Your Local Government Pension Scheme (LGPS) pension is secure

There has been much in the news in recent weeks about the impact on pension funds of market volatility, particularly the impact of rising gilt yields following the Government’s mini-budget announced in late September. Many of those pension funds affected invest in Liability Driven Investment (LDI) funds, where government gilts are used to hedge against the negative impact of changing interest rates and inflation on a pension fund’s liabilities. The rise in government gilt yields at the end of September and into early October led to the value of many LDI funds plummeting, and the amount of leverage, or borrowing, employed within the funds increased as a result; this led to many investment managers issuing large collateral calls requesting additional cash from pension funds in order to rebalance portfolios. This created panic in the markets, with concerns that many pension funds would be forced into costly asset sales to meet those collateral calls and potentially come close to default.

The Fund would like to reassure members that although the Lambeth Pension Fund has investments in an LDI strategy, the amount of leverage in use within the portfolio is much lower than generally reported in the media for the mostly private sector schemes which, in conjunction with a highly collateralised position, meant that the Fund was never in any serious risk of needing to sell other assets to finance the LDI portfolio. The Fund has remained in regular contact with its investment manager throughout this turbulent period and has always been reassured of the portfolio’s fairly comfortable position. The Fund will continue to monitor the portfolio, as well as the rest of the pension fund’s assets, as part of regular stewardship activity through investment performance reporting and the Fund’s risk register.

Cost Of Living

We’re all seeing rises in the cost of living which may mean that you’re struggling with your money at the moment and considering options on cutting back, including opting out of the Local Government Pension Scheme (LGPS). The National Local Government Pension Scheme has put together some answers to the following frequently asked questions about the cost of living crisis:

• Where can I find help with rising living costs?
• Can I reduce or stop my pension contributions?
• Could pension scams increase?
• Is there any help for pensioners on lower incomes?

Take a look at the LGPS website to get help on managing your money in these uncertain times.