CPS Research Fellow Michael Johnson, author of ‘The Local Government Pension Scheme: opportunity knocks‘, wrote to the Financial Times on Monday 2 November.
Sir, Last week the Local Government Pensions Scheme (LGPS) published its latest annual financials (for 2014-15). The cost of running the scheme increased by a mind-boggling 42 per cent in the past year, to £810m. And, by its own admission, only some (number undisclosed) of the 101 separate funds reported on the basis of guidance issued by the Chartered Institute of Public Finance and Accountancy during 2014-15. There is worse to come.
Decades of dismally lax, ineffective governance has allowed the LGPS to become a staggeringly inefficient, opaque and self-serving empire. The interests of those who work within it, or provide services to it, ride roughshod over the interests of the LGPS membership, employers and taxpayers, as well as economic rationale. In addition, resistance to change is facilitating a fundamental misallocation of risk and return, with value leakage of well over £1bn annually, via unreported performance fees (paid to third parties) and unnecessary operating costs, stealthily and iniquitously eroding capital.
The LGPS’s parlous financial condition should come as no surprise: 21 per cent underfunded as at the 2013 valuations, with more than a third of the individual funds being cash flow negative in 2012-13. For a nation that is supposedly a leading provider of financial services, and given the scale of the LGPS, it is a national embarrassment.
It is time that a good many of the chief finance officers, paid to ensure the proper administration of local government affairs, were required to end their masterclass in non-accountability… and leave.
Centre for Policy Studies,
London NW5, UK
Date Added: Tuesday 3rd November 2015