Annual Report 2023

Chair's Statement

On behalf of the Scheme Advisory Board I am delighted to be able to present the eleventh Annual Report for the Local Government Pension Scheme (LGPS) in England and Wales. The LGPS is one of the largest defined benefit (DB) schemes in the world and is the largest DB scheme in England and Wales, with 13,802 active employers, 6.49m members and assets of £354bn.

The aim of this Annual Report is to provide a single source of information about the status of the LGPS for its members, employers, and other stakeholders. Continually improving key information about the Scheme as a whole is one of the top priorities of the Board. This report aggregates information supplied in the 86 fund annual reports, as of 31st March 2023.

To navigate the Annual Report, please use the menu to the right of this page.

Here are some key LGPS highlights for 2023:

• Total membership of the LGPS increased slightly, growing by 106,166 (1.6%) to 6.49m members in 2023 from 6.39m in 2022
• The total assets of the LGPS decreased to £354bn (a change of -2.6%). These assets were invested in public equities (51%), bonds (12%), property (8%), infrastructure and private equity (both 6% respectively), as well as other asset classes including – but not limited to – multi-asset credit, private debt, diversified growth funds
• In a challenging year for markets, the Local Authority return on investment over 2022/23 was -1.8%. This compares to UK CPI year on year inflation of 3.2% (Sept – Sept)
• The scheme maintained a positive cash-flow position overall, including investment income
• Over 2m pensioners were paid during the year
• Despite continued higher than expected mortality in the general UK population, 2022 was a better year than the two dreadful years that preceded it. Pensioners appear to be seeing a more pronounced bounce back towards pre-pandemic life expectancies than the general population, particularly pensioners in the LGPS
• Total investment management costs decreased by £141m (-7.6%) from £1,868m. This was primarily driven by a £188.5m net decrease in performance fees. Management fees increased by £106m, transaction costs increased by £15m while other [investment] costs decreased by £71m.
• Total administration and governance costs increased by £28m, with administration costs increasing by £12.1m, and oversight and governance costs increasing by £19.7m. “Other” administration and governance costs decreased by £3.8m.

In a separate analysis of local fund valuation reports, it was estimated that as at 31st March 2022, the LGPS had an overall funding level of 107%. Since its establishment, the Board has actively developed proposals to tackle the funding deficit (£6bn in 2019, £37bn in 2016) and has been successful in improving the sustainability of the LGPS and its funding level. The next triennial valuation of the LGPS will be as at 31st March 2025.

The work of the Scheme Advisory Board through the period of this report (1 April 2022 – 31 March 2023) included getting the new Compliance and Reporting Committee fully established and commencing work in earnest on its workplan – including a good governance working group aimed at encouraging the government to put the Board’s good governance project recommendations into action, as well as a focus on audit given the challenges in local authority audit.

The Board responded to the government’s climate risk reporting consultation and continued its focus on responsible investment, including moving the work on the LGPS and Sharia law forwards by engaging with Islamic finance experts. There was consideration of assumptions relating to the 2020 Scheme valuation (conducted by the Government Actuary’s Department) and the associated cost control mechanism.

The Board continued to be appraised of progress with regulations and guidance on implementing McCloud remedy in the LGPS, once the primary legislation was finalised in early 2022 – work on McCloud remedy remained a central focus for LGPS funds alongside many other competing demands.

The Board and its secretariat continued to support the sector in various ways, including direct engagement at many in-person and online events.

I would be pleased to hear your views on this our eleventh Annual Report (these should be sent to the Scheme Advisory Board secretariat). The Board is keen to ensure we add to the Report and that the work underlying our compilation and analysis is ultimately recognised through the UK.