Forced LGPS pooling contributes to ‘uncertainty’
0The government’s forced pooling of Local Government Pension Scheme funds is contributing to increased economic uncertainty, according to the chair of a leading pensions body.
Lesley Williams, chairman of the Pensions and Lifetime Savings Association (PLSA) made the comments during a speech at her organisation’s conference in Edinburgh this week.
She included the ongoing reform process among a list of unpredictable factors, including the effect of government energy policy on infrastructure investment, the Zika virus, the value of mining bonds and Russian participation in the Olympics.
She told delegates: “All of these and more seem to be contributing to a collective sense of uncertainty and instability for 2016.”
In addition, she said that extra uncertainty is currently stemming from unsustainable debt levels in China, recession and corruption in Brazil and fears about the stability of banks in the Eurozone.
Finally, she said that the future of the European Union itself is already causing problems in markets, due to the immigration crisis and the UK’s referendum on future membership.
She said: “If Britain leaves we’re not certain what will happen, but according to Adair Turner last month, the possibility of Brexit is causing ‘major destabilisation at a global level’.”
Also speaking at the conference, PLSA chief executive Joanne Segars said that private sector pension funds could take inspiration from the LGPS pooling process.
She said: “Of course we have our own example of asset pooling in action through the Pensions Infrastructure Platform (PiP) which is pooling investment for pension funds in infrastructure.
“Already with £1bn committed to UK infrastructure it is saving participating funds millions of pounds a year in fees and providing direct access to infra where that wouldn’t otherwise be possible.
“So we need to explore the possibilities of pooling and other structural interventions.
“Can we go further and think about how pooling could help smaller funds, for example?”
This week, the PiP Multi-Strategy Infrastructure Fund (the Fund) launched with a target size of £1bn.
Two LGPS funds – Strathclyde Pension Fund and West Midlands Pension Fund – are founding investors in the fund.
Segars also announced the creation of a new direct benefit pensions taskforce, to be chaired by Ashok Gupta, deputy chairman of the Bank of England’s enquiry into pro-cyclicality by pension funds and insurance companies.
The taskforce will investigate the challenges facing DB schemes and potential solutions, reporting by October.
