Following the UK government’s green light to six out of eight local government pension scheme (LGPS) pools for meeting its new minimum set standards, 21 UK local authority pension funds are finding themselves looking for a new home, a process which will be costly and challenging, according to Jennifer Devine, head of Wiltshire Pension Fund.
Speaking during a panel session at the Local Authority conference hosted by the Pensions and Lifetime Savings Association (PLSA) on Monday, Devine recalled that when the government sent out letters stating its verdict on the future of LGPS, she did not expect Brunel Pension Partnership – the investment pool of which Wiltshire Pension Fund is a partner of – to receive a red light.
She said that she originally expected the government to put pressure on the pool to “work harder” on proposals that did not meet its expectations, not ask partner funds to find a new home.
However, she said the clarity the letter provided was “welcome” and allowed the pension fund to think about how to move forward.
She explained that there is an “awful” lot of risk for the fund in this process, as it is looking for a new home along with 20 other pension funds. Brunel, with 10 partner funds including Wiltshire, and ACCESS, with 11 partner funds, were the only two investment pools not to pass the government’s fit-for-future’ standards.
“It’s not a procurement exercise where we can go out and just look at our options – those options might not look the same in a few months when everyone’s made their decisions,” she noted.
Devine added that the process itself will be “really costly”.
“Those 21 funds that didn’t get the green light to go forward are being quite heavily penalised. There will be costs in leaving our pool and there will be costs in joining another pool. You can’t move billions of pounds without spending millions of pounds.
“It’s going to be an expensive process,” she stressed.
Devine added that the government will not help the funds with this cost. “The understanding that I have from speaking to central government is that that’s on us. Those are one of the costs and we just have to weather them”.
But while cost is a big challenge, Devine highlighted that the “orphaned” funds are now “very reliant” on all other funds in the LGPS to support them.
She said: “We can go out there and we can talk to the pools, but a pool might turn around and say ‘we don’t want you, you don’t suit us’. Or they might say ‘we do want you’ and then the partner funds, which are the ones making the decisions, might turn out and say they don’t want us.
“We are really relying on a lot of goodwill and sympathy from other people in the LGPS to take us orphans in and give us a new home.”
She added that as the Wiltshire Pension Fund is looking for a new home, it will have to compromise, but it will find “the best that we can”.
In the meantime, Devine said that Brunel is still working with its partner funds and will continue to do so after it “ceases to exist”.
She said: “It [Brunel] has over £2bn of our investment. That’s really important, and we need to look after that. Shareholders of the company, all the staff who have worked so hard to support us and deliver pooling for us today, need to be taken care of too.”
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