Our response to the 2024 LGPS Pensions Investment Review

A challenge has been set for the Local Government Pension Scheme with a new government seeking to maximise the benefits to UK growth of investment by the scheme.

This ambition was clearly set out in the Pensions Review Call for Evidence which was published on 4 September 2024.

On 25 September 2024 we submitted our response in respect of the Local Government Pension Scheme (LGPS) – you can download a full copy here.

The Government’s Pensions Investment Review focuses on defined contribution workplace schemes and the LGPS. The call for evidence sought input on key areas such as scale and consolidation in the pension market, balancing costs versus value, and increasing investment in UK assets. 

The Government is also considering interventions to promote, and possibly compel pension funds to allocate more to UK assets, with an ultimate goal of stimulating UK economic growth.

Our response addressed:

• Reviewing the success of pooling in the LGPS.
• The case for government intervention to encourage the increase in investment budgets.
• The potential for a more consolidated LGPS to increase investment in UK growth assets.
• The factors behind changing patterns in investment in the UK.
• The case for incentives to raise the level of UK growth investment in LGPS portfolios. 

Our response followed on the development of our thinking across these areas following the announcement of the Pensions Review on 20 July 2024 and the publication of its Terms of Reference on 16 August 2024.

In summary, we consider there to be a case for increased UK investment but at the right pace and with the right incentives. However, we do not consider that medium term radical reform of scheme structures would in any way guarantee such an outcome which would be better achieved by developing solutions which benefit both the scheme and UK growth over the short term. Rather, we see greater clarity from the Government on its aims and setting out clear legislative backing and statutory guidance on how the LGPS can meet both the review’s objectives and their fiduciary duty.

Background context to our thinking

You can see how our thinking developed in the following blogs:

• LGPS Policy: Is it about more than just the numbers? – addressed the claim that LGPS costs had increased by 70% since 2017 set out in the press release announcing the Pensions Review.
• The changing role of investment consultancy for the LGPS – delved into the role of consultants in a changing LGPS investment landscape.
• LGPS: key questions for the Pensions Investment Review – asked 12 challenging questions for the Pensions Review in an effort to promote positive engagement.

If you would like to discuss any of the points raised in our response or the blogs above please contact either Jeff Houston or Dave Moreton.