Only days after being appointed deputy leader of Reform UK, Richard Tice set out his ambitions for the UK economy, including strong criticisms and proposals for reform of the Local Government Pension Scheme (LGPS). Room151 took a closer look at the figures.
Echoing earlier comments made by his party, Tice described local government pension funds as “suckers of last resort” and alleged that funds overspend on fees and underperform investment benchmarks.
Room151 has examined publicly available data to assess these claims. Reform UK has not published detailed supporting calculations for the figures cited in Tice’s most recent remarks. Room151 approached the party for clarification, but no response was received at the time of publication.
Tice did present estimates of potential cost savings relating to LGPS funds at ten councils under Reform UK control in a presentation released in September 2025. In the absence of more recent detailed analysis, this presentation provides the clearest available indication of the basis for his claims.
Can the LGPS be turned into a sovereign wealth fund?
Tice said in his speech that the LGPS could be transformed into a vehicle investing more heavily in UK infrastructure, stating: “We can transform this into a British sovereign wealth fund, proudly paying all of the members and pensioners whilst patriotically backing Britain.”
Pensions experts have cautioned that such an approach could raise significant fiduciary considerations. Unlike sovereign wealth funds, which typically pursue national economic objectives, the LGPS is a funded pension scheme whose administering authorities are required to act in the best financial interests of scheme members.
This fiduciary principle was examined in the 1985 case Cowan v Scargill, which established that pension fund trustees must prioritise members’ financial interests when making investment decisions, although its application continues to be interpreted in the context of modern ESG and stewardship frameworks.
Zoe Alexander, executive director of policy and advocacy at Pensions and Lifetime Savings Association, stressed: “The LGPS exists to fund the retirements of nearly seven million local government workers. Its primary purpose is to deliver pension benefits to members.”
Reform UK has also proposed increased pension fund investment in UK infrastructure and strategic assets.
A key example are infrastructure investments. In its 2024 manifesto, Reform suggested that pension funds could acquire a 50% stake in critical infrastructure assets, Tice yesterday cited British Steel as an example. However, British Steel precisely came under government control because it was heavily lossmaking, it currently has more than £700m in debt outstanding and reported a loss of £200m in 2023. Taking on these assets could come with significant risks to LGPS portofolios.
‘Closing the LGPS could save councils millions’
Reform UK has proposed closing the LGPS to future accrual and enrolling new employees into defined contribution (DC) schemes instead. Tice said this could reduce employer contribution costs.
It is true that closing a defined benefit scheme to future accrual will reduce long-term liabilities for employers. Public data shows that LGPS employers paid approximately £10bn in contributions in the 2024-25 financial year.
However, the LGPS remains still significantly more cost effective that unfunded public sector schemes where employer contribution rates are often twice as high.
Moreover, shifting the LGPS towards a DC model would likely lead to significantly worse outcomes for new members, warned the Scheme Advisory Board in response to the proposals: “Compared with defined contribution (DC) schemes, the LGPS delivers each £1 of retirement income around 50% more cheaply. Proposals to move new local government employees into DC schemes would likely reduce retirement security, particularly for lower paid workers.”
‘The LGPS overpays £2bn per year in fees’
Tice said that the LGPS overpays £2bn annually in investment management fees. He did not provide detailed calculations in his speech.
According to Ministry of Housing, Communities and Local Government SF3 statistical returns, LGPS funds reported approximately £1.9bn in total investment management expenses in 2024-25.
Reform’s earlier analysis of the ten councils with Reform majorities suggested that these councils were overpaying £338m per annum in fees, Tice suggested that this could be reduced to £73m. He also said in September that current average performance fees of 0.5% could be brought down to 0.1%.
Feels could be brought down by shifting to a stronger focus on index-based funds while private market holdings usually come with higher fees.
The latest SF3 data released by the government in October suggest that for the 2024 / 2025 financial year, the LGPS paid a total of £1.9bn in investment management expenses.
Even if fees were brought down to 0.1%, the figures do not stack up.
‘The LGPS is underperfoming its benchmark’
Tice also said that changes to LGPS investment strategy could generate an additional £8-£10bn in returns.
He did not publish detailed calculations for this figure.
His earlier presentation estimated that ten selected LGPS funds underperformed their chosen benchmarks by an average of approximately 1.9% annually over five years.
Again, it is unclear what these figures are based on, but Tice’s earlier analysis of the10 council pension fund under Reform control shows that the weighted average levels of underperformance per annum was 1,9% over the past five years, equivalent to an underperformance of £1.24bn over five years.
Funds tend to operate with different benchmarks by asset classes and many LGPS equity funds did indeed underperform their benchmarks, as previously reported by Room151, due to relative underweight positions in US tech stocks, which were a key driver of global equity performance.
According to Tice, a “sensible benchmark” for the LGPS could be a 75% allocation to an FTSE Global Tracker Equity Index and a 25% allocation to a Vanguard Bond Tracker fund.
It is unclear which funds Tice is referring to but a 75% allocation to the FTSE Global All Cap Index would indeed have offered higher returns, the index delivered a whopping compound return of 76% over the past years. However, past performance does not equate future returns.
Many LGPS investors have opted to remain underweight US equities amid concerns over concentration risks. Nearly a third of the index consists of tech stocks, almost all of which are domiciled in the US. Only 3% of the index consists of UK firms, leaving LGPS investors with almost no exposure to the UK stock market, a stated incentive of Reform’s agenda.
‘The LGPS is failing to back Britain’
In his speech earlier this week, Tice appeared to change tone on his ideal vision for LGPS asset allocation, accusing the LGPS of “failing to back Britain” arguing that funds should invest a third of their assets in the UK with a 15% allocation to infrastructure and a 75% allocation to equities.
According to the Pensions and Lifetime Savings Association, the LGPS currently has an average allocation of approximately 17% to UK assets, although allocations vary significantly between funds.
However, a higher allocation to the UK assets such as infrastructure could also come at a lower return and higher fees than global benchmark indices.
Contradictions
Reform UK has proposed significant changes to the structure and investment strategy of the LGPS, including increasing domestic investment and altering scheme design.
Reforms proposals are faced with a number of contradictions, the most important one being that investments in the best interest of the country are not always in the best interest of scheme members.
LGPS funds could opt for a higher allocation to overseas equities to achieve stronger returns in the short-term, this would however come at expense to investments in the UK.
Moreover, while closing the LGPS to future accrual would deliver cost savings for councils, it would come at the expense of members who would be faced with a massive reduction of future retirement income.
