New PLSA research project has pin-pointed some key issues
LONDON, 7 July 2022 – Aon plc (NYSE: AON), a leading global professional services firm, has said that the Pensions and Lifetime Savings Association’s (PLSA) research project, ‘LGPS: Today’s Challenges, Tomorrow’s Opportunities,’ sheds significant light on the issues that face the Local Government Pension Scheme (LGPS) in the UK and outlines the key challenges it currently faces.
Alison Murray, partner and head of Public Sector UK, Wealth Solutions Aon, said: “With its new research project, the PLSA has pin-pointed some of the most important issues that the LGPS has to deal with, from the regulatory environment in which it exists through to the questions that the current economic uncertainty will pose.
“In our work with LGPS funds, we frequently see how the benefits the scheme offers are not sufficiently valued by members, and that staffing issues – of all sorts – seem to be an unending difficulty. However, as schemes and employees navigate new forms of volatility, one thing is very clear. Membership of the scheme will offer a largely predictable, inflation-proof income in retirement, the value of which cannot be over-estimated – even if it might be currently under-appreciated.”
Alison Murray continued:
“Timely and clearly understandable communications to members and employers are needed to reinforce the real benefits of public service pension schemes – and to prevent members ‘opting-out’ to save on contributions as a response to the squeeze on living standards. Many LGPS funds are also reviewing their communication strategy in the light of greater use of digital media, so this is an ideal opportunity to take a step back and to assess how best to engage with stakeholders throughout their pensions journey, including those who prefer more traditional methods of communication or who do not have access to digital tools.
“Currently, even those who understand the benefits may not value them sufficiently to stay in their public sector job. LGPS funds are struggling to recruit and retain staff - often because the skills required for roles aren’t properly recognised within the local authority pay/grading structure. More can be done to build a resilient workforce by improving job roles and descriptions, and also by optimising the resourcing structure. But there should be greater freedom to offer more attractive pay and career opportunities that are commensurate with the requirements of administration, governance and investment roles in LGPS funds. These are specialist positions and need to be recognised as such.”
Resourcing
Catherine Pearce, associate partner at Aon, said:
“There also needs to be a significant shift of mindset away from ‘lowest cost’ being the standard by which many funds assess themselves. Value for money is of course a core aim for public services, but under-resourcing pensions administration and governance not only tends to lead to worsening outcomes for members but is likely to prove to be a false economy when additional work is required to address backlogs or correct long-running issues.
“There is a constant flow of additional work for administering authorities, with key projects such as McCloud, Pensions Dashboards, compliance with the new Code of Practice from the Pensions Regulator as well as the expected new Task Force on Climate-related Financial Disclosures (TCFD) requirements. And that’s not to mention ‘Good Governance’ changes, all of which demand additional resource. This could be a critical time for LGPS funds to ensure they can be sustainably managed into the future.”
More information about Aon’s Public Sector team is available here: Public Sector Pensions | Aon UK
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