LGPS funds weather the financial downturn

12-07-2011

LGPS funds weather the financial downturn

Despite the global financial crisis and the fact that people are living longer, pension fund deficits as at 31 March 2010 show only a small deterioration on the 2007 position, a CIPFA survey of the 89 LGPS funds across England and Wales has shown.

Total assets rose from £130 billion to £140 billion.  Increasing longevity contributed, however, to scheme liabilities rising from £140 billion to £180 billion over the same period.  As a result, average scheme funding levels fell by around 6.5 per cent from 83.5 per cent to 77 per cent.

These results also take into account a reduction in liabilities due to the change from the basis of pensions indexation from the Retail Prices Index to the Consumer Prices Index.  This change had the effect of reducing liabilities by around £15 billion.

Commenting on the survey results, CIPFA Pensions Panel Chair, Bob Summers said:

‘As with any set of pension scheme valuation results, this is just a snapshot at a particular point in time.  From the position we were seeing at the depths of the financial downturn in 2008-09, there is good reason to view this as a “glass half full” set of results.  Investment returns recovered well towards the end of the valuation period and have continued to do so through 2010-11.  Funds have managed to restrict the impact on future employer contribution rates to an average increase of well under 1% across the board, helping to keep the LGPS affordable, viable and fair to taxpayers.’

Ends

Contact: Lindsay Machin / Chloe Forbes
CIPFA Press Office
t 020 7543 /5645/5787
e lindsay.machin@cipfa.org.uk / chloe.forbes@cipfa.org.uk

Notes to Editors:

1. The last valuation period for Local Government Pension Scheme (LGPS) funds was from 2007 to 2010.  The CIPFA survey is based upon the valuation results from 85 of the 89 funds across England and Wales. Scottish LGPS funds operate on a different valuation cycle and are therefore excluded.

2. The key findings from the survey are:

Pension Fund

Average funding level as at 31 March 2010

Average employer contributions 2010/11

Average employer contributions 2013/14

County Funds (including Environment Agency)

77.0%

19.7%

20.6%

Metropolitan area funds

84.9%

15.6%

16.4%

London funds (including London Pension Fund Authority)

75.4%

20.9%

21.7%

Welsh pension funds

76.1%

20.6%

20.5%

Overall average

76.8%

19.8%

20.5%

3. About CIPFA

CIPFA, the Chartered Institute of Public Finance and Accountancy, is the professional body for people in public finance. Our 14,000 members work throughout the public services, in national audit agencies, in major accountancy firms, and in other bodies where public money needs to be effectively and efficiently managed. As the world’s only professional accountancy body to specialise in public services, CIPFA’s portfolio of qualifications are the foundation for a career in public finance. They include the benchmark professional qualification for public sector accountants as well as a postgraduate diploma for people already working in leadership positions. They are taught by our in-house CIPFA Education and Training Centre as well as other places of learning around the world. We also champion high performance in public services, translating our experience and insight into clear advice and practical services. They include information and guidance, courses and conferences, property and asset management solutions, consultancy and interim people for a range of public sector clients. Globally, CIPFA shows the way in public finance by standing up for sound public financial management and good governance. We work with donors, partner governments, accountancy bodies and the public sector around the world to advance public finance and support better public services. This includes the development of local professional qualifications in African countries like Lesotho and Nigeria and in Europe in post conflict states in the Balkans.