Key Takeaways
- • Karan Paintal, policy lead at Pensions UK, argues in a Local Government Chronicle opinion piece that the Local Government Pension Scheme (LGPS) should not be redesigned as a sovereign wealth fund, calling it a British success story that needs evolution rather than revolution.
- • The LGPS serves more than 7.6 million local workers and is built on employee and employer contributions from councils, academies, housing associations and charities, not state-owned assets.
- • Per the article, between 17% and 28% of all LGPS assets in England and Wales are invested domestically, and long-term returns have averaged 7% a year over the last decade and 8% over longer periods.
- • Funding levels have improved, with 91% of funds in England and Wales and 100% in Scotland and Northern Ireland at least fully funded, which the author says should not be treated as spare cash.
- • The author's priority is implementing existing LGPS pooling reforms, which have already delivered more than £1bn in savings, and addressing public sector classification barriers to deploying long-term capital into UK growth.
Summary
Karan Paintal, policy lead at Pensions UK, argues in a Local Government Chronicle opinion piece that the Local Government Pension Scheme (LGPS) should not be converted into a sovereign wealth fund. He describes the scheme as one of the UK's most important institutional investors, paying promised pensions to more than 7.6 million local workers while investing at scale in the domestic economy. In his view, the priority is implementing current reforms well rather than pursuing structural upheaval.
The central distinction Paintal draws is between the LGPS and a sovereign wealth fund. Sovereign wealth funds typically manage state-owned assets or pursue fiscal and strategic objectives, whereas LGPS assets are built from contributions by employees and participating employers, including councils, academies, housing associations, charities and other public service organisations. Investment strategies are set by locally accountable administering authorities, which take account of each fund's liabilities, cashflows, membership and funding position, and decisions must be made in members' best financial interests under fiduciary duty.
Paintal states that the LGPS already supports UK growth without being directed to do so. Citing available data, he says between 17% and 28% of LGPS assets in England and Wales are invested domestically, including in businesses, infrastructure, housing and regional growth. He warns that closing the scheme to new members would weaken the offer to workers and reduce investment capacity, as membership would mature and the investment horizon would shorten. He also cautions against suggestions that new members be moved into defined contribution arrangements, noting that such a shift would transfer investment risk to individual savers. He cites a typical member as a 47-year-old woman earning around £18,000 a year with an average annual pension of about £5,000.
On performance, Paintal reports long-term returns averaging 7% a year over the last decade and 8% over longer periods, above both inflation and actuarial assumptions. He credits diversification into housing, infrastructure and other productive assets for supporting this record. He cautions that improved funding is not spare cash: 91% of funds in England and Wales and 100% in Scotland and Northern Ireland are now at least fully funded, but these figures rest on assumptions about returns, inflation and longevity that can change. Reinvesting any surplus for broader social or political purposes, he argues, could increase volatility in funding outcomes and employer costs.
Looking ahead, Paintal says pooling and collaboration have already delivered more than £1bn in savings and strengthened investment capability. He calls for funds and pools to be given time and stability to embed reforms, and for policymakers to create more pension-grade investment opportunities and address barriers, including public sector classification frictions, that limit deployment of long-term LGPS capital into UK growth.
The central distinction Paintal draws is between the LGPS and a sovereign wealth fund. Sovereign wealth funds typically manage state-owned assets or pursue fiscal and strategic objectives, whereas LGPS assets are built from contributions by employees and participating employers, including councils, academies, housing associations, charities and other public service organisations. Investment strategies are set by locally accountable administering authorities, which take account of each fund's liabilities, cashflows, membership and funding position, and decisions must be made in members' best financial interests under fiduciary duty.
Paintal states that the LGPS already supports UK growth without being directed to do so. Citing available data, he says between 17% and 28% of LGPS assets in England and Wales are invested domestically, including in businesses, infrastructure, housing and regional growth. He warns that closing the scheme to new members would weaken the offer to workers and reduce investment capacity, as membership would mature and the investment horizon would shorten. He also cautions against suggestions that new members be moved into defined contribution arrangements, noting that such a shift would transfer investment risk to individual savers. He cites a typical member as a 47-year-old woman earning around £18,000 a year with an average annual pension of about £5,000.
On performance, Paintal reports long-term returns averaging 7% a year over the last decade and 8% over longer periods, above both inflation and actuarial assumptions. He credits diversification into housing, infrastructure and other productive assets for supporting this record. He cautions that improved funding is not spare cash: 91% of funds in England and Wales and 100% in Scotland and Northern Ireland are now at least fully funded, but these figures rest on assumptions about returns, inflation and longevity that can change. Reinvesting any surplus for broader social or political purposes, he argues, could increase volatility in funding outcomes and employer costs.
Looking ahead, Paintal says pooling and collaboration have already delivered more than £1bn in savings and strengthened investment capability. He calls for funds and pools to be given time and stability to embed reforms, and for policymakers to create more pension-grade investment opportunities and address barriers, including public sector classification frictions, that limit deployment of long-term LGPS capital into UK growth.
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