LGPS could decentralise cost transparency monitoring

Each of the Local Government Pension Scheme (LGPS) funds in England and Wales could be given responsibility for acquiring their own cost transparency monitoring service under new plans unveiled at the end of December.

The LGPS Scheme Advisory Board announced on 31 December that it was exploring replacing its current system, procured by the board for use by all LGPS funds, with a “framework” approach.

This would bring it into line with other LGPS services, which are acquired through the National LGPS Frameworks.

It would effectively mean that each of the 86 funds in England and Wales – as well as the eight pools – would be responsible for acquiring their own supplier for investment cost monitoring and reporting.

National LGPS Frameworks was set up by the LGPS to streamline procurement. It conducts due diligence and appoints “panels” of providers from which funds can select their preferred supplier.

The Scheme Advisory Board launched an “early market engagement” request in July last year in relation to the cost monitoring system.

Technology company Byhiras currently runs the LGPS’s Code of Transparency compliance tool, managing reporting templates and the collection of data from asset managers. Its contract is due to expire in August 2026.

The Scheme Advisory Board said the framework approach would “continue to offer basic collecting and reporting of cost templates to all funds but allow them to procure data validation and benchmarking services alongside this in a seamless fashion.”

The board said it was also exploring “additional avenues to promote compliance” with the Code of Transparency, including issuing further guidance or amending investment regulations.

The LGPS Code of Transparency was introduced in 2017 after a cross-industry working group investigated how to improve transparency of asset management costs. The group drew up reporting templates that are now used across the LGPS and by private sector schemes through the Cost Transparency Initiative.

There are currently 156 service providers signed up to the Cost Transparency Initiative, according to the Scheme Advisory Board’s website.

According to Byhiras’ website, at the start of last year the system was updated to support quarterly and biannual reporting from asset managers. The company said LGPS funds were “increasingly seeking more frequent and useful data” on investment costs.