The LGPS in 2022-23
Investments
The total value of the LGPS in England and Wales at the end of the 2022-23 financial year was £354 billion, from a starting point of £369 billion – reflecting a challenging year for investments, largely resulting from the economic shocks associated with Russia’s illegal invasion of Ukraine, as well as the Liz Truss/Kwasi Kwarteng “mini budget” in September 2022 domestically.
The asset mix is broadly similar to previous years, with continuing evidence of growing allocations to alternatives and private equity and gradual decreased allocation to public equities.
The biggest percentage points change relative to the total value of assets between 2021-22 and 2022-23 was bonds which decreased by 2.2% to £44.1 billion from £53.2 billion, followed by infrastructure which increased by 1.5% from £17.8 billion to £22.7 billion.
Assets in private debt increased by 1.3%, the third largest percentage point change from 2022, reflecting the ongoing diversification of the scheme and investment in unlisted asset classes.
As seen in the previous year, excluding investment income the scheme was cash-flow negative. Contribution income decreased by £0.5 billion and was £0.9 billion lower than benefit outgoings. However, despite the challenging year for investment returns, including investment income and charges the scheme had a positive cash-flow position overall of £2.07 billion.
Membership
Total membership of the LGPS grew by 1.6% (106,166) to 6.49 million in 2023 from 6.39 million in 2022, and the data shows that there were 51,037 newly retired pensioners during the year.
The 1.6% growth in membership is split as follows – the number of contributing active members increased by 0.6%; the number of deferred pensioners increased by 0.2%, and the number of pensioners increased by 0.8%. In a year when inflation was at record levels, it is positive that the number of active members increased, rather than decreased – implying that the scheme perhaps did not see too many members opting out of scheme membership as a result of the cost-of-living crisis.
LGPS news in brief for 2022/23
In the March 2023 Spring Budget there were changes announced to pensions taxation methods. The Annual Allowance was increased from £40,000 to £60,000 and the Lifetime Allowance (LTA) was reduced to zero from 6 April 2023, with a commitment to legislate for the LTA to be fully abolished in a future Finance Bill.
The Board progressed its work looking into the Gender Pensions Gap by releasing in March 2023 a report it had commissioned from the Government Actuary’s Department, and which analyses the gender pensions gap in the LGPS.
The Board Secretariat progressed the work of the Compliance and Reporting Committee (CRC), which had been established the year before to replace the Chartered institute of Public Finance and Accountancy’s disbanded Pensions Panel. The workstreams set up during the year covered: Audit Issues, Funding Strategy Statement Guidance, Annual Report Guidance, Knowledge and Skills Framework and Good Governance.
Administering authorities were provided with guidance by the LGA pensions team to help them with McCloud data issues. The guidance sets out what options administering authorities may consider if they are unable to collect the data about individual members needed to implement the McCloud remedy.
In November 2022, the Government closed its consultation on new requirements for all LGPS administering authorities to report against various metrics and targets on climate risk – largely mirroring the TCFD reporting requirements in place for private sector pension schemes. As at the date of drafting, the response to the consultation is still awaited.
The individual underlying annual reports and audited financial statements of each individual LGPS pension fund in England and Wales for each financial year ending 31st March from 2013 onwards can be found on the fund annual reports page of this website.