The Government is frustrated at the slow pace of LGPS pooling. Since the eight LGPS pools were set up in 2015, the Government has been pushing for 100% pooling. However, as of March 2024, only 45% of LGPS assets are invested through pools (HMT, 2024). The level of pooling varies by Local Authority, in 2022 Bromley pension fund had still not pooled any of its assets because it didn’t see the business case for doing so, the Norfolk pension fund had pooled 45% of its assets, and the West Sussex pension fund had pooled 78% (Local Government Chronicle, 2022).
Why are LAs reluctant to pool?
It can be assumed that if the business case were obvious more LAs would be transitioning their assets more quickly, so where are the hindrances?
Level of savings: not all pools feel that they have been given concrete evidence about how much can be saved from pooling, and what the best way of calculating savings is. The Government claims that pooling has saved LAs £870m since 2015 because of lower fees, enhanced investment opportunities and improved efficiencies.
Governance concerns: Different pools are governed in different ways – for example, ACCESS is managed by a joint committee, Border to Coast is internally managed by partners/shareholders and Brunel and London CIV are externally managed. Some LAs are concerned about the differences in governance between pools and that LA level of oversight will be too weak.
Investment objectives: Schemes have stated concerns that their investment objectives will be more difficult to meet using shared funds. In particular, if LAs are focusing on supporting specific sectors of their local economy, this will be more difficult through shared pools.
The Government is keen to ensure that pool governance is strengthened and streamlined, but they are also aiming for schemes to hand over delivery of investment objectives entirely to schemes.
There’s a lot of Government pressure at the moment for schemes to behave and invest in particular ways, which makes sense on a macro level in terms of achieving scale and simplicity. However, some schemes may struggle on the way and if this process is costly and complex, will members pay the price?
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