As LPFA chairman Edi Truell steps down, his successor Sir Merrick Cockell tells Stephanie Baxter it is time to challenge the status quo in local government pensions
At a glance
- Sir Merrick Cockell became LPFA chairman in September
- Thinks partnerships between funds are the future
- LGPS must use collective weight but keep local sovereignty
The London Pension Fund Authority (LPFA) played an influential role in driving change in the local government pension scheme (LGPS) under the recent leadership of Edi Truell.
After Truell resigned as chairman earlier this year to become a pensions adviser to London Mayor Boris Johnson, his former deputy Sir Merrick Cockell became the new face of the LPFA. Cockell first took the reins as acting chairman, and this month took the role on a permanent basis.
He is well-placed to take on the position given his extensive experience working in local government since the 80s when elected a councillor. Like his predecessor, Cockell believes the status quo in the LGPS must be challenged, and that partnerships between funds are key to the scheme's future.
He takes over as the LPFA is in the crucial stages of its recently-announced asset and liability partnership with Lancashire Pension Fund, in which he has already played an important role.
The funds are close to making final decisions and registering with the Financial Conduct Authority (FCA) with the aim to go live next April.
Ensuring the success and growth of the venture, which is the first of its kind, will undoubtedly be one of Cockell's greatest challenges in the coming years. It comes at an important time for the LGPS, as the government is looking to force it to pool investments, with all funds expected to put forth proposals in the coming months.
Cockell says this has "jolted the LGPS into action" with the knowledge that the "government is watching" and that the "clock is ticking". He acknowledges it won't be easy work, and not something that all of 89 members are necessarily equipped to do. It is very resource intensive and requires a great deal of leadership from fund boards.
Cockell says: "More of the other funds have to realise that they will need to come up with real proposals that government will see as working together and a real commitment to partnership, which means active investment and not passive management procurement partnerships, as that won't cut the mustard."
But partnerships would allow funds to keep their local sovereignty - as is the case with the Lancashire and London Pensions Partnership (LLPP) - in a way that merging all 89 funds would not, he says.
The £10bn pooled venture is "open for business" with the potential for other funds to join. "It's not the case that everyone has to do it themselves; we and other funds are doing that work now so others can join the party."
Not all about cost cutting
Such ventures are intended to lead to significant cost reductions, with the LLPP expected to save at least £32m. Cockell says the venture's discussions with current and potential fund managers show that "when you talk about £10bn rather than £5bn, you can cut better deals".
It is not all about cost efficiency, however. "There are great possibilities for better investments that produce better returns, and that can't be ignored," says Cockell. "The LGPS cannot simply look at mechanisms that find savings and efficiencies but that don't also find better long-term performance."
He adds: "It's about the sleeping giant of the LGPS actually using its collective weight so we can be part of far more interesting, long-term investments that other [larger pension funds around the world] such as in Canada see as really good investments."
As the LGPS becomes more interconnected through partnerships, the more likely it will be able to compete with large foreign investors when tapping up infrastructure opportunities.
Cockell believes the LGPS should be a natural fit for local infrastructure investment. "We need to work together to get better opportunities and to be key partners. The UK is seen as a place where people want to do business, and [where it is useful] to have a local partner such as a local pension fund that understands local areas and how they operate, and how national/local politics works."
He acknowledges this is not going to be simple to achieve, however. "If we're not going to use expensive fund managers, we've got to build our own teams which will cost money. We can get high quality people that understand investment rather than relying on the obvious names to provide that at very high cost. Some of this will cost more money initially to save more money over the longer term."
Sir Merrick Cockell became deputy chairman of the LPFA in April 2013 and permanent chairman in September 2015.
He was chairman of the Local Government Association from 2011 to 2014. A councillor since 1986, he served as Leader of the Royal Borough of Kensington & Chelsea for 13 years and chaired London Councils for four, and is also a former audit commissioner.
He currently chairs local government think-tank Localis, Crossrail 2 Growth Commission, and the Local Capital Finance Company.
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