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Huge gulf in fees paid by local authority pension funds

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New research into local authority pension funds has found huge disparities in the fees paid to fund managers by individual councils, with some paying three times more than their counterparts.

A Financial Times commissioned study by Investor Data Services found the top quarter of council pension funds with the most expensive fees paid four times more than the cheapest quarter, averaging at £5.5m a year.

The FT examined the pension funds of Staffordshire and Devon councils which contain £2.62bn and £2.68bn funds under management respectively.

Both counties has similar portfolios and held the same three largest stocks but Staffordshire paid almost three time more in fees than Devon over nine years, costing £3.9m a year more. Staffordshire’s pension pot grew by 5.7 per cent a year, the local authority average, and Devon by 6 per cent.

Local Government minister Brandon Lewis last week launched a review into whether the 89 separate bodies in England and Wales are managing their funds properly.

He told the FT: “There is compelling evidence from around the world to suggest that the [local government pension] scheme could benefit from a smaller number of optimal funds.”

Lewis said he will make a decision by the end of the year on whether to force councils to pool their pension funds.

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. It all goes back to incentives, in my opinion. What is the motivation for the FD of one council to compare notes with others?

  2. Exasperated Me 28th May 2013 at 2:44 pm

    Scrap the schemes, they are unaffordable.

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