Future pensioner payments into local government pension schemes could be higher than assumed due to most LGPS Fund liabilities being uncapped to inflation, new report says.
A new report from Alpha Real Capital, the specialist manager of secure income real assets, has found that UK Local Government Pension Schemes (LGPS) in England and Wales see contributions from members as their main source of cashflow to pay benefits. This is followed by income from bonds, selling assets, income from equities and then from private markets.
However, Alpha Real Capital cautioned that future pensioner payments could be higher than assumed, because most LGPS Fund liabilities are uncapped to inflation.
Stuart Hanson, client solutions, Alpha Real Capital, said: ‘While many Local Government Pension Schemes are confident that future cashflows can largely be met via contributions, there is a chance that squeezed local authority finances and improving funding levels means that future contributions are lower than expected. The combination of inflation and lower contributions could lead to greater focus on cashflow security, including secure income from private assets.’
Alpha Real Capital also found that 58% of LGPS see inflation as their fund’s biggest worry. The second biggest worry was longevity at 19%. Some 14% cited affordability of future accrual as their fund’s biggest worry, and 9% cited geopolitics.
