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Saturday, February 25, 2012

Stopping the LGPS being "ripped off"?

This was posted in UNISONactive last week. "The FT recently published a series of letters on the Local Government Pension Scheme (LGPS) and the pros and cons of fund mergers. Michael Johnson of the Centre for Policy Studies takes stock of the debate and states that potential economies of scale which could be achieved by mergers are 'not in the (pensions) industry’s interests, but very much in the interests of scheme members' and that 'local councils should take the lead and confront the staggeringly inefficient LGPS.'

Comprising 101 separate funds, these should be merged into five regional operations, to facilitate pooled administration and procurement; each would have some £30bn in assets. In time, they would become “expert clients” capable of extracting best value from the financial services industry, and enjoying the other benefits of scaling up': http://www.ft.com/cms/s/0/953c9362-5668-11e1-b548-00144feabdc0.html#axzz1n3UuUI7A (you have to register with the FT to see these reports).

I must admit that I agree that the £150 billion Local Government Pension Scheme (LGPS) is being "ripped off" by the financial services industry (with honourable exceptions) and we need to look at structural change. For example I understand that total commission payments to brokers more than doubled between 2003 and 2007, the result of portfolio turnover tripling over that period.

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