London CIV and Brunel Pension Partnership receive pooling green light
0Five out of eight LGPS pools have now received letters of approval from central government to continue with their plans.
Two more groups of local authority pension funds have been given the go-ahead to progress their plans to pool assets.
Room151 has learnt that local government minister Marcus Jones has given the thumbs-up to proposals submitted by the London Collective Investment Vehicle and the Brunel coalition of South West councils.
The move means that five of the eight prospective pools have now been given the ability to proceed, following the green light given to LGPS Central, Border to Coast and Welsh local authorities before Christmas.
Brunel
Helen Cusins, project manager at the Brunel Pension Partnership, told Room151: “We received the letter from Marcus Jones on 16 December, which confirmed that he was content for Brunel Pension Partnership to proceed with the pooling proposal.”
The eight members of the Brunel pool have assets which were valued at more than £25bn at 31 October 2016.
It is planning to reduce the current number of 170 mandates to 22 “outcome focused investment portfolios”, according to documents released this week.
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The move is expected to significantly reduce the number of managers, which currently stands at almost 100.
Annual fee savings from pooling are projected to be £20m per year by March 2021, rising to £30m by March 2027. On an aggregated basis, Brunel’s financial model indicates that net savings exceeding £0.5bn are achievable by 2036.
Brunel initially proposed the creation of a collective asset pool to be overseen by a joint committee, as an alternative to the government’s favoured Authorised Collective Scheme structure. Brunel argued that an ACS would have brought additional complexities and costs to establish and operate.
However, following discussions with ministers, Brunel has agreed to create an independent entity, regulated by the FCA to administer the pool.
An analysis by consultant PwC has recommended that Brunel creates this new entity itself, rather than renting it from a commercial provider.
Documents prepared by Brunel said: “The PwC analysis showed that the build model would have advantages over the rental model, especially on accountability. It would also generate less uncertainty around the future roles of investment officers.”
PwC also recommended that the company should be based in the Bristol area due to its transport links, office costs and remuneration levels.
London CIV
Hugh Grover, chief executive of the London CIV also confirmed to Room151 that the government has approved the pool’s proposals.
Documents submitted to government by London CIV in July listed assets of around £28.4bn across 33 funds in the pool, and estimated savings of up to £185m per year by 2027.
The Local Pensions Partnership – consisting of Lancashire County Pension Fund and London Pensions Fund Authority – has yet to receive its approval letter.
The proposed pool only has £14bn of assets – well below the government’s original target of £25bn.
Sources at the £30bn ACCESS and £36bn Northern Powerhouse pool also told Room151 that they have yet to receive their letters of approval.
Former chancellor George Osborne originally announced plans to merge the assets of the 89 existing LGPS schemes into six new “wealth funds” during the 2015 Conservative Party conference.
A spokesperson for the Department for Communities and Local Government had not responded to Room151’s request for comment by the time of publication.
