With UK productive finance still high on the Chancellor's agenda, it was no surprise that LGPS Funds and their investment potential were once again in Jeremy Hunt's sights in this week's budget.

Whilst the industry breathed a sigh of collective sigh of relief that no radical new pensions policies were announced, there are some measures for LGPS Funds to be aware of:

  • Investment allocation disclosure requirements.  In common with DC schemes, a new obligation will be brought into annual reporting requirements, requiring LGPS Funds to "provide a summary of asset allocation, including UK equity investment, as well as provide greater clarity on progress of pooling”.  So far so benign, but the new standardised data return will take effect from April 2024 - a matter of weeks away.
  • Investment in new children's homes.  The Chancellor has promised extra funding for local authorities to fund additional children's homes places.  The Budget document says that the government will also “work with the Local Government Pension Scheme to consider the role they could play in unlocking investment in new children's homes”.

Comment

Once again LGPS Funds are being asked to implement changes in a short time frame - this time its the reporting requirements that are changing rather than the basis of administration or underlying investments / benefits / fund structure.   However, as we all know, depending on how existing records are structured, compiling data in a specified form is not always straightforward. Last year's form had to be submitted by 15 September so if the new return is published in April as promised, Funds may expect to have around 5 months to provide the new information.  It will be interesting to see how the investment data request is structured and what form the “greater clarity” on pooling progress takes.  

The proposal to consider investment by LGPS Funds in new children's homes is an interesting one. In view of the ever increasing focus on ESG (environmental, social and governance) factors in relation to investments, and the funding challenges faced by local authorities, it is easy to see how this could be an attractive proposal.  However, the administering authorities of LGPS Funds owe a fiduciary duty to scheme beneficiaries (members and arguably employers) to act in their best interests when making investment decisions. Whilst ESG factors can be taken into account, Council funding challenges would not be a relevant factor for the purpose of making investment decisions.  Overall, the administering authority would need to be satisfied that any such investment is in the best financial interests of the scheme.