London councils could save millions of pounds by making changes to their pension administration arrangements, an Audit Commission study has found.
Unlike the UK’s other metropolitan areas, London is split into 32 boroughs and the City of London, which each have separate pension funds, totalling £11.8bn, with at total of 414,000 members. The average administration cost per member is £126, compared with only £44 for metropolitan council funds elsewhere.
Reducing admin costs to the level of the average metropolitan fund would save the capital’s schemes £34m a year, the study found.
The higher administration costs are due in part to the ‘London effect’ – the higher cost of salaries and office accommodation in the capital – but also to the small scale of the 33 London schemes, which means they do not benefit from the same economies of scale as other councils.
The report, Efficiency Challenge: costs of administering local government pension funds in London, suggests creating one London-wide pension fund and establishing one pension authority as a possible way forward.
Steve Bundred, chief executive of the Audit Commission, said: “We hope that the London boroughs, with the support of London councils and the Department for Communities and Local Government, will use this report to challenge their current pension arrangements and move towards a more efficient system for the benefit of all their members and taxpayers.”