The Department for Levelling Up, Housing and Communities (DLUHC**) chose Budget Day on 27 October to issue its annual statistical release. This summarises the finances and membership of all 85*** Local Government Pension Scheme (LGPS) funds in England and Wales, for the year 2020-21.

I may not have exactly whetted your appetite with that opening paragraph, but genuinely there is some interesting information here. For instance, three headline figures which jump out:

• The LGPS has more assets under management than ever before, now one third of a £trillion. The significant investment returns over the year are by far the main reason for the substantial increase from £272bn at March 2020.
• Membership is also at its highest ever level, nearly 1 in 9 of the population has an LGPS entitlement. There are 6.1 million LGPS members, an increase of c.100,000 p.a. (mostly due to a net increase in pensioners and deferred benefits) over the past few years. 
• The number of employers in the LGPS continues to grow, now approaching 19,000. Over 40% are in the education sector, mainly English academy schools.

But wait, there’s more. With some delving we can extract these other five particularly interesting nuggets:

• Employer contributions showed a spike in 2020-21, however it is not a sign of increased employer contribution rates. This is the triennial prepayment effect - we saw the same spike three years ago. In the spring immediately following completion of the triennial actuarial valuation, many large employers pay all three years of their Secondary Contributions in a single lump sum (in this case, typically in April 2020). Employer contributions which had been c.£7-7.5bn p.a. in the preceding two years, exceeded £10bn in 2020-21.
• Net cashflow looked to be positive, but not for long. Further to the above, we’d expect the 2021-22 total contributions to fall closer to the 2019-20 level, but benefits to continue to rise (£9.1bn in 2020-21). The triennial prepayment effect gives funds a positive cashflow for that year (in fact for a single month), before reverting to the more typical, negative position. Indeed, prepayments make the other 35 months in the three year cycle even more cashflow negative than they would have been.
• Investment management expenses have risen markedly, but not nearly by as much as investment values. This figure, which understandably attracts some attention, increased by c.14% from the previous year; however assets under management had increased by c.22% over the same period, meaning investment expenses are 0.4% of assets.
• Administration & governance costs have remained flat from the previous year. Whilst that might be seen as a positive outcome, we are aware that officers have more to contend with than ever before: more members & employers (see above), more regulations, and more external scrutiny and governance requirements. Does this suggest that more resourcing could be appropriate here? And let’s consider their relative size – the current level of these costs is around 0.5% of payroll, or 0.06% of assets.
• Sadly there is a clear COVID-19 effect: 2020-21 might have seen a continued increase in pension payments, but that doesn’t quite stack up with the lowest number of retirements in the past three years (and the first reduction for many more). When we consider the 12% jump in death benefit lump sum payments as well, it is difficult to avoid the conclusion that COVID-19 has had a material impact on the LGPS’s beneficiaries.

In summary, the LGPS is bigger than it has ever been, by pretty much any definition you care to use. But what does this mean for resources? The answer, as ever, will vary from fund to fund. In general, it is clear that LGPS officers are under ever more pressure to deal with ever more demands: how they continue to achieve that is beyond the scope of this DLUHC release.

*Except for viewers in Scotland: these statistics refer to the LGPS in England & Wales.

**The artist formerly known as MHCLG.

***Well, actually 83: two funds did not submit their SF3 information in time, however their absence is immaterial in these national statistics.