UK - Pending reforms of the £83bn Local Government Pension Scheme could lead to a "massive consolidation" of administration in the sector, managers believe.
The Office of the Deputy Prime Minister is currently preparing its fourth stocktake discussion paper of LGPS administration.
It is expected to highlight concerns that smaller authorities are struggling to offer a full range of services at a cost-efficient price – and suggest a consolidation of administration to save money.
West Midlands Metropolitan Authorities Pension Fund chief pensions officer Mike Woodall said it was likely recommendations would be made about the optimum size of local government schemes. This could lead to regional administration centres for individual funds.
He said that consideration of “optimum size” was particularly astute in London where employment and rental costs are out of line with national averages.
He added: “It is likely that the optimum size that the ODPM recommends may well be greater than the average size of a London borough pension fund.”
But London Pension Fund Authority chief executive Peter Scales noted that even the smallest local government scheme was still a “big pension fund” when compared with most of the private sector – and said other issues affected small LGPS schemes more.
He said: “The problems that smaller schemes, with fewer staff, have is that they are more exposed to losing key staff.”
He added: “Whether there are real economies of scale in pensions administration or whether the more local focus is better is still a matter for debate.”
Separately, the £400m London Borough of Hammersmith & Fulham Superannuation Fund has gone out to tender for pensions administration services.
The scheme – with 4500 active, 2800 deferred and 3504 pensioner members – has set a time limit of October 15 to receive tenders. It is advised by Hewitt Bacon & Woodrow.
Hammersmith & Fulham has already been receiving some administrative assistance from the London Pension Fund Authority on a temporary basis.
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