The industry has welcomed government criteria and guidance on Local Government Pension Scheme (LGPS) pooling, but warned the timescale for implementation is too tight.
The government published a consultation paper as part of the Spending Review inviting the UK’s 89 local government pension schemes to design and implement “up to” six pools of assets, each with at least £25bn under management.
The paper set out four criteria for schemes to adhere to, including articulating the benefits of scale, strong governance and decision-making processes, reduced costs and value for money and an improved capacity to invest in infrastructure.
The paper said: “Working together, authorities have a real opportunity to realise the benefits of scale that should be available to one of Europe’s largest funded pension schemes. The creation of up to six British Wealth Funds, each with at least £25bn of scheme assets, will not only drive down investment costs but also enable the authorities to develop the capacity and capability to become a world leader in infrastructure investment and help drive growth.”
However, authorities have been asked to submit initial proposals by 19 February, and completed ones by 15 July, a timescale City Noble director William Bourne (pictured), who is also joint independent local pensions board chairman of the Lancashire and LPFA pensions partnership, said was a “concern”.
He said: “The guidance indicates that they would expect the first assets to be transferred from April 2018. The experience of the London CIV and the LLPP (Lancashire and LPFA partnership) is that the proposed timing is extremely challenging. It will be even more so for pools comprising perhaps eight or 10 authorities who may be widely separated geographically.”
Hymans Robertson head of public sector John Wright said it was important to establish first what should be done, but funds should be given time to figure out who they should pool with.
He added: “Some funds are making progress with the ‘who’ as well but it is right that the timetable allows some leeway for funds to work out the right groupings and partnerships to get the best outcomes for the long term. The timetable makes some allowance for this with initial proposals in February and final detailed proposals by July, but we should remember that the aim should be to identify the best proposals for the long term and taking time to get this right will pay dividends in the future.”
The Pensions and Lifetime Savings Association chief executive Joanne Segars said the body supported the development of pooled investment vehicles that generate economies of scale and enable smaller LGPS funds to access new and novel investments.
However, she added: “That said, the timetable for submitting proposals is tight.”
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