Reform UK has branded the current status quo surrounding Local Government Pension Scheme (LGPS) investment performance and fees as “negligent”, urging pension committees to “urgently” change course, as it announced plans for its own Reform UK pool.
Speaking at a party press conference, Reform UK Deputy Leader, Richard Tice, argued that the investment fees currently facing LGPS funds are “frankly egregious”, estimating that the 13 councils included in Reform’s analysis are overpaying by some £265m in just one year.
“Roll that out across the whole LGPS, and that’s that’s over a billion pounds of overpayment on fees that no one’s been talking about,” he stated.
Tice also argued that the current investment performance of LGPS funds is failing to meet expectations, with Reform UK’s analysis suggesting that funds have underperformed cumulatively by almost £1bn over the past year.
Taking both the estimated overpayments and underperformance, Tice emphasised that this could represent £9-11bn a year, suggesting that this is the sort of funding that could improve the country’s social care needs, for instance.
And Tice argued that, currently, there is “no accountability – no responsibility”, warning that there is a “gravy train culture” in the LGPS, which is allowing taxpayers to be “ripped off”.
Tice also raised specific concerns around the current allocation to illiquid investments, arguing that councils should consider capping illiquid investments at 10 per cent.
“This is simply financially incompetent at best. gross negligence at worst,” he continued, arguing that “because people don’t understand it, no one has dug into it”.
However, Tice confirmed that this is set to be a key focus for the Reform party going forward, as it looks to “stop this ripoff, this complacency”.
In particular, he revealed that Reform UK will be calling on local pension committees to “urgently change course”, also lodging an urgent question to the Speaker to raise this in the House of Commons as soon as possible.
“In some councils there needs to be a serious review with a possible request for some significant refunds,” he stated, calling on councils to “immediately” tell their advisers that they want to pay lower fees.
“This cannot go on,” he stated. “It is simply unacceptable…The numbers are enormous: £8 to £10bn a year is the potential if this is done properly.
“And any council committee that says ‘no, we’re quite happy with the status quo’ – mark my words, if you do that, you are showing you’re on the side of the rich city investment managers.”
Tice also confirmed that Reform UK will be looking to launch its own Reform UK branded pool manager, because “bluntly, we think we can do this better”.
However, the government is currently pursuing plans to shrink the number of LGPS pools operating, with both Brunel and Access having recently failed to receive the green light on their future plans.
And despite the claims that this is not an issue that has been explored previously, the LGPS has been a key focus of the government’s recent pension reforms, with a particular a focus on LGPS investment, including illiquid assets such as infrastructure.
The comments from Reform have already sparked concern, as UK Sustainable Investment and Finance Association (UKSIF) CEO, James Alexander, stressed the need for policy to be driven by experts, not politicians,
He said: “Investors managing capital over decades recognise that global warming is among the greatest threats to financial returns. Sustainable strategies help to address these material risks, safeguarding portfolios and supporting stronger long-term gains.
“Ill-advised attempts to override this forward-thinking approach could hollow out hard-earned pension pots. Investment decisions should be guided by experts who understand these financial principles, not parties with short-term political agendas.”