Local Government Pension Scheme (LGPS) pools are awaiting further clarity on the future regulatory and operational requirements for LGPS pools, after the majority of pools were given government approval on their proposals.

At least five of the eight Local Government Pension Scheme (LGPS) pools have been given the greenlight on their pooling plans, including the Wales Pension Partnership, LGPS Central, Northern LGPS, Border to Coast Pensions Partnership and London CIV.

WPP representative, Anthony Parnell, confirmed that the group’s submission had been accepted, after the Pensions Minister wrote to the pool to confirm that the proposals had met the government's criteria and overall ambition.

In an extract of the letter seen by Pensions Age, the minister wrote: “It is clear Wales Pension Partnership has embraced the ambition to create a standalone LGPS investment company to deliver for your eight partner authorities and for the benefit of Wales as whole."

LGPS Central received a similar joint letter from government ministers, which confirmed that the government had approved the plan submitted by the group and given it the greenlight to proceed.

According to the pool, the letter described the LGPS Central Limited transition plan as detailed, comprehensive, and aligned with the overarching ambition of the Fit for the Future consultation on the LGPS.

"We will continue to work closely with our Partner Funds to deliver on this ambition. We thank them for their collaborative approach and commitment to securing the best possible outcomes for the future of the LGPS Central Pool and its members," the pool stated.

More clarity is still expected in a number of key areas, as whilst Northern LGPS has had its proposals approved, it said that it is still awaiting the forward to the government’s response to the consultation, which is expected to provide "much-needed clarity" on the future regulatory and operational requirements for LGPS pools.

"A clear framework will be essential in ensuring that pooling continues to deliver strong governance, efficiency, and value, and allow us to move forward with confidence," the pool said.

"We also acknowledge the constructive engagement with government and stakeholders and will continue to work towards delivering the best outcomes for our partner funds, their members and employers."

Adding to this, Border to Coast Pensions Partnership CEO, Rachel Elwell, said: “Thanks to the support of our Partner Funds in our development over the last decade, the government has confirmed our transition plan meets expectations.

"We are focused on implementing our 2030 Strategy and providing our Partner Funds with the investment performance and added resilience to enable pensions to be paid in an affordable and sustainable manner.

"Our partnership remains committed to supporting the LGPS in its purpose of paying pensions in a sustainable and affordable manner for members, employers and local taxpayers.”

However, both Brunel Pension Partnership and Access Pool have confirmed that their proposals were rejected, after the Pensions Minister confirmed that the proposals did not meet the government’s vision for the future of the LGPS.

In a statement shared by Brunel, it confirmed that it is now taking some time to consider next steps with its partner funds and will continue to coordinate its approach as it considers the latest feedback from the government.

“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,” Brunel Pension Partnership chief executive officer, Laura Chappell, said.

The Access Pool also expressed its “extreme disappointment” with the news that the government had chosen not to support its intention to build its own regulated investment management company, confirming that it is currently exploring all avenues available.

The pool pointed out that other similar proposals had been given the green light, claiming that the government's rejection of its proposal attempts to downplay significant cost considerations, without counter-factual evidence.

Estimates by the pool suggested that transition costs would be between 28-36 basis points of the value of active listed assets pooled, equivalent to over £100m, consistent with multiple external sources of evidence and in line with the estimates of other pools who also did not propose merger.

After a lengthy review of the options, Access established that the costs of merging "far exceeded" its proposed built model.

Despite this, it is thought that both Brunel Pension Partnership and Access Pool will now be invited to merge with other pools, in line with the government's initial proposals and consultation.

The Pensions and Lifetime Savings Association (PLSA), however, argued that the interests of local authority pension scheme members should be paramount, advocating for a merger process that is transparent, fair, evidence-led and fully costed.

In particular, the PLSA argued that pools should not be penalised for adopting a business model that is different from the direction now proposed, emphasising that whilst some of them did opt for an authorised model, this was not a requirement set into regulation or statutory guidance.

In addition to this, the PLSA said that the cost of changing the existing arrangements for investment needs to be acknowledged and weighed against any benefits.

It also stressed that, given the consequences of any decision, specific, quantifiable evidence should always be provided to demonstrate the value for money of a change in pooling structure, whether that is developing an existing model or requiring a merger.

The Local Pensions Partnership has been contacted for comment by Pensions Age.

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