Susan Martin says local government pension funds have made great strides in collaborating but there are still challenges ahead of the April deadline
I am always struck by how local government rises to a challenge. Time and again our local government delivers. This is particularly true for the Local Government Pension Scheme (LGPS) pooling initiative. Colleagues across the sector were quick to respond when the government introduced pooling, and they have been remarkable in working together to deliver to a very tight timetable. The formal deadline for pools to be established is only six weeks away, and while there is undoubtedly a lot of work still to do, one of the most striking aspects of this process is just how much has been achieved in such a short time.
Most of the collaborations will meet that deadline, and those that don't will not be far behind. And quite rightly with such a change, they are checking that all is in place before they launch. Members retirement benefits and stable employer contributions need careful management. Therefore, I believe we might just briefly allow ourselves a collective sense of pride in the achievement. In less than three years, more than 80 local authority funds with combined assets of more than £250bn as of October 2017 will have collaborated successfully to create substantial asset pools with the scale to deliver better returns on their investments, significant cost savings and, as a result, more sustainable long-term benefits for pension scheme members. Not to mention providing a significant new source of capital for infrastructure, housing and socially impactful investments, with all the advantages that brings for the wider community.
It has not been easy. There have been, and will be, enormous challenges - re-shaping teams (or setting up new ones), transforming investment strategies or implementing more robust governance structures. Agenda-shaping changes of this kind require technical expertise, hard work, innovation and creativity. Above all, they also require collective will and a little help from your friends. As local government knows, real and positive change on this scale can only be achieved through effective collaboration, and a shared sense of purpose.
This inevitably means some compromise, and an acceptance that some collaborations will follow different routes. Not all the LGPS partnerships have followed the model that we at the Local Pension Partnership (LPP) have taken, for example, with the level of devolved day-to-day investment responsibility as well as building a risk and administration services business. But regardless of model, benefits are being delivered and will continue to be across the pools as they develop.
Collaboration is at the heart of pooling and it has, I believe, firmly taken root across the LGPS. We have seen this in action on a large scale in the partnership that formed and expanded the GLIL infrastructure investment vehicle (a joint venture between the Greater Manchester Pension Fund and London Pensions Fund Authority), and on a smaller scale in cross-pool meetings, and the many one-to-one coffees that are no doubt taking place across the LGPS.
Our successes are gaining attention outside the LGPS as well. Who would have thought that innovation in public sector pensions would one day be attracting interest as a model for the corporate defined benefit environment? But I see that each day through direct calls and working with the Pensions and Lifetime Savings Association and others.
There is, of course, no room for complacency. The job is not complete. To paraphrase Winston Churchill, we're not at the end, we're at the end of the beginning.
And that in itself is an exciting prospect. For all the great strides we have made, there are still challenges ahead of us - whether in the practical implementation of further structural change, the pension funds learning to hold the pools to account or macro-economic headwinds. The fundamentals are now in place, and as we in LPP can demonstrate after two years the case for collaboration is made. It's unlikely you'll have read this phrase before, but just now is a genuinely exciting time to be involved in local authority pensions!
Susan Martin is chief executive officer of the Local Pensions Partnership
Here they are - the winners of the 3rd annual Women in Pensions Awards...
Chancellor Rishi Sunak has warned that the UK’s “economic emergency has only just begun”, as he revealed that the Office for Budget Responsibility (OBR) has forecast the economy will contract this year by 11.3% - the largest fall in output for more than...
The UK’s cumulative excess deaths figure for 2020 is higher now than at the previous peak of 64,600 recorded during the first wave of Covid-19, the Continuous Mortality Investigation (CMI) says.
Companies could be overstating their pension liabilities by up to £60bn due to their life expectancy assumptions, according to XPS Pensions Group.
Trustees must be “accountable for the security of data and assets” to protect schemes and members from the risk of cyber attacks, according to The Pensions Regulator (TPR).