2022 LGPS valuations offer optimistic view for LGPS’s long-term funding

The 2022 valuation was extremely strong for LGPS funds in England and Wales, reveals Hymans Robertson in its report LGPS 2022 Valuation: The Big Picture.

The report aims to help LGPS stakeholders better understand the funding position of the LGPS and to put their own funds’ results into context.

It is based on a review of whole fund results, and the analysis outlines the common trends apparent in relation to contribution rates and funding positions.

Robert Bilton, head of LGPS valuations at Hymans Robertson, said: “The 2022 LGPS valuations conclude in a very different environment from which they started with inflation, a worldwide pandemic and a cost-of-living crisis all featuring within this triennial period.

“Prior to valuation, there was an expectation that the funding position of the LGPS would improve, which has proved to be correct.

“Higher short-term inflation has been more than offset by better than expected investment returns. Our analysis indicates that the average increase in fund asset values was 27.5%, with some individual funds well over 30%.

“For funds, the delicate balance between security, affordability and stability remains a constant consideration when setting contribution rates.”

Overall, the average employer contribution rate has reduced in 2022, down by 1.1% of pay to 20.8% of pay.

The analysis gives good cause for optimism that the long-term funding sustainability of the LGPS is robust. This is due in no small part to the hard work undertaken across all funds for more than a decade.

Bilton added: “While the good news is welcome, the hard work doesn’t stop, and it is important that funds use the next two years to continue to systematically review their risks to keep them in the best place possible ahead of the valuations in 2025.”