Local Government Pension schemes in England and Wales have an average standard funding ratio of 95% — although this hides huge variations in performance — according to figures from the LGPS Advisory Board.
The board has almost completed its valuation process for funds as they stood on 31 March last year, with 85 of the 89 funds already assessed.
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The anonymised results show that the top funded scheme has a funding ratio of 123%, with the worst performer at only 66% funded.
However, Graeme Muir, partner at fund actuary Barnett Waddingham, said that the latter fund will not necessarily be worried about its sustainability.
He told Room151: “The fund in question is hopefully ploughing or planning to plough large contributions into the fund to plug the gap.
“It’s just not all about funding level. It is really more about the plan to get to 100% and by when. A 66% funded fund may be aiming to get to 100% sooner than an 85% funded fund.”
Last year, the board completed a dry run of new rules requiring assessment of funds’ achieving regulatory compliance against consistency with other fund valuations, solvency and long-term cost efficiency.
During that process, the board highlighted the ten funds with the lowest funding level on its standardised basis.
It said that if the rules had been in place in 2013, “we may have engaged with some of these funds to better understand how they intended to improve their funding position”.
The results of the triennial valuation of the LGPS assets and liabilities are set to be released around the end of March.
Meanwhile, a report by the Centre for Policy Studies (CPS) this week claimed that annual fee costs per member vary wildly between LGPS funds.
It found that Enfield Council’s £592 per member is 21 times larger than West Yorkshire’s £28 per member.
Michael Johnson, research fellow at the CPS, said: “Over the past decade the LGPS’s assets have under-preformed the major UK and global equity and bond indices: passive investing would have been more rewarding.
“The only winner has been the industry, garnering over £4.5bn in reported fees which, as a percentage of asset market value, have more than doubled over the last decade. In addition, this paper estimates unreported fees, including performance fees paid to alternative assets managers, to be between £3.6bn and £4.6bn.”
