The Royal Borough of Kensington and Chelsea (RBKC) has said that it is “minded” to exit membership of the London CIV Local Government Pension Scheme (LGPS) pool.
Quentin Marshall, RBKC pension chair, told Room151 that the borough and the pool were “considering how their future relationship will evolve”. A final decision will be made by the RBKC Investment Committee on 9 February 2023.
This would be the first time that a council pension fund has withdrawn from one of the eight LGPS pools, and will be a significant blow to London CIV. The RBKC pension fund currently has over 10,400 members and assets in excess of £800m.
“RBKC remains committed to the principles underlying pooling, in particular, reducing unnecessary fees and costs. RBKC recognises that each LGPS fund has different circumstances and investment strategies and that, for many, the London CIV represents an attractive partner,” Marshall said.
He added that the borough would “remain a supporter of the London CIV and its objectives, and does not rule out future cooperation on a mutually agreed basis”.
Efficient exit
London CIV represents the pension funds of the London boroughs and the City of London. Its client funds have £48bn in assets, 57% of which have been transferred to the pool (including passive funds).
Dean Bowden, CEO of London CIV, told Room151 he would have preferred RBKC to remain within the pool.
“However, this is a decision for RBKC and, should they choose to leave, we will work with them to achieve this in as efficient manner as possible, making sure that exit arrangements include a framework for future collaboration and a basis for an ongoing cordial and commercial relationship,” he said.
If RBKC does decide to withdraw from London CIV, “notice to leave” has to be given by 31 March 2023 for an orderly exit by the end of March 2024.
Should [RBKC] choose to leave, we will work with them to achieve this in as efficient manner as possible, making sure that exit arrangements include a framework for future collaboration and a basis for an ongoing cordial and commercial relationship.
Tougher regulations
William Bourne, principal with Linchpin Advisory, told Room151 that the proposed move was highly significant, particularly in light of the expectation that the government will soon be tightening the pooling requirements for LGPS funds.
“The obvious point is how they will satisfy the investment regulations which mandate pooling? Will they go to a different pool? We are expecting the government to increase the pressure to pool when it issues new regulations later this year,” said Bourne.
In a statement to Parliament on 9 December 2022, chancellor Jeremy Hunt confirmed that the government would consult on new guidance on asset pooling in England and Wales in “early 2023”.
Pressure on London CIV is also likely to increase when Bromley Council’s Pension Committee meets on 22 February. Room151 has been told that a “key decision” will be made at the meeting, which could also involve withdrawal from the pool.
Bromley is a member of London CIV in name but has yet to transfer any assets. Its pension fund has more than 19,000 members and net assets of £1.3bn.
There have been suggestions that the London Borough of Hounslow was also disenchanted with membership of London CIV. However, council leader Shantanu Rajawat said: “Hounslow Council is a member of the London CIV pool, and we continue to support it. They are also a key partner within our fund investment strategy.”
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