New research, which shows that Local Government Pension Scheme (LGPS) funds could be paying hundreds of millions of pounds more than necessary to City fund managers, has been welcomed by the London Pensions Fund Authority (LPFA).

Research conducted by The Daily Telegraph found that local authority pension funds paid £347m to investment managers last year, up nearly 9% on the 2011 figure, while the funds themselves increased in value by nearly 4% to £158.6bn.

The Daily Telegraph analysed the annual reports of 89 LGPS funds and also found that there were "big disparities" between the different funds, the paper reported.

In response to the findings, Local Government secretary Eric Pickles told The Daily Telegraph: "This research proves the real need for reform and true level of scope for savings."

He added that the Government is looking at ways administrative savings can be made from councils collaborating more and merging funds, and told the paper that the Government wants to reduce administrative costs for the 89 funds by putting measures in place.

The report was published at the same time as the Financial Times found that some LGPS funds were paying fund managers three times as much as other schemes of the same size.

Edi Truell, LPFA chairman, said: "These research papers further support our assertion that creating pension scheme 'superpools' of up to £50bn would result in markedly reduced fees for LGPS funds, improving net returns and helping to reduce deficits.

"In addition to delivering fee reductions, pooled funds would also have the resource to invest in a wider range of asset classes, as well as to pursue more complex liability-driven investment strategies, further driving returns. There is also huge savings potential in the administration of schemes."

First published 29.05.2013

monique_simpson@wilmington.co.uk