Pooling for Scheme Members
Q&A for LGPS members
At the Summer Budget 2015 it was
announced that the Government will work with Local Government
Pension Scheme (LGPS) administering authorities to reform how LGPS
investments are managed.
The LGPS is one of the largest
public sector pension schemes in the UK. It is a nationwide pension scheme for
people working in local government or working for other types of
employer participating in the scheme. In England and Wales the LGPS is currently
organised as 91 funds, each with an administering authority
responsible for the management of its assets and liabilities and
the administration and payment of pensions to its local
The Government want the 91 LGPS
pension funds to pool their assets into around six investment pools
in an effort to drive down investment costs and enable funds to
develop the capacity and capability to become world leaders in
infrastructure investment and help drive growth in the UK
LGPS pension funds in Scotland and
Northern Ireland are not affected by the proposals, and their
investments will continue to be managed in the same way that they
The expectation is that the new
investment pools will begin to be used for collective investment
from April 2018 onwards.
The following questions and
answers aim to help you understand the changes:
Q1: Why is this
Q2: Will the changes affect the amount of
pension I receive?
Q3: Will the amount of pension
contributions I pay change?
Q4: Does this change who administers my
Q5: Who is responsible for deciding how a
fund invests its assets and will this change?
Q6: Where can I find out more
Q1: Why is this happening?
A1: Across the LGPS in England and
Wales the scheme holds £217bn
of assets (2014/15 figure). These assets are currently held in 91 local
pension funds and are used to pay the pensions of former members of
the scheme and their dependants. The LGPS is one of the largest
funded pension schemes in Europe.
The Government commissioned
research which indicates that significant savings can be delivered
by the creation of around six investment pools, each with assets of
at least £25bn. Each
LGPS administering authority will be obliged to join, or help
create, an investment pool with other LGPS administering
Savings will be achieved through
economies of scale and increased bargaining power; investment costs
will be reduced along with other costs for all types of investment
used in the pool.
The Government is also keen for
the LGPS to have the capacity and capability to be able to invest
in infrastructure e.g. railway, road or other transport facilities
or housing supply. Currently only a very small proportion of
LGPS assets are invested in infrastructure and it is hoped that the
creation of investment pools will make it easier for LGPS funds to
invest in infrastructure due to increased scale.
Q2: Will the changes affect the amount of pension I receive?
A2: No, the LGPS is a defined benefit scheme
which means that your pension benefits are based on your salary and
how long you have been a member of the LGPS. The pension benefits you receive are not
linked to investment returns.
To find out how your pension is
calculated visit www.lgpsmember.org.
Q3: Will the amount of pension contributions I pay change?
A3: No, as a member of the LGPS
the rate of contributions you pay is based on how much you are
To find out how much the LGPS
costs you visit www.lgpsmember.org.
Q4: Does this change who administers my pension benefits?
A4: No, the Government is only requiring LGPS
administering authorities to pool the investment of their
assets. There is no
requirement for any change to the administration of the LGPS i.e.
who calculates and pays your pension.
Your LGPS administering authority
is determined by where you work or, if you have an LGPS pension or
deferred LGPS pension, where you used to work. You can find the contact details for your
LGPS administering authority at www.lgpsmember.org/contactfund.php.
Q5: Who is responsible for deciding how a fund invests its
assets and will this change?
A5: Each LGPS administering
authority decides how the assets for that fund are to be invested
in line with its agreed investment strategy. This will not
change when assets are invested via the new investment pools from
Q6: Where can I find out more information?
A6: Further information about
investment reform is available on the LGPS Scheme Advisory Board