Scotland proposes pooling £42bn of public pension assets
The advisory board to Scotland’s £42bn (€48bn) Local Government Pension Scheme (SLGPS) has proposed pooling its 11 local authority funds to boost economies of scale and cut costs.
As part of a consultation process on the future of the SLGPS, the scheme’s advisory board is seeking views on four options, ranging from retaining its current structure to merging into one fund.
According to the consultation document, the main aim was to determine whether the sustainability of the overall scheme – and members’ interests – can be improved “by reducing the investment management costs of the system”.
However, the paper warned that this could be “with the trade-off of potentially diminishing local governance and oversight”
Jonathan Sharma, joint secretary to the SLGPS advisory board, said the potential changes had “always been on the agenda”.
“Looking at the wider landscape, obviously there’s been movement elsewhere in England and Wales, in addition to what’s been happening around pension schemes internationally,” he said. “What we’re focused on now is more about how they could invest in a more effective way.”
The proposal reflects moves in England and Wales to consolidate the assets of 89 LGPS funds into eight separate pools. In Scotland, at present, the Falkirk and Lothian pension funds already work together to invest in infrastructure – with plans to collaborate further across additional asset classes.
Unison, one of the UK’s largest unions, said its own research backed the benefits of scale. However, in a statement, the union warned that “the reality of pooling of assets on the scale of the Scottish LGPS is not without significant challenges and costs”.
Unison added: “It should be obvious that this is not a straightforward or easy decision. It is also complex, with few hard numbers to support any option because other economic factors impact on any evaluation.”
The SLGPS has more than 406,000 members, including from the police, and the education and voluntary sectors. Out of the 11 funds, Strathclyde is currently the largest with more than £20bn in assets and 210,000 members
The advisory board is expected to report its findings to the Scottish government’s cabinet secretary for finance and constitution, Derek Mackay, by April next year.
A spokesperson for the Scottish government said they were interested to gain views from all perspectives.
“We are keen to see pension funds play a part in increased investment in infrastructure and support for stable and sustainable growth,” the spokesperson said.