‘Good value’ key to scheme reforms: NAPF

The chief executive of the National Association of Pension Funds said it had devised a code to ensure the government’s recently launched consultation on the LGPS, Opportunities for Collaboration, Cost Savings and Efficiencies, is conducted in the best interests of employers, taxpayers and scheme members.

Speaking at the NAPF local authority conference on 20 May she said: “The principles I have set out today are aimed at helping us collectively assess the success of reform and to guide us to a good outcome.

“Balancing these principles is not easy, I acknowledge, but that is the challenge. The NAPF looks forward to working with local authority members to respond to the consultation and to shape the government’s proposals.”

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The principles state that the outcome of reform should acknowledge the benefits that can be delivered by “developing new structures that leverage scale whilst also providing funds with sufficient flexibilities to invest in accordance with their local circumstances that is shown to add value”.

In the 25-page consultation, which closes on 11 July, the Department for Communities and Local Government stated that there was “scope for significant savings” worth £660m a year in the LGPS. It is one of the largest funded pension schemes in Europe, with £178bn of assets under management.

ProposalEstimated annual saving
Moving to passive fund management of all listed assets, accessed through a common investment vehicle£420m
Ending the use of fund-of-funds arrangements in favour of a common investment vehicle for alternative assets£240m

A damning 25-page study released by Michael Johnson, the independent pensions consultant, last year revealed that the “woefully inefficient” scheme could leave its 5.4m members struggling to make ends meet when they retire.

Mel Kenny, director of London-based Radcliffe & Newlands, has branded the revelations “disturbing” and in need of urgent attention.