The chief executive of Brunel Pension Partnership fears that the current political situation could delay the Local Government Pension Scheme’s (LGPS) framework consultation, which poses a risk to its reputation and progress on asset pooling.
Laura Chappell told Room151 that recent ministerial changes in the Department for Levelling Up, Housing and Communities (DLUHC) may set back the framework consultation, which could ultimately “risk the reputation of the LGPS, one of the largest pension funds in the world”.
Teresa Clay, head of local government pensions for DLUHC, previously announced at the Pensions and Lifetime Savings Association’s (PLSA) local authority conference that the government was planning to launch a consultation in autumn 2022.
It will outline rules and guidelines for LGPS funds to speed up the move to pooled arrangements.
Chappell added: “There has been much speculation over what might be in the proposed consultation, some of this caused by DLUHC itself.
“The longer this goes on, the more time we spend on speculation and not getting on with the business of the pool, which is to tap into the benefits of scale including finding great assets, generating investment performance and ensuring value for money.”
Asset pooling
Joanne Donnelly, board secretary at the LGPS Advisory Board, agrees that a delay to the consultation could affect the progress of asset pooling.
Speaking to Room151, she highlighted comments made by Clay at the PLSA’s local authority conference that ministers are growing impatient with the slow pace of the pooling project.
“In the absence of further guidance or regulatory change then it cannot be assumed that the pace of pooling would change or increase,” she said.
Mike O’Donnell, CEO of the London CIV pension pool, previously attributed the slow progress of pooling the assets of the LGPS to a lack of clear framework from DLUHC.
He told Room151: “As a result of the current political position, there is an obvious risk of further delay.
“Certainly, we would hope that the government can continue the pace and consult on proposals for a new pooling framework.”
In the absence of further guidance or regulatory change then it cannot be assumed that the pace of pooling would change or increase.
TCFD reporting
Donnelly also highlighted that an absence of a framework consultation could implicate future Task Force on Climate-Related Financial Disclosures (TCFD) reporting.
The TCFD is an international framework to promote better disclosure of climate-related risks. TCFD reporting requirements for the LGPS are set to be outlined by DLUHC in a future consultation.
Donnelly said some LGPS funds need the consultation to help them pool their assets, and pension pools can only start TCFD reporting once this process has been completed.
She told Room151 that an absence of a consultation would particularly impact smaller funds: “Things like TCFD reporting could be undertaken by pools; this may be more difficult though where [smaller] funds have not moved the majority of assets to their pool.”
DLUHC response
A spokesperson for DLUHC told Room151 that work continued on the “priorities established by the previous secretary of state”.
They added: “The department continues to consider how the framework for LGPS investment could be strengthened, including stronger governance, improved reporting, and greater transparency on investment performance.
“Asset pooling is an important part of the framework. We are committed to achieving the substantial further savings and other benefits of scale, as funds deepen their collaboration with their pools.”
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