UK roundup: £46bn public sector pool appoints Northern Trust
The largest UK public sector pension pool, known as the Northern Pool, has appointed Northern Trust as custodian and administrator for its £46bn (€52.9bn) of assets.
The Northern Pool is a collaboration between the Greater Manchester, West Yorkshire and Merseyside pension funds and was created in line with the UK government’s push to consolidate funds and reduce operating costs.
Subject to the final contract being signed, Northern Trust will provide services including securities lending, private equity fund administration, compliance monitoring and carbon reporting for the Local Government Pension Scheme (LGPS) pool.
Ian Greenwood, chair of the Northern Pool, said: “We appointed Northern Trust based on their proven experience in the UK pensions market and their ability to offer us a range of holistic reporting, custody and alternative administration solutions, in accordance with the government’s requirements of putting the highest and most expedient levels of regulation and asset safety at the heart of the Northern Pool.
“Their collaborative approach and willingness to support our evolving requirements with bespoke solutions were key factors in their appointment.”
In February Northern Trust was appointed as custodian of another LGPS pool, the Border to Coast Pensions Partnership. This £43bn collaboration between 12 LGPS funds will launch in the summer after securing a three-month extension on the government’s April 2018 deadline to be operational.
The Brunel Pension Partnership appointed State Street as its custodian in September last year. Both the ACCESS and Wales pools have hired Link Asset Services to provide the infrastructure for their collaborative investments.
London CIV confirms sustainable equity mandate
The London Collective Investment Vehicle (London CIV) – which is working to pool the assets of 32 LGPS funds in the UK capital – has formally launched a sustainable equity fund managed by RBC.
The fund has an initial £66m investment from the London Borough of Merton Pension Scheme, with a second unnamed fund due to invest £180m.
Rob Hall, head of equities at London CIV, said: “This fund offers an active and pragmatic approach to investing with an environmental, social and governance lens and we look forward to working with RBC to offer the London boroughs a market-leading sustainable equity offering.”
In addition, the London CIV confirmed its plan to launch a multi-asset credit fund in June. Last month it emerged that CQS and MidOcean had been appointed to run multi-asset credit mandates, subject to due diligence processes.
Despite significant problems regarding resources and governance , which have resulted in some London funds being reluctant to engage with the pool, the London CIV said it now had oversight of more than £15bn, or 40% of its member finds’ total assets. This includes its own funds and pooled passive mandates.
Water regulator warns on dividend policies in response to pension concerns
The UK water regulator Ofwat has said it expects energy companies to “take fair account of employee interests before making dividend payments” in the latest step in the ongoing discussions regarding the balance between shareholder payouts and pension contributions.
In a letter to Frank Field, chair of the UK parliament’s Work and Pensions Select Committee, Rachel Fletcher, CEO of Ofwat, said that the regulator did not have “powers to regulate what pension arrangements companies should have in place”.
However, she emphasised that Ofwat had recently launched “an ambitious programme of reforms” to address the issue of dividend payments.
“Part of this package involves an expectation that boards first meet their obligations to customers and take fair account of employee interests before making dividend payments,” Fletcher said.
The response comes in the wake of growing controversy over shareholder payouts in the sector. On 28 March, Field wrote to Ofwat with regards to plans by certain energy companies to close their defined benefit schemes to future accruals.
In his letter to Ofwat, Field asked the water regulator for its view on moves by firms “while continuing to make large distributions to shareholders”.
Fletcher responded that companies’ pension arrangements were beyond the remit of the regulator.
She said: “However, while we believe it is appropriate that companies should take account of pension obligations when making dividend decisions, we make no judgement about the appropriateness of companies closing their defined benefit schemes to future accruals, and it is not Ofwat’s role to regulate how much companies should pay in to their pension funds.”
Any repairs to existing deficits should be borne by shareholders, rather than energy company customers, Fletcher added.
The union said it was concerned that the companies’ profits were “heavily skewed towards the shareholders” and warned that the closures could see staff lose as much as £100,000 from their overall pension pots.