The total membership of the LGPS grew by 144,000 (2.8%) to over 5.1m members in 2015 from 5.0m in 2014. There was an increase in each category of scheme membership (contributing active members (+2.7%), deferred pensioners (+3.7%), and pensioners (+1.9%).
The 2.7% (50,000) increase in active membership between 2014 and 2015 compares with a 5.1% (92,000) increase between 2013 and 2014. The lower level of new entrants compared with 2014 (but higher than 2013) was due to the automatic enrolment staging dates for LGPS employers being phased in during 2014/2015. This trend continued in 2016, albeit to a lesser extent, as the very smallest LGPS employers begin to auto-enrol members.
Of particular note was the taking on of membership data and assets by Greater Manchester Pension Fund GMPF as it became the one administering authority for probation staff. This increased the membership of GMPF by around 46,000 and increased assets by £3 billion following the regulatory changes that took effect from 1 June 2014.
The scheme has continued to remain cash-flow positive in 2015. Contribution income increased by £897m and was £541m higher than benefit outgoings.
The total number of LGPS employers in 2015 was 11,801 as compared with 10,671 for 2014. 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 £25.1bn (13.0%) from £192.1bn to £217.2bn during 2015. The net investment return on these assets (after fees) as at 31 March 2015 was +12.1% compared with +5.9% in 2014. The 2015 figure reflecting more favourable financial market conditions than in 2014. The relative investment return of Local Authority pension fund assets in 2014/15 was -2.8% and -0.7% lower over 5 year period than a corporate pension fund peer group.
LGPS assets were invested in pooled investment vehicles (42.8%), public equities (36.8%), fixed interest/index linked (7.7%), property (7.0%), other asset classes (5.7%). Between 2014 and 2015 the main shifts in asset allocation were -1.7% less equities and +1.7% more pooled investment vehicles; Fixed interest securities (-0.6%), cash deposits (-0.4%) deriviatives (+0.3%), and property (+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 vehicles (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 2015. 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, on average, broadly exceeded 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. The yields available on these instruments remained negative during the year and indeed fell further. This decrease in yield resulted in a higher 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 worsened funding levels and higher deficits across the LGPS funds at 31st March 2015. The actual progress made by individual funds will have been heavily influenced by a number of factors specific to them such as contribution levels, investment performance and membership profile. 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 Scheme Advisory Board has continued to develop and populate its 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 31st March 2015 (31st 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.