UK – Government ministers in the UK would not rule out the merger of local government pension schemes (LGPS) if they believed this would improve the system’s efficiency, but hard evidence is required to confirm the hypothesis, a leading civil servant has said.
Bob Holloway, responsible for overseeing the forthcoming reforms to the local authority funds within the Department for Communities and Local Government (DCLG), praised the collaboration already underway between funds – such as joint framework agreements.
But he said ministers “want to see more”.
He told the Public Sector Pensions conference in London last week: “They do not rule out the idea of merging funds to achieve further scheme efficiency, to improve investment returns.”
However, he said the merging of funds remained an “untested area”, and that a roundtable in May with various stakeholders that would debate reforms proposed by 2011’s Independent Public Service Pensions Commission chaired by Lord Hutton would be an opportunity to present evidence for and against consolidation.
He said it was important to have a “really robust” body of research to weigh up the advantages and disadvantages of consolidation, and that there could be a call for evidence by the department.
Brian Strutton, national secretary for public services at GMB and one of the union’s lead negotiators during the recent reform work, seconded Holloway’s call for evidence, saying there was currently no reliable data either way to demonstrate the benefits of merging funds.
“We don’t have reliable information,” he said. “In fact, our information about the LGPS is so bad, we can barely compare different funds anyway.
“I am completely indifferent about whether there are 89 funds, 10 funds or 200 funds. All I want to know is, will it improve performance yields? Will it do something about managing our deficits? Those are the only two criteria I particularly care about.”
The comments come after London Pensions Fund Authority (LPFA) chairman Edmund Truell said the idea of pooling local authority assets was “gathering pace”.
The LPFA has been one of the driving forces behind a debate to merge London’s local authority funds.
Strutton said it was currently much more important to ensure the local authority schemes reported data in the same fashion so that “good, comparative data” could be collected that could be the basis for informed decisions.
He later said a national board for the LGPS – a reform suggested by Hutton in his report – should formulate the metrics and produce an annual report that showed fund performance on a comparative basis, rather than use a league table.
“The suggestion would be that, first of all, the board tries to speak to any funds that are in difficulty and tries to help them through some of those difficulties – perhaps even tries to bring in people from other funds to help them,” he said.
However, he warned that, in extreme cases, funds that failed to see improvement could be subject to a recommendation from the board to the secretary of state, currently Eric Pickles, who could then take “direct” action to improve the situation found lacking.
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