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Out-Law News 1 min. read

UK Budget 2024: changes to LGPS reporting requirements to ‘stimulate growth’ announced

Jeremy Hunt provided more detail around measures affecting the local government pension scheme (LGPS) during his UK Budget but “transparency for transparency’s sake” may not provide the best outcome for pension scheme members, an expert has said.

In his Spring Budget (91 pages / 1.1 MB) speech, the chancellor announced significant changes to reporting requirements for the LGPS as part of measures aimed at stimulating economic growth. The requirements mean that LGPS funds will need to publicly provide a summary of asset allocation, including UK equity investment. The annual reporting guidance will also require LGPS funds to provide greater clarity on progress of ‘pooling’ assets into larger investment pots, through a standardised data return. The changes will take effect from April.

Nick Stones, pension expert at Pinsent Masons, said: “This is very short notice for new LGPS reporting requirements and getting revised reporting guidance in place.”

Equivalent requirements are being introduced for all defined contribution (DC) pension funds.

However, provisions of benefits under LGPS are different from that under a typical workplace DC scheme. LGPS funds are defined benefit (DB) based, so benefits are calculated by reference to an employee’s earnings, service, and age, rather than depending on investment return. It means that the investment outcome is not the responsibility of the pension scheme members, with their final pension instead guaranteed by the fund.

The expert also raised concerns over the necessity of these reporting requirements, especially as for LGPS members do not make investment choices.

“The concern may be whether this reporting requirement becomes part of a journey towards more compulsion as to how to invest,” he said. “This would be worrying given that the focus of LGPS funds, and that of all pension schemes and providers, should be on the best economic return for their members.”

The announcement comes as across the pensions industry investment into UK equities has fallen to around 6%, according to government data.

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