LGPS seek to meet pooling deadline despite Brexit uncertainty
The UK vote to leave the European Union and ensuing political upheaval have raised questions about their having a potential impact on the timetable and agenda for pooling by local government pension schemes (LGPS).
The government, has, however, remained steadfast with respect to the most imminent event on the timetable, a deadline coming up in less than two weeks.
The 89 LGPS in England and Wales, which the government has called on to combine in asset pools of at least £25bn (€29.8bn), to submit detailed proposals on the proposed pools.
The surprise vote for the UK to leave the European Union is understood to have revived questions in some parts about the deadline, which had already been viewed as challenging and has had many at the LGPS working flat out to be able to meet it.
Whether there is any genuine expectation of a deadline extension, the government had shown no signs of budging before the referendum and is sticking to this position.
Kieran Quinn, chair of the pension fund management panel at Greater Manchester Pension Fund (GMPF), England’s biggest local government scheme, told IPE the government’s answer “has been ‘No’ from day one” and that the message from the Department for Communities and Local Government (DCLG) since the Brexit vote has been that “the 15 July date is essential for them to still deliver the timescale for full pooling by April 2018”.
He added: “If they move [the date] now, pooling, I think, would itself be under question.”
Indeed, a spokesperson for the DCLG last week told IPE: “The administering authorities for the Local Government Pension Schemes have had nearly eight months to work on their pooling proposals. We have every confidence they will hit the deadline.”
A spokesperson for the LGPS Board last week told IPE it was “not aware of any changes to the policy or timescale as a result of the referendum”.
The political upheaval in the UK in the week following the vote has raised questions about the longer-term timetable and the pooling agenda itself, however.
Moira Gorman, client director for LGPS at Columbia Threadneedle Investments, last week said the referendum result could have a “potential impact on the timetable and objectives for pooling, given the personalities who may lead the government following prime minister [David] Cameron’s departure”.
Just over a week after the UK referendum, Mark Tinker, head of Asia equities for AXA Investment Manager Framlington, said the first area of policy uncertainty stemming from the vote was “the UK government itself”.
Barry McKay, partner at consultancy Hymans Robertson, suggested the vote to leave the EU could have an impact on the government’s LGPS pooling plan at a very practical level.
“Asset pooling will still be very much part of the future of the LGPS,” he said.
“However, we expect HMT will be very busy in the months to come as they work on the EU exit process. This may take some of their resource away from LGPS pooling and could result in a more flexible timetable.”
For GMPF’s Quinn, the fate of the LGPS pooling project is “tied much more with the outcome of the Conservative party leader election than with Brexit, with the exception that, if Brexit were to lead to a general election, then clearly pooling would be stopped.
“If there is an impact [on pooling], we will know more in the autumn, definitely post-Conservative Party conference.”
In the absence of clear information suggesting a change to the asset pooling timetable or agenda, the LGPS have to continue with their preparations for the asset pools, according to Quinn.
“It has to be business as usual until someone tells us it’s not business as usual,” he said.
AXA’s Tinker said “greater clarity on possible policy direction” should be available over the next few weeks as the official shortlist of candidates to succeed Cameron is whittled down.
The first round of a series of votes by the parliamentary Conservative party is on Tuesday, 5 July.