Reform UK has branded the current status quo surrounding Local Government Pension Scheme (LGPS) investment performance and fees as "negligent", urging pension committees to "urgently" change course, as it announced plans for its own Reform UK pool.

Speaking at a party press conference, Reform UK Deputy Leader, Richard Tice, argued that the investment fees currently facing LGPS funds are "frankly egregious", estimating that the 13 councils included in Reform's analysis are overpaying by some £265m in just one year.

"Roll that out across the whole LGPS, and that's that's over a billion pounds of overpayment on fees that no one's been talking about," he stated.

Tice also argued that the current investment performance of LGPS funds is failing to meet expectations, with Reform UK's analysis suggesting that funds have underperformed cumulatively by almost £1bn over the past year.

Taking both the estimated overpayments and underperformance, Tice emphasised that this could represent £9-11bn a year, suggesting that this is the sort of funding that could improve the country's social care needs, for instance.

And Tice argued that, currently, there is "no accountability - no responsibility", warning that there is a "gravy train culture" in the LGPS, which is allowing taxpayers to be "ripped off".

Tice also raised specific concerns around the current allocation to illiquid investments, arguing that councils should consider capping illiquid investments at 10 per cent.

"This is simply financially incompetent at best. gross negligence at worst," he continued, arguing that "because people don't understand it, no one has dug into it".

However, Tice confirmed that this is set to be a key focus for the Reform party going forward, as it looks to "stop this ripoff, this complacency".

In particular, he revealed that Reform UK will be calling on local pension committees to "urgently change course", also lodging an urgent question to the Speaker to raise this in the House of Commons as soon as possible.

"In some councils there needs to be a serious review with a possible request for some significant refunds," he stated, calling on councils to "immediately" tell their advisers that they want to pay lower fees.

"This cannot go on," he stated. "It is simply unacceptable...The numbers are enormous: £8 to £10bn a year is the potential if this is done properly.

"And any council committee that says 'no, we're quite happy with the status quo' - mark my words, if you do that, you are showing you're on the side of the rich city investment managers."

Tice also confirmed that Reform UK will be looking to launch its own Reform UK branded pool manager, because "bluntly, we think we can do this better".

However, the government is currently pursuing plans to shrink the number of LGPS pools operating, with both Brunel and Access having recently failed to receive the green light on their future plans.

And despite the claims that this is not an overlooked topic that has been explored previously, the LGPS has been a key focus of the government's recent pension reforms, with a particular focus on LGPS investment, including illiquid assets such as infrastructure.

The comments from Reform have already sparked concern within the industry too, as Pensions UK said that it did not recognise the claims made by Reform UK, pointing out that the LGPS is one of the most successful pension schemes in the world and is already on a reform journey intended to further enhance the effectiveness of the scheme.

Pensions UK director of policy, Zoe Alexander, said: “The latest valuation figures show that the LGPS delivered an aggregate return of 8.9 per cent in 2024 with average funding level of 108 per cent.

"The next valuation is expected to show this position even further improved. Significant improvements in funding over this valuation cycle are already expected to result in reduced employer contributions."

Alexander also clarified that whilst any savings could be passed onto taxpayers via reductions in their council tax, these decisions are for individual councils.

“The policy of consolidation, pursued by both the last and current government, has led to considerable savings, estimated at over £1bn," she continued. "These savings are expected to accelerate as the pooling reforms proceed rapidly.

“Like all significant UK pension schemes, the LGPS takes responsible investment seriously and integrates climate considerations into overall risk management.

“The LGPS also has a strong record of investing in local areas – and we anticipate that the latest government reforms, and the devolution bill, to strengthen this further. It has the highest proportion of investments in domestic assets in the UK pension sector.

“Any policy proposing changes to the structure or approach of one of the largest pension funds in the world should be supported by evidence, and detailed plans. The duty of LGPS is to look after members’ interests.”

UK Sustainable Investment and Finance Association (UKSIF) CEO, James Alexander, agreed, stressing the need for policy to be driven by experts, not politicians.

“Ill-advised attempts to override [the current] forward-thinking approach could hollow out hard-earned pension pot," he stated. "Investment decisions should be guided by experts who understand these financial principles, not parties with short-term political agendas.”

The comments have also sparked concern amongst unions, as Unison general secretary, Christina McAnea, warned that "forcing council staff on to inferior pensions would leave retired workers worse off and add to the already severe recruitment crisis in local government".

“Employees’ pensions aren’t the reason so many councils are on a financial precipice. That’s down to years of budget cuts from Conservative governments," she continued.

“The sums involved appear to have been plucked out of the air by Reform UK. The latest evaluations of the scheme are expected to show it’s well managed with healthy returns.

“The country desperately needs a world class social care system, but making council staff poorer and elderly people more vulnerable isn't the way to deliver it.”

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