Mercer’s Higher Education Group: LGPS funding levels are soaring
If you have employees in the LGPS - whether it’s a handful or your entire professional services staff - this is your moment to act!
Markets have taken a remarkable turn since the 31 March 2022 Local Government Pension Scheme (LGPS) valuations for England & Wales, and even since the 31 March 2023 Scotland valuations. Long-dated fixed interest gilt yields have skyrocketed from 1.7% in March 2022 and 3.7% in March 2023 to an impressive 5.3% this week!
As a result, funding levels in the LGPS have seen a significant boost. The aggregate funding position on an exit basis (i.e. the position if you’d decided to stop all your employees in LGPS building up any more in LGPS) for the LGPS as a whole, across England & Wales was around 60 – 70%. However, now, that position is more like 120 – 130%. (Note this is for all LGPS Funds together, individual Funds will have different levels.)
So, what does this mean for you?
- This could open the door to exiting the LGPS, potentially with an exit credit instead of a debt. It’s a complex decision, regardless of how many employees you have in the scheme, but can you afford to overlook this opportunity?
- It could be time to reassess your pensions strategy—why wait for unfavourable conditions to make crucial decisions? Take a proactive approach now!
- Consider reaching out to your Fund before the 31 March 2025 (England and Wales) valuation to discuss the possibility of accelerating implementation of revised contributions.
- Explore with your Fund the options for mitigating risk to secure these favourable funding positions.
- Head of Mercer’s Higher Education Group