The total membership of the LGPS grew by 243,000 (4.9%) to just over 5m members in 2014 from 4.8m in 2013. There was an increase in each category of scheme membership (contributing active members (+5.0%), deferred pensioners (+5.9%), and pensioners (+3.5%).
The 5.0% (91,000) increase in active membership between 2013 and 2014 compares with a 1.4% (23,000) increase between 2012 and 2013. One possible reason for this was the new automatic enrolment staging date for LGPS employers with 250 employees or more was on 1st February 2014. We expect this trend to continue in 2015/2016, albeit to a lesser extent, as smaller LGPS employers have fewer eligible workers.
The scheme has continued to remain cash-flow positive in 2014. Contribution income increased by £357m and was £206m higher than benefit outgoings.
The total number of LGPS employers in 2014 was 10,671 as compared with 9,340 for 2013. We expect this employer count to increase further as more academies are admitted to LGPS Funds and as result of additional LGPS employer information to be published by funds in 2015.
Further details of the scheme membership and scheme employers can be found here.
The total assets of the LGPS increased by £11.2bn (6.0%) from £180.9bn to £192.1bn during 2014. The net investment return on these assets (after fees) as at 31 March 2014 was +5.9% compared with +12.5% in 2013. The 2014 figure reflecting more challenging financial market conditions than in 2013. The relative investment return of Local Authority pension fund assets in 2013/14 was +2.6% and +0.9% greater over 5 year period than a corporate pension fund peer group.
LGPS assets were invested in pooled investment vehicles (41.1%), public equities (38.5%), fixed interest/index linked (7.9%), property (6.6%), other asset classes (5.7%). Between 2013 and 2014 the main shifts in asset allocation were -1.6% less fixed interest/index linked and +1.6% more property (+0.7%), pooled investment vehicles (+0.3%), public and private equity (+0.3%), and other asset classes (+0.3%).
Due to the differing investment strategies adopted by each LGPS fund to specifically meet their liabilities it is not appropriate to just compare them against each other on net return on investment basis. However charting the 2014 and 2013 returns fund by fund suggests that the distribution of returns is not random, suggesting a relationship between the risk taken and financial return achieved, relative to the allocation to public equities and fixed income.
Further details of the LGPS asset allocation and amount directly invested in securities (fixed and index-linked), equities (UK and overseas), property (pooled and direct), plus pooled investment vehiicles (PIVs) and other investment categories have been analysed and charted and can be found here. Also the LGPS investment performance such as average returns by each asset class set against relevant market indices, and in addition, the comparison against a corporate peer group can be found here.
The Shadow Advisory Board produced a separate summary and key messages report of the 2013 triennial valuation results and have collated the 2010 triennial valuation results for comparison. The most recent LGPS funding level was 79%.
There has been no valuation of the LGPS funds since 31st March 2013. As a consequence, there can be no certainty about how each LGPS funds’ assets and liabilities had developed by 31st March 2014. Nevertheless, general comments on how funding positions have developed are set out below.
On the asset side of the balance sheet, investment performance over the year varied across the funds. Investment performance was, on average, broadly in line with the actuarial assumptions set out in the 2013 valuation. The deficit contributions paid by employers into LGPS funds also had a positive impact on asset levels and funding positions.
On the liability side, the yields available on index-linked gilts continued to be a significant factor for many funds. At the end of the year, the yields available on these instruments were higher than at the start of the year. This increase in yield resulted in a lower assessment of the pension liabilities for many funds, although this impact was conditional on the valuation methodology being used by the funds.
Overall, the combined movements in assets and liabilities generally led to improved funding levels and smaller deficits across the LGPS funds at 31st March 2014. The actual progress made by individual funds will have been heavily influenced by a number of factors specific to them. Individual funds are required to monitor and report on whether their funding strategy is being achieved and do so using a range of approaches.
The next full triennial valuation will be in 2016 based on the scheme membership and value of assets as at 31st March 2016.
As part of the 2016 valuation process, LGPS funds will revisit both their funding and investment strategies to ensure that these strategies together leave them appropriately placed to meet their long-term pension obligations as they fall due.
During the year, the Shadow Scheme Advisory Board has continued to develop and populate it website with news items, meeting papers and minutes, scheme guidance and other publications. Each fund has a statutory communications policy statement and the majority of funds have developed websites for the new 2014 scheme with online access for scheme members and potential scheme members, in addition to the national www.lgps2014.org website. Hard copies of all scheme information are accessible from all of these websites.
Further information and next steps
The individual underlying annual reports and audited financial statements of each individual LGPS pension fund in England and Wales for the financial year ending 31 March 2014 (and 31st March 2013) can be found in one place on this website.
The most recent triennial actuarial valuation reports of individual LGPS funds in England & Wales are as at the 31st March 2013 can also be found in one place on this website. Once available 31st March 2016 triennial valuations reports will be put on this website.
Going forward we intend to develop these two key information archives and continue to improve and develop this content and value to stakeholders of the overall scheme annual report each year.