return on investment in 2020/21 was 20.56 per cent, which was reflective of the market conditions over the year and set against the UK equities return of 30 per cent.

Total management charges increased by £196m, which was primarily driven by a £193m rise in investment management charges, while administration and oversight and governance costs remained ‘broadly stable’.

“It’s important to remember that the scheme remained cashflow positive, but of course we are a maturing scheme,” Phillips stated.

“The Baby Boomers are all retiring – we knew this and have been planning for this. Therefore, all the contributions plus invested income is now required to pay the pensions. There was a time when the contributions alone would not only pay for pensions but allow you to invest that surplus.

“The membership has grown and I think it’s important to remember there are 1.8 million pensioners in receipt of an LGPS member. It’s also important to remember that some of these people represent some of the lowest paid people in the public sector.

“Just a word on the total management charges – these increased by £196m and I’m sure there will be many that want to make something of that. The good news of that is much of the management fees is related to the value of your funds and investments, and therefore rises will come with that. It also reflects the change in the type of investments that are now being invested in.”

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