Access and Brunel may now need to merge with other pools
Two Local Government Pension Scheme (LGPS) pools, Access and Brunel Pensions Partnership, have had their pooling plans rejected by the government – a move that could see them forced to merge.
The eight local government pools were all required to submit their pooling proposals to government as part of November's LGPS: Fit for the Future consultation.
Of the eight, two pools have confirmed they have been told their proposals did not meet the government's vision for the future of LGPS.
In a statement, Access said it was "extremely disappointed" to learn that government has chosen not to support its intention to build its own Financial Conduct Authority-regulated investment management company at a time when other similar proposals have been given the green light.
The pool said its proposal was based on significant detailed analysis, and evidence-based appraisal of alternative approaches to meet the requirements of November's consultation – including a consideration of the Treasury's request to evaluate setup and transition costs.
Access said that, in both its detailed submission and at its meeting with ministers, it had underlined its independent implementation plan; how its pool would develop from the minimum standards to best-in-market; and also highlighted what it said was the significant cost and risk associated with merger with either the Local Pension Partnership or Border to Coast pools.
Access estimated transition costs for a merger of between 28 and 36 basis points of the value of active listed assets pooled – equivalent to over £100m. It said that after a "lengthy" review of the options, it found the costs of merging far exceeded its proposed built model.
It said a merger would involve the "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".
Access said: "The government's rejection of our proposal attempts to downplay significant cost considerations – without supplying its own analysis or counter-factual evidence – nor proposing a framework for how costs will be compensated in the event of undesirable pool or fund level mergers."
In a statement on its website, Brunel also confirmed it had received a letter from the Ministry of Housing, Communities and Local Government (MHCLG) stating its proposals did not meet the government's vision for the future of the LGPS.
Brunel said it was now taking time to consider next steps with its partner funds and would continue to coordinate its approach as it considered the latest feedback.
It did, however, note its success "across multiple agendas" since inception – saying Brunel had been a "pooling success" when assessing it against areas such as transition of assets, governance, asset class range, responsible investment, and UK impact.
Brunel Pension Partnership chief executive Laura Chappell said: "Our growth and success have been built on working with multiple stakeholders, and we will continue to work with the government and our partner funds to ensure the best possible future for our pool, its funds, and their members."
Gloucestershire Pension Fund head of pensions Matthew Trebilcock added: "Our partnership is built on a shared vision and shared priorities. We coordinate very closely to achieve our goals and it is crucial that any structural changes enable this momentum to continue rather than be delayed."
