Zoe Alexander: Any policy proposing changes to the structure or approach of the LGPS should be supported by evidence, and detailed plans
Reform UK calls for the Local Government Pension Scheme (LGPS) to be overhauled have been rejected by the industry.
Yesterday, Reform UK called for the LGPS to reduce the "egregious" fees it pays fund managers by moving assets into low-cost global equity index and bond trackers.
Deputy leader Richard Tice claimed that local authorities in England and Wales were paying at least £1bn more than they should in fees to fund managers – noting that inadequate performance had cost between £8bn and £10bn annually over the past five years.
Tice told a press conference that "for too long, British taxpayers have been taken for mugs" – describing the expenditure by pension funds as "enormous" and the fees as "frankly egregious".
Pensions UK led the industry response – saying Reform had made claims about the LGPS that it did not recognise.
It said the LGPS is "one of the world's most successful pension schemes" and was already on a reform journey projected to save millions and further enhance the effectiveness of the scheme.
Pension UK said any policy proposing changes to the structure or approach of one of the largest pension funds in the world should be supported by evidence, and detailed plans.
Director of policy Zoe Alexander said: "The LGPS is one of the world's most successful pension schemes, delivering pension payments to millions of workers across the country. It has consistently demonstrated financial resilience and operational stability throughout regular periods of rapid change, capitalising on economies of scale and a collaborative culture.
"It provides pensions on behalf of 15,000 employers and close to seven million workers in local government. Those pensions are not generally large: the average sum received is around £5,000 per annum.
"The latest valuation figures show that the LGPS delivered an aggregate return of 8.9% in 2024 with average funding level of 108%. The next valuation is expected to show this position even further improved. Significant improvements in funding over this valuation cycle are already expected to result in reduced employer contributions. Any savings could be passed onto taxpayers via reductions in their council tax but these decisions are for individual councils."
Pension UK said the policy of consolidation, pursued by both the last and current government, had already led to considerable savings, estimated at over £1bn, savings that were expected to accelerate as the pooling reforms proceeded rapidly.
Alexander continued: "The vast majority of LGPS investments are now carried out via Financial Conduct Authority-authorised pools, and from spring next year, it is expected that all investments in England & Wales will be managed by these large, sophisticated vehicles.
"Like all significant UK pension schemes, the LGPS takes responsible investment seriously and integrates climate considerations into overall risk management.
"The LGPS also has a strong record of investing in Local areas – and we anticipate that the latest government reforms, and the devolution bill, to strengthen this further. It has the highest proportion of investments in domestic assets in the UK pension sector.
"Any policy proposing changes to the structure or approach of one of the largest pension funds in the world should be supported by evidence, and detailed plans. The duty of LGPS is to look after members' interests."
The UK Sustainable Investment and Finance Association also hit out at Reform UK's announcement.
UKSIF chief executive James Alexander said: "Investors managing capital over decades recognise that global warming is among the greatest threats to financial returns. Sustainable strategies help to address these material risks, safeguarding portfolios and supporting stronger long-term gains.
"Ill-advised attempts to override this forward-thinking approach could hollow out hard-earned pension pots. Investment decisions should be guided by experts who understand these financial principles, not parties with short-term political agendas."
