WMPF Statement on funding and employer contributions – January 2025

Headlines

• Employers participating in the West Midlands Pension Fund pay the appropriate amount of contributions to meet the costs of pensions benefits promised to their employees.
• These contributions are set by the Fund in line with legislation, supported by our professional advisers and in consultation with all of our employers. They form part of a long-term strategy aimed at ensuring long term cost efficiency and responsible, sustainable funding of member benefits.
• Evidence confirms that the contributions paid by employers to the Fund are typically in line with those payable to the majority of funds across the LGPS.
• We fully disclose our investment costs in a transparent way, in line with industry best practice and these are independently benchmarked each year.
• Our investment costs are broadly the same as those for LGPS funds of a comparable size.
• Our members, employers and key stakeholders should be assured that in setting contribution levels, we are confident the highest standards are applied and in full compliance with legislation. Member benefits are secure and in no way affected by the timing of funding.
• We actively engage with our employers on developing funding and contribution requirements and from March 2025 we will be reviewing all employer contributions effective from April 2026, as part of the next triennial actuarial review. Our statement provides further evidence to support this position.

Statement from West Midlands Pension Fund

We are aware of recent articles and claims relating to West Midlands Pension Fund’s setting of employer contributions and investment management costs and would once again like to set the record straight.

Employer contributions and investment costs

We can confirm and demonstrate:

• Employers participating in the Fund pay the appropriate contributions to meet the costs of pensions benefits promised to their employees.
• Employer contributions are set every three years in line with legislation, supported by our professional advisers and in consultation with all of our employers. Each employer contribution schedule is unique to their circumstances so it’s unreasonable to expect all employers to have the same contribution rate. There are many reasons for differences in the rate paid by employers relating to their history and member profile, including how this has changed over many years.
• In developing contribution plans, prudent allowance is made for the investment return the Fund’s assets are expected to generate in future and over the decades benefits will be paid to members. The assessment of pension liabilities for entry into an employer’s annual statutory accounts is determined by international accounting standards and set by the employer in consultation with their auditor.
• Our employer contribution levels are in line with those across the LGPS. These do vary according to the unique circumstances of each employer and LGPS fund. Analysis and reporting by the Government Actuary Department (GAD) appointed to review outcomes of local Fund valuations across the LGPS, confirms that employer contribution levels set by the Fund were in the middle of the pack when compared to other funds.
• Our investment costs are independently benchmarked and are broadly the same as those for LGPS funds of a comparable size. Costs and value add also compare favourably against our global peer group. It is not possible to draw comparisons between funds using annual reports in isolation – it requires an in-depth analysis into the different ways fees are reported and the underlying investment strategy to enable a like-for-like comparison, which the independent benchmarking provides.
• We fully disclose our investment costs in a transparent way and in line with industry best practice.
• The Fund exists to meet the benefits of our members. If actual experience is better or worse than expected, then employers will receive either a benefit through reductions in future contributions or conversely additional contributions will be required. There is a strict legislative framework confirming the process for this which we have to follow. The next review is due as at 31st March 2025, with consultation involving employers to occur later in the year.

Please see our previous statement for further clarification on the setting of employer contributions, investment strategy and investment costs.

Notes to editors

The West Midlands Pension Fund provides Local Government Pension Scheme services to over 340,000 members and more than 850 employers across the West Midlands region. It is the second largest LGPS Fund in England and Wales with over £21 billion of assets. Over £7.3billion of these are invested in the UK in a wide range of assets including infrastructure projects, private equity and property.

Employers include the seven Local Authorities: Birmingham City Council, Coventry City Council, Dudley Metropolitan Borough Council, Sandwell Metropolitan Borough Council, Solihull Metropolitan Borough Council, Walsall Council and the City of Wolverhampton Council (who are also the Administering Authority), together with the West Midlands Combined Authority for the seven Constituent Authorities.

The Fund’s Funding Strategy Statement (FSS) sets out the approach to the setting of employer contributions from 1 April 2023 to 31 March 2026. In finalising the FSS, all participating employers were consulted. More recently, the Fund published an employer Briefing Note with commentary on the LGPS surplus environment and its 2024 Annual Report and Accounts.

The Government Actuary Depart (GAD) undertakes a review of LGPS fund valuations under section 13 of the Public Service Pensions Act 2013 The GAD report considers funds’ progress against compliance, consistency, solvency and long-term cost efficiency. The Fund performs well against these tests, with no ‘flags’ confirmed by GAD for the 31 March 2022 valuation.

The Fund uses a leading international benchmark provider, CEM, to undertake comparisons for the Fund of both investment and administration costs against LGPS funds, as well as a global peer group. CEM provide benchmarking to the world’s leading asset owners with participating assets over $13trillion.

The analysis provided to the Fund compares it against two universes:

• LGPS: 33 funds with total assets of £264billion representing over 2/3rds of LGPS assets
• Global Peer group: 24 global asset owners including public and private pension with assets of between £9.6 and £30.3 billion (median £18billion) against the Fund’s £21billion

The analysis not only looks at investment and administration costs. but also considers value add.

The Fund has been recognised for its strong governance and investment strategy achieving awards in both categories in the Local Authority Pension Fund Investment Awards 2024. In 2023 the Fund won the Investment Innovation Award for its collaboration with the West Midlands Combined Authority to support growth and innovation among new companies and technologies within the region via the new West Midlands Co-Investment Fund.

The Fund has achieved signatory status to the UK Stewardship Code (2020) for the last four years, and has attained accreditations for Pension Administration from PASA, holds Investors in People (GOLD), Customer service excellence and annually undertakes independent benchmarking to inform continuous improvement.

The Fund set up, and is part of, the LGPS Central pool, which is Financial Conduct Authority (FCA) regulated and has been established since 2018 to create opportunity for greater efficiency and access to wider investment opportunities through increased scale, capacity and expertise.