In the summer 2015 budget, the then Chancellor announced that he would be seeking proposals for Local Government Pension Scheme (LGPS) funds to pool their assets in order to create improvements in the following four areas:
- Scale
- Value for money
- Governance
- Facilitating infrastructure investment
Greater Manchester Pension Fund (GMPF), Merseyside Pension Fund and West Yorkshire Pension Fund developed pooling proposals to meet the above four criteria and made submissions to Government setting out the operation of the ‘Northern LGPS’ pool. There are eight LGPS pools in total. The Northern LGPS model is unique in terms of the small number (three) of very large member funds, and it is the only pool that does not directly own or rent a regulated entity.
In 2019, government ran an informal consultation. The Management Panel, Local Board and Northern LGPS Joint Committee all submitted responses which included detailed legal analysis from Squire Patton Boggs and QC opinion. GMPF and Northern LGPS expressed significant concern at aspects of the proposals. For example, there was concern that the requirement to appoint a pool company would over-ride the discretion afforded to administering authorities under the investment regulations to appoint an investment manager and, in some cases, could increase costs. There were also concerns that the draft sought to make pooling mandatory, even when there was a potential loss to the administering authority.
On 11 July 2023, Government launched a formal consultation seeking views on proposals relating to the investments of the LGPS. It broadly covered the areas of asset pooling, levelling up, opportunities in private equity and investment consultancy services. The consultation document is available at the following link:
Local Government Pension Scheme (England and Wales): Next steps on investments - GOV.UK (www.gov.uk)
GMPF and Northern LGPS submitted responses to the consultation, which repeat many of the messages to the 2019 consultation, in particular:
- Government needs to focus on delivering successful outcomes.
- LGPS Funds are diverse – one size fits all is not appropriate.
- Funds’ fiduciary duty is paramount.
In addition, the responses make the following points:
- Consistent reporting is much more difficult than it sounds.
- GMPF is supportive of greater cross pool collaboration.
- Long term benefits of pool mergers are unlikely to outweigh short term disruption.
- Pools must deliver funds’ strategic asset allocation.
- Concerns regarding Pools advising funds and individual fund ability (or lack of) to influence pools.
A copy of the Northern LGPS submission is available at the following link:
Northern LGPS responds to Government consultation on next steps for LGPS investment | Northern LGPS