Scrap the LGPS for a SWF?
Reform UK’s deputy leader Richard Tice wants to transform the UK LGPS into a sovereign wealth fund (Christopher Furlong/Getty Images)
Last month, Reform UK’s deputy leader Richard Tice announced that a Reform government could transform the UK Local Government Pension Scheme into a £500bn sovereign wealth fund, while scrapping defined benefit pensions for incoming civil servants.
Right now, the LGPS in England and Wales comprises 86 administering authorities, with a combined £402bn in assets. Another 12 authorities in Scotland and Northern Ireland bring the total number of individual funds to 98.
Tice has called the scheme “disparate” and “uncoordinated”, “with duplicated costs and no unified investment strategy”.
According to Reform, the UK’s sovereign wealth fund would be the eighth largest in the world, with a target return of 6.5 per cent and a mandate to invest in Britain. Starry-eyed over the likes of Norway’s £1.6tn and Singapore’s £968bn megafunds, Tice says: “We could do that. We could have that.”
The idea would “sav[e] councils millions and millions every year”, while boosting domestic growth, he says.
But is LGPS money actually up for grabs to be sovereign wealth fund-ified?
“The LGPS exists solely to fund the retirements of close to seven million local government workers, many of whom are low earners,” says Zoe Alexander, executive director of policy and advocacy at Pensions UK.
“It does not exist to manage a pool of assets to fund government projects.”
And Tice is fundamentally wrong in his assessment of the system, she adds. As one of the largest and most successful pension schemes in the world, the LGPS already has an annual return of around 7 per cent over the last decade, and an allocation to UK investments of around 17 per cent.
“We simply do not recognise the picture of the Local Government Pension Scheme that Reform UK has painted,” says Alexander.