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LGPS deficit cut by £10bn over three years, but still worth £37bn

The gap in the Local Government Pension Scheme (LGPS) has been cut down to £37bn from £47bn in 2013, the LGPS advisory board has revealed.

In the annual LGPS report released this week, which aggregates information supplied in the 91 fund annual reports, it was found that as of 31 March 2016, liabilities for the LGPS were valued at £254bn while assets stood at £217bn.

The LGPS is one of the largest defined benefit schemes in the world, covering 13,000 employers as well as 5.3 million members. Cllr Roger Phillips, who chairs the LGPS advisory board, added that the board were currently in the process of developing measures to cut down the deficit in pensions even further.

However, the Local Authority net return on investment over 2015-2016 was only 0.1%. This was, according to the board, reflective of the difficult market conditions during the year and set against the FTSE All Share Total Return of -3.9%.

“During 2016, the Board has been actively developing proposals to further tackle the estimated funding deficit of £37bn (£47bn in 2013) to improve the sustainability of the LGPS and its future funding levels. The next triennial valuation of the LGPS will be as at 31 March 2019,” he said.

In 2014, Cllr Phillips stated that a suite of LGPS pension fund ‘health’ indicators had been developed which were piloted over 2015 to better estimate the state of the pension fund.

“This will enable us to assess and benchmark the overall health of the scheme relative to other large public or private pension schemes, as well as between individual LGPS funds,” he added. “The results of the pilot form part of this report and administering authorities are encouraged to complete the exercise based on their new 2016 data.”

The news comes after a think-tank claimed in February this year that the LGPS had been “haemorrhaging money” to unnecessary external fund managers and was rapidly running out of cash.

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