Local authority funds in England and Wales remain cash-flow positive, largely due to returns from investments, a report has shown.
The Local Government Pension Scheme (LGPS) Advisory Board, set up by the government to monitor the performance of the English and Welsh funds, published the first annual report covering all of the nearly 90 schemes in the two countries.
The report showed that the average funding ratio for the 2012-13 financial year stood at 79% across the schemes, with total assets of £180bn (€213bn) compared with liabilities in excess of £227bn.
It also found that schemes received £12bn in income over the course of the year, exceeding the £9.2bn in benefit payments made during the same period.
However, last financial year’s contributions only stood at £8.3bn, leaving investment returns of £3.1bn to prevent the system from becoming cash-flow negative.
Kris Hopkins, the junior minister at the Department for Communities and Local Government responsible for the LGPS, welcomed the report’s publication.
“By bringing together the data from all English and Welsh funds, the Shadow Scheme Advisory Board has helped usher in a new standard of transparency for scheme members, employers and taxpayers alike,” he said.
“This will also provide a comprehensive and clear reference document for the scheme as a whole.”
According to the report, the funds invested the largest amount of their assets, £73.5bn, in pooled investment vehicles, without offering a breakdown of what underlying assets these held.
It added that a further 38% of assets were invested in standalone UK or overseas equity mandates, and £17bn in fixed income.
The remaining £10.5bn were invested, directly or indirectly, in property and the final £9.8bn in undefined ‘other’ assets.
In his remarks, Hopkins stressed the importance of the sustainability and affordability of the LGPS, shortly after the funds switched to a career-average, rather than final salary, approach for future pension accrual.
His department is currently mulling how to cut costs among the local authority funds, with a ban on active investing considered.
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