The government’s decision to close two of the eight Local Government Pension Scheme (LGPS) asset pools will come with a hefty cost, according to one of the affected funds.
Speaking at an industry event this week, Jennifer Devine, head of the Wiltshire Pension Fund, shared her recent experience after the Brunel Pension Partnership was informed that it had not met the government’s “megafund” criteria.
Wiltshire is one of 21 LGPS funds in England now looking for a new pooling partner following the government’s decision to move from eight pools to six.
“As well as looking for a new home for ourselves, this is going to be a really costly process for us as well,” Devine said. “Those 21 funds who didn’t get the green light to go forward are being quite heavily penalised.
“There will be costs in joining another pool, and you can’t move billions of pounds without spending millions of pounds.”
Devine’s concerns echo similar warnings from the ACCESS pool, which has also been ordered to close. In April, in response to the government’s rejection of its plan, ACCESS said merging with another pool could incur costs of as much as £100m.
“The costs of merging [are] unnecessary expenditure of tens of millions of pounds and a financial burden on our scheme members which could alternatively be used to invest in UK productive finance initiatives,” the pool said.
Pools preparing to provide new services
Richard Law-Deeks, chief executive of LGPS Central, said his pool was exploring how it could evolve to become a strategic partner to individual funds, in line with the government’s requirements for the pools to provide more services.
“There are new business lines like advice, implementation, and local investment that we are going to have to learn and get to grips with,” he said.
“We’ve got limited experience of those in the past. Doing them holistically is going to be a change for us.”
Last month, LGPS Central hired an experienced change and transformation director, Rajeev Mehta, to oversee the work on adapting to the new requirements.
Despite these headwinds, those less directly affected by pool closures have reported a positive experience.
Joe Kempton, head of the Lincolnshire Pension Fund, said: “We work better together. I’ve got some great partner funds that I work with.”
Lincolnshire is a member of the Border to Coast Pensions Partnership.
