LGPS funding levels improved by up to 12%, says research

LGPS funds should see positive improvements in funding levels after they complete their 2022 valuation, according to consultant Hymans Robertson.

Hymans has published analysis outlining the common trends emerging from the valuation process, within the context of current economic challenges in relation to inflation.

“The 2022 LGPS valuations take place against a background of rising inflation, post Covid and a cost-of-living crisis – a starkly different environment from the previous valuation,” says Robert Bilton, head of LGPS valuations at Hymans Robertson. But the main headline is that the improving funding levels of recent years has continued, with early research indicating this to be between 7% and 12%.

“Our analysis indicates that strong three-year investment returns of 27-28% have been the driver behind the improvement, more than offsetting higher future inflation expectations. Other factors such as salary increase and life expectancy post-Covid have had minimal impact on the funding position,” says Bilton.

“For funds, we would urge cautious optimism as experience tells us that the funding position does not directly drive employer contribution rates – these will start to be reported in the next few weeks.”

Hymans launched its latest nationwide LGPS assessment of knowledge and understanding at the end of September.

This provides LGPS funds with an opportunity to assess the knowledge levels of key decision makers and compare these on a nationwide basis.

It will highlight training requirements to all participating LGPS funds and will form part of a national report that will allow funds to benchmark their position against others and provide insights into technical, decision-making and roles and responsibility knowledge with the committee and board members.

“The pandemic has driven fundamental changes in the LGPS, from new ways of working and the growth of online tools, through to better remote training expectations from members,” said Andrew McKerns, senior governance and administration consultant.

“The results from the assessment are vital to help funds deliver and track the success of their training plans and meet the best governance standards expected of the scheme.”