The LGPS Scheme Advisory Board (Board / SAB) was set up under the Public Service Pensions Act 2013 and the Local Government Pension Scheme Regulations. The purpose of the Board is to encourage best practice, increase transparency and coordinate technical and standards issues as well as liaise with ministerial bodies and relevant sector regulators.
The Board is keen that the LGPS is seen as a value led and innovative scheme and the move toward investment fee transparency and consistency across pension funds / asset owners forms part of this goal.
Cost transparency is also part of the revised CIPFA accounting standards issued for inclusion in LGPS and administering authorities’ statutory annual report and accounts as well as being included in the government’s criteria for pooling investments.
Investment costs are a complex area which pension committees and officers need to consider and understand. The LGPS Code of Transparency (described in more detail below) helps LGPS clients gather cost information in a consistent format. Cost information must always be viewed in the context of risk and return, and should form part of any overall value for money assessment.
This compliance system (here) makes the process of collation more efficient than the previous ad hoc arrangements and will ensure the Board can monitor compliance for the funds and the pools – as well as streamlining the process for the managers providing the data in the first place. This summary page provides the background to the LGPS Code, the procurement of a compliance system and the next steps for relevant parties to understand. A set of frequently asked questions that have been raised by investment managers and LGPS clients is available here on the Board’s website.
The LGPS Code of Transparency
A Code of Transparency covering investment management fees and costs was developed and approved by the Board and launched in May 2017. (The current Code can be found here). Fund managers to the LGPS are being encouraged to sign up to this Code and as at June 2021, there were over 150 signatory firms.
The total LGPS assets under management falling under the Code is estimated at approx. £180bn.
A full list of managers which have signed up to the Code is available here. This is updated as new signatories join. Five LGPS investment pool companies are signatories; Border to Coast Pensions Partnership Limited, Brunel Pension Partnership Limited, LGPS Central Limited, Local Pensions Partnership Investments Ltd and London CIV. Link Fund Solutions, the provider of asset management services to the ACCESS and Wales pools, have also signed up.
From its outset, the Code of Transparency was an LGPS Advisory Board (England and Wales) initiative. However, since its launch, the Scottish Scheme Advisory Board and Scottish LGPS and LGPS (Northern Ireland) clients have been included at their request.
Fund manager and Pool signatories to the Code are able to use the “tick” logo to confirm their signatory status and can use it in marketing to other possible clients. Most LGPS funds now require bidding managers to be signed up to the Code. Code signatories can request the logo details and colour palette from the SAB Secretariat via their shared mailbox ([email protected]).
In 2018, the Financial Conduct Authority (FCA) launched the Institutional Disclosure Working Group (IDWG) following the FAC's asset management market study as part of the remedies package and noted the success of the LGPS Code.
The FCA wanted to see more consistent and standardised disclosure of costs and charges for institutional investors. It thought that a standardised disclosure template should provide institutional investors with a clearer understanding of the costs and charges for a given fund or mandate. This should allow investors to compare charges between providers and give them a clear expectation of the disclosure they can expect.
In November 2018, the Cost Transparency Initiative (CTI) was launched and became the organisation taking forward the work of the previous IDWG.
For the LGPS funds to have the relevant data to investigate and understand their respective fees and costs, the SAB and the Investment Association developed the templates currently used under the Code. These templates can be found here.