Early results suggest stability in LGPS employer contribution rates

Employer contribution rates are likely to remain stable across the Local Government Pension Scheme (LGPS) based on early results from 100 councils advised by consultant Hymans Robertson.

The analysis involved the calculation of proposed changes to contribution rates over the next cycle (2023 to 2026) using data from LGPS funds for 30% of councils across England and Wales.

Robbie McInroy, partner and fund actuary at Hymans Robertson, told Room 151: “From the data that we have looked at and the funds that we are advising, the stability of contribution rates can be delivered despite everything that is going on in the world at the moment.”

The results represent a cross-section of location, size, funding levels and current rates of councils. They suggest that over 85% of councils are not increasing or decreasing contributions by more than 3% of pay over the next three years (equivalent to 1% of pay per annum).

Within this range, nearly 50% of authorities have agreed to keep contributions at current levels or within 1% of pay change over the cycle.

McInroy added: “This is really good news. When you think about councils, they are long-term employers in the LGPS, they need the stability of contributions, they want certainty, so hopefully this gives finance directors and section 151 officers comfort.”

The analysis suggests authorities currently paying contribution rates of over 30% are in the strongest position, as over a third expect to make reductions of more than 3% over the next three years.

This outcome contrasts with councils that are paying less than 20% of pay, where none is predicting any reduction in contributions. However, 90% of these authorities are not predicting a change in contributions of more than 1% of pay per annum.

McInroy said: “This is a strong headline for these councils, as even if you’re paying a low contribution rate at the moment, you’re not going to see big contribution hikes coming at you, which you have to attest to and budget for.”

McInroy stated that the results from the evaluation “prove the resilience of the LGPS, from what has been a turbulent time over the last three years”.

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