The delay in finalising major changes to the local government pension scheme's investment regulations is already causing problems for pooling, funds have warned.
The draft changes which were consulted on at the start of the year received more than 23,000 responses. The Department for Communities and Local Government (DCLG) was due to publish its response earlier this year but this has been delayed further down the line.
Greater Manchester Pension Fund chairman, councillor Kieran Quinn (GMPF) told PP it is "frustrating" for the LGPS funds, which are being mandated by government to pool their investments and had to submit their final proposals by mid-July. The current investment regime poses some barriers to pooling because it includes restrictions on the size of mandates.
The regulations restrict investment of more than 35% of a fund's assets into collective investment vehicles managed by a single entity.
Given pooling is forcing the size of mandates to increase beyond what they are allowed to be, the regulation changes are absolutely crucial to the functioning of the pools that will need to be set up in April 2018.
"The frustration is that it is forcing us to make decisions around regulations that potentially could change in a beneficial or non-beneficial way," said Quinn.
"The latest we've been told is the papers are with the minister - that was when parliament was about to go into recess. It's a real frustration for the LGPS that something that should have been open for its final round of consultation, discussion and deliberation before implementation hasn't happened.
"We keep getting told there will be a sure window of opportunity when they're published to send a check and make them real but actually we need them to make some decisions."
Local government minister Marcus Jones told an LGPS audience in May that government was still working through its draft response and hoped to bring through the regulations shortly. He said the various deadlines set out in the draft regulations will be amended to reflect the delay in the government's response to the consultation.
Although pooling won't happen until 2018, Quinn said some funds are already talking about early adoption of the pooling regime.
"If that's the case, we desperately need to regulation. The practical day-to-day matters that the new investment regulations would help to resolve are causing problems. Government knows this but isn't assisting us with it."
Sackers associate director Ralph McClelland added: "I thought we would already have them; I don't know what hold-up is. The responses to the consultation raised some sensible and practical points that I hope will be addressed."
The London Pension Partnership set up by Lancashire County Council Pension Fund and London Pension Fund Authority is already countering some issues under the current regime. Having pooled the management of assets in April and received authorisation from the Financial Conduct Authority, it is now structuring a series of investment pooling vehicles into which existing assets can be transferred and new investments can be made.
However, the LLP noted in its pooling submission this is being inhibited by the current LGPS investment regulations and it encouraged the government to bring the changes into force at the earliest opportunity. "Through LPP's flexible structure we are able to realise many of the benefits of pooling, but will achieve even greater benefits once the new regulations are in force," it said.
The pool's chairman Michael O'Higgins told PP it is an "irritation":
"We can pool the management of the asset but we can't pool certain assets because of the regulations. So they stay in two separate columns but we're still pooling the management of them. In one sense it's an irritation because we can't formally pool some asset streams but it doesn't stop us pooling the management of the asset streams."
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