Hello there 
We are developing a local couch-coop multiplayer game and had to stay on 5.0 because of exactly this issue (1 keyboard, 1 gamepad → no controls on second pawn)! 
I am just here to confirm that (been testing this in every new version coming up in a fresh TPT) even the brand new 5.3 preview version hasn’t resolved this issue. 
I have a feeling Epic doesn’t like local multiplayer very much 
Please Epic, fix this already! 
Greetings,
Markus
Bagpack Games