Members considered a report of the Strategic Director Transformation and Resources that provided an update on the Fund’s actions in response to the government’s proposals for pooling of LGPS investments.
The report also sought Members’ approval for officers to continue to develop proposals for pooling in consultation with the Chair.
It was reported that in the Chancellors Budget on 8 July 2015. the Budget Report (Red Book) contained a section announcing potentially far reaching changes to the degree and flexibility that would be given to Local Government Pension Funds (LGPF) in the future regarding local decision making and control in the management and allocation of LGPS pension fund investment assets. The statement had followed:
“Local Government Pension Scheme pooled investments: the government will work with Local Government Pension Scheme administering authorities to ensure that they pool investments to significantly reduce costs, while maintaining overall investment performance. The government will invite local authorities to come forward with their own proposals to meet common criteria for delivering savings. A consultation to be published later this year will set out those detailed criteria as well as backstop legislation which will ensure that those administering authorities that do not come forward with sufficiently ambitious proposals are required to pool investments.”
Members were informed that on 5 October 2015, in his speech at the party conference, the Chancellor had referred to the pooling of LGPS assets the intent of which had subsequently confirmed by DCLG in their letter of 7 October 2015 “the Chancellor announced that we are going to work with administering authorities to bring together investments into up to six pools spread across the country, creating conditions to save hundreds of millions in costs and invest billions in infrastructure in the regions”. The letter had continued “The Government remains keen to see authorities take the lead in identifying the best way to deliver savings and drive infrastructure investment and, as announced at the Budget, we will shortly be inviting administering authorities to bring forward proposals to deliver pooled investments that meet published criteria”.
It was further reported that to date, actions had included officer attendance at events, and conference calls with the Local Government Association (LGA), Department of Communities and Local Government (DCLG), Scheme Advisory Board (SAB), and many other LGPS funds. The consultation paper, which would be published imminently, would provide a lot more detail and guidance than is present at the moment.
The November consultation paper would cover legislative changes circulated in draft to give the Secretary of State increased powers; proposed changes in the investment regulations; acceptable criteria for pooling; and back stop measures for recalcitrant schemes.
It was noted that the government’s proposals were intended to deliver substantial savings from the investment manager fee base within the 89 funds of the LGPS. It was expected that the work being co-ordinated by Hymans Robertson would provide credible data which would inform the costs of the various options and potential savings.
The Chair noted the challenges of the timescales involved and on behalf of the Committee thanked Peter Wallach, Head of the Pension Fund, for the preparatory work being undertaken.
Resolved – That;
1. the report be noted and officers be authorised to continue developing pooling options.
2. future papers for the Committee provide further information on likely costs/benefits and any material costs incurred in working up proposals and it be noted that any final decision will be subject to Committee approval.