Pensions experts have queried a think-tank study which claims restructure of the Local Government Pensions Scheme (LGPS) could deliver efficiency savings of at least £860m a year.

A report issued 25 November by the Centre for Studies think-tank condemns the 101 funds across England, Wales and Scotland as being ‘woefully inefficient' and draws a correlation between administration costs per member and fund scale – with larger funds having lower costs.

The paper includes a cost comparison of LGPS funds and shows administration costs vary from £13.70 a year in Nottinghamshire to £139.40 a year in Durham. 

Investment management costs range even wider, from a mere £7.60 a year in West Yorkshire to some £317.30 in the city of London.

According to the paper, the £860m annual savings figure could be achieved through digitalisation and centralisation of LGPS management, improved investment management and amalgamation of the 101 funds into six giant schemes with average assets worth £33bn.

Report author, Michael Johnson, said: ‘Costs are controllable, whereas investment performance, by and large, is not.

‘This necessitates structural change and could help secure the future viability of the LGPS,' he added.

But rival experts questioned the report's findings.  Nigel Keogh pension's manager for the Chartered Institute for Public Finance and Accountancy said the report ‘seems peculiarly timed as many of its recommendations simply copy initiatives already being considered by the LGPS shadow scheme advisory board'.

‘More importantly far from being in the difficulty suggested the LGPS has over £200bn in assets and continues to have a positive cash flow,' he added.

Graeme Muir, partner and public sector practice area leader at actuaries Barnett Waddingham said: ‘As with most papers produced by Mr Johnson, it's the usual mix of the good, the bad and the downright ugly – some facts, some fiction, some sensible stuff and some nonsense that could mislead us to the wrong conclusions.'