The Society of Pension Professionals highlight industry concerns with Government proposals for LGPS

The Society of Pension Professionals (SPP) has responded to the current Government consultation on the Local Government Pension Scheme: Fit for the future with a number of challenges to consultation proposals, calling on the Government to “seriously reconsider” its position and to revise the associated timescales.

Timetable for change
The SPP response states that, “The Government has indicated that it expects proposals to be submitted by 1 March 2025, i.e. within less than two months of this consultation closing… It seriously constrains the ability of pools to undertake a full assessment of the merits of the different options which Government is intending to prescribe. We are not at all convinced of any merit in forcing those pools to change their approach, incurring further unnecessary costs and fundamentally changing the relationship between partner funds that has built up successfully over the last decade.”

Transfer of assets
Other areas that the SPP have highlighted as being of concern include proposals to require the transfer of assets into pooled vehicles. Here, the SPP explains; “We support the aim of encouraging the pooling of LGPS assets, within the overall fiduciary duty of administering authorities to determine the best approach for their own fund” but go on to state that the SPP, “…does not support the proposal to ‘require’ the transfer of listed assets into pooled vehicles owned by the pool company” instead suggesting that a “comply or explain” approach is adopted.

Regulation
In relation to proposals for compulsory FCA authorisation, the SPP highlights that the consultation does not provide any evidence to support why a March 2026 deadline is considered an appropriate deadline for non-FCA authorised pools to become so, before explaining, “Government should not compel those funds who are not FCA authorised to become so given there is little to no evidence that any of the hypothetical benefits being suggested can be sufficiently evidenced.”

Kirsty McLean, Chair of the SPP’s Public Sector Group, said: “We agree with the Government’s opening consultation statement that the LGPS is fully funded with good investment returns and has achieved many successes in recent years. Indeed, on its pooling journey over the last decade, the LGPS has demonstrated a willingness to collaborate where that leads to efficiencies and improves investment, governance and performance.”

That journey continues and, whilst it is right for Government to challenge the sector to assess its progress, the type and pace of changes being proposed run the risk of derailing some of the good work of the last decade, as well as impinging on administering authorities’ fiduciary duties. Within the LGPS it is not clear how these proposals will meet either of the Government’s objectives of improving pension outcomes for members or increasing investment in the UK. As a result, we are urging them to carefully reconsider both the nature and pace of some of these proposals.”