Government warned delays could damage pension pooling project
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The government has been warned that any delays to the timetable for pooling Local Government Pension Scheme funds caused by Brexit could undermine the process.
All eight nascent pools last week submitted beefed up proposals for pooling to government, with the original timetable giving six weeks before ministers decide whether to accept them.
But the result of the European referendum has led to fears that civil servants will be distracted from focusing on the task – making it more difficult for pools to prepare for launch in April 2018.
John Harrison, independent investment adviser to Surrey Pension Fund, told Room151: “Whether the government meets the six week deadline or not is in question.
“The timetable is already tight and the more you squeeze it the longer pools have to delay making appointments.
“If the decision to proceed is delayed until December, pools will start to get twitchy. You would need all of the year beginning April 2017 to implement the pools.”
The decision to force LGPS funds to pool their resources was a pet project of former chancellor George Osborne, who has now been replaced by Philip Hammond.
However, DCLG official Andrew Cornelius this week told a conference that the government is still committed to the project.
Colin Pratt, investment manager at Leicestershire County Council, said: “There are some pools who would love it for the government to say, things have got difficult due to the availability of civil service staff after the Brexit vote so we will give you another year.
“We aren’t planning on that but there are certain things we need to do in six months’ time, such as getting Financial Conduct Authority registration and appointing key staff.
“We have to carry on. If we leave this work too long then we won’t be able to do it in an efficient way.”
Hugh Grover, chief executive officer at London LGPS Collective Investment Vehicle, said that there was no need to wait for government approval before proceeding with the process.
He said: “My personal view is that if a pool believes in the concept of collaboration and pooling then they don’t need permission to do it.
“Unless a pool is minded to do something completely different to what the government is suggesting then there is no need to wait.”
Other figures close to the process told Room151 that little progress has been made so far on the creation of a national pool covering infrastructure investment.
One source, who did not want to be identified, said: “A number of pools believe they have the skills to manage infrastructure in-house and don’t want a national platform.
“LGPS is stretched enough as it is to manage the pooling process and it is a big ask to get them to use their limited resources to set up a national infrastructure platform.”
However, the submission from the pool consisting of London Pension Fund Authority (LPFA) and Lancashire County Council contains an ambition to expand an existing infrastructure fund involving Greater Manchester.
The submission said: “The £500m infrastructure joint venture, GLIL, which LPFA and Greater Manchester Pension Fund established in January 2015, will be expanded to include respective wider pooling partners during summer 2016 lifting total commitments to in excess of £1bn.”
Meanwhile, the Northern Powerhouse submission – involving Greater Manchester and West Yorkshire pension funds – has rejected the government’s preferred option for pools to be structured as Authorised Contractual Schemes (ACS). The pool has opted for an Alternative Investment Fund Manager structure instead.
The submission said: “Our understanding is that many other LGPS pools will be establishing an ACS.
“However, due to the scale of the existing mandates (GMPF has a c.£6bn external balanced mandate and WYPF internally manages c.£9bn of listed assets), limited overlap between mandates and low-cost, low turnover approach of the pool, holding listed assets in an ACS is not currently the most cost effective approach for the pool.”
Photo (cropped): Digital Internet, Flickr.
