More Efficient Local Government Pensions

A couple of weeks ago I noticed that the Government has begun the process of seeking advice on how to manage £150 billion of Local Government Pension Scheme assets in a more efficient manner.

Currently these assets are spread out over 89 separate schemes, each managed independently by a separate investment committee, with separate fund managers and advisers. Clearly the Government is actively looking at some degree of consolidation, to try and make the overall management of this sizeable portfolio more streamlined -  but could it be that the Government is thinking about more extreme changes?

The local government scheme is unique, as it is the only major funded public sector scheme in the UK.

All other public sector schemes are unfunded. If the local government scheme starts being run in a more unified fashion, instead of 89 independent fiefdoms, then it is not difficult to see that the temptation to turn the scheme into an unfunded, Government-backed arrangement may become irresistible.

There is, of course, a clear precedent for this. When the Government took on responsibility for the Royal Mail pension scheme, it pocketed assets to the tune of £30 billion. The prospect of a further £150 billion dropping its way in treasury coffers may make even George Osborne drool.

John Broome Saunders
Actuarial Director

Telephone: +44 (0)20 7893 3456

Email:  contactus@broadstoneltd.co.uk