The pensions industry has voiced its opposition to Reform UK’s planned changes to the Local Government Pension Scheme (LGPS) if it was elected.

In a speech on Tuesday (24 February), Reform UK deputy leader, Richard Tice, announced plans to merge the LGPS into a sovereign wealth fund and mandate investment in the UK.

Furthermore, defined benefit (DB) LGPS funds would be closed to new entrants as part of the proposals, with new workers to be enrolled in a defined contribution (DC) scheme instead.

Pensions UK said the proposed LGPS changes were concerning and not supported by evidence.

“We simply do not recognise the picture of the LGPS that Reform UK has painted,” said Pensions UK executive director of policy and advocacy, Zoe Alexander.

“The LGPS is one of the largest and most successful pension schemes in the world.

“It is fully funded and undergoing a major reform programme to consolidate its assets into six large investment pools ranging from £25-100bn, with savings to date estimated at £1bn, and with further savings to come.

“It is an exemplar of UK investment amongst pension schemes, with an allocation of around 17 per cent. LGPS investment performance for England and Wales has been strong, with the scheme having achieved a return of around 7 per cent p.a. over the last decade.”

Alexander stated that Reform UK’s proposals were lacking in detail, but its intentions to place all new workers in a DC scheme and to transform the scheme into a sovereign wealth fund were worrying.

“The LGPS exists solely to fund the retirements of close to seven million local government workers, many of whom are low earners,” she said.

“It does not exist to manage a pool of assets to fund government projects. With average pension sums received of around £5,000 per year, LGPS members rely on the scheme to invest solely to fund their retirements.

“Any policy proposing changes to the structure or approach of one of the largest pension funds in the world should be supported by evidence, and detailed plans.

“We stand ready to engage with Reform to ensure they have a full picture of the operation and strategic direction of the LGPS.”

UK Sustainable Investment and Finance Association (UKSIF) CEO, James Alexander, added that the proposals to force pension schemes to invest in the UK ran the risk of distorting markets and creating asset bubbles.

“They could also lead to lower returns for savers, at a time when shortfalls in retirement pots have left a whole generation facing a later-life income crisis,” he continued.

“This stands to affect workers across the economy, including those now close to leaving employment.

“If policymakers want to unlock the power of pension capital, their focus should be on building a strong pipeline of investment opportunities that can help fund our high-growth areas, such as the clean energy sector.

“This is the most effective way to ensure private finance delivers both sustainable economic growth and good returns for savers while creating thousands of quality jobs across the country.”

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