An analysis of key governace and investment trends in the LGPS, in association with Aviva Investors


Councils at the crossroads

Greater efficiency has been the watchword for years in local government, even before austerity began to bite.

It is hardly surprising, therefore, that council pension schemes are being asked to step up to the plate by working together more closely.

To take the temperature of the Local Government Pension Scheme at this critical moment in its evolution, Pensions Insight has conducted in-depth research in association with Aviva Investors into some of the key issues facing council funds.

This survey of key LGPS opinion formers focuses on governance and investment. We explored councils’ appetite for infrastructure and housing. On governance, the survey examined the degree of interest in joint working and whether councils should use their pension arms to invest in local projects.

The survey has been carried out against a backdrop of unparalleled financial pressure on local government, which looks set to continue after the next general election. As pressures intensify on public finances, the temptation to raid the LGPS kitty becomes greater.

It isn’t just Whitehall that is lured by the hundreds of billions of pounds worth of assets lying in council pension funds. Local politicians, faced by cuts to mainstream budgets, must find it hard not to be tempted by these same pots when they see pressing housing and infrastructure projects that cannot get off the ground because of a lack of capital.

However, as our survey respondents remind us, pension funds exist to benefit the member and not the council’s wider corporate objectives.

Our survey also confirms the government’s conclusion that schemes are overwhelmingly hostile to the idea of forced fund mergers, which undermine the local sovereignty that councils cherish so strongly.

However, it shows that schemes have responded to the government’s push to encourage more collaborative working, with more than half planning to participate in some form of collective investment vehicle.

The Local Government Pension Scheme is not sitting back and waiting for reform: it is actively shaping it.

David Blackman, editor, Pensions Insight