By Professor John Clancy and Professor David Bailey
20th November 2025

£2.7Billion:
the record-high payout in taxpayer-funded Management expenses to pay UK's local government pensions.

£2.4 Billion of it to investment bankers for an embarrassing 3.3% return on investment.
Would have done better sticking it in a building society.

We are now able to exclusively report that the management expenses paid out to the managers of the U.K.'s 97 local government pension funds last financial year reached an astonishing, record-high of £2.7 Billion.

£2.4 Billion
was pocketed in expenses by the investment bankers, and the other
£300 Million
was spent on "administration" - in just one year.

You would have expected stellar returns on your investment for this kind of money, wouldn't you?

Yes, you would.

The embarrassing news for the investment managers was that last year's return on the £0.5Trillion of taxpayers' assets invested was...... a pathetic 3.3%.

They would have done better sticking it on deposit in a bank or building society last year.

They still got paid £2.4 Billion for the privilege of investing it, though.

This comes right out of general taxpayers', and council taxpayers', pockets, because:

• it is an amount annually deducted from the fund,
• which in turn suppresses the ongoing investment returns figures
• that are then used to set (i.e.increase) the %-rate of employer pension contributions from local government.

We estimate that the size of the accumulating expenses is now adding 3-4 % points in Employer contributions to every local government employee's payslip.

Not just council workers, but non-uniformed Police and Fire staff, non-teaching staff in local authority schools, which are still paid for through council taxes.

And then there's the non-teaching staff in Academies and Free Schools, FE colleges and some universities' staff, who get their employer contributions to the LGPS paid straight out of general taxation.

So the investment bankers are actually pocketing their £2.4B from the pockets of the UK taxpayer, and particularly UK council tax payers.

And to be clear, the vast majority of pensions paid out from the LGPS are small payments to the poorest of women pensioners, old women more likely than not living in pension poverty.

The average pension is around £3,600 a year, and bearing in mind the recently sometimes extremely large salaries and pensions to senior officers and executives in local government, many get a lot less than £3,600 a year. Gold-plated perhaps for some, but tin-can payments for most.

Which is why prioritising the £2.7 Billion bill seems so obscene. They get paid first. Everyone else is at the back of the queue. And the taxpayer pays.

And as we've pointed out many times here,

over the last 10 years (at least) the funds themselves have not been touched to pay out pensions and retirement lump sums. Contributions 'in' have covered all those pension payments 'out'.

So the only payments out of the pension funds have actually been the annual now £2.7 Billion management expenses. A quite ridiculous situation.

The massive £0.5Trillion asset base and its investment returns aren't used to pay pensions.

They're used to pay expenses.

So how, and where, did this all stack up last year?

What did each local pension fund hand over in management expenses, at your expense?

What share of each pension fund's assets was deducted from the fund, and handed over in Management expenses locally?
And what percentage investment return did each local government pension fund get for its money?

These are multi-£Billion funds. All but four are more than £1 Billion, 12 are bigger than £10 billion, and 2 are over £30 billion.

In those circumstances, the industry and observers tend to calculate their sums in what are called basis points (BPs).

It enables us to better understand proportions. It's crucial in determining returns on investment and expenses. A basis point is a hundredth of a percent. So half a percent is 50 basis points, a quarter percent is 25 basis points, 1% is 100 basis points and so on.

So in the bar chart below you will see the proportion of the fund handed over in expenses in BPs. But change in just one basis point can mean a huge amount when you're dealing in multi £Billions matters.

So we have quite a list of Saints and Sinners, in a ridiculously wide spread of basis points handed over.

The canny folk in most of Yorkshire (in West and East Yorkshire, at least) managed to limit their management expenses to under 10 BPs. But 60 of the 97 were prepared to hand over more than 5 times that amount, and without any justification in terms of the returns on investment for that.

10 of the 97 came up with an expenses payout figure 10 times what West and East Yorkshire did, and twice what most of the rest did.

You'll see in terms of the returns on investment there is absolutely no relationship between what was paid out and how the assets performed.

In terms of investment management expenses, West and East Yorkshire managed on fewer than 5 BPs. Others shelled out over 100 BPs! And we'll be looking at the issue in our next blog.