Three London boroughs that currently jointly manage £2.3bn (€2.9bn) in local authority pension assets are to review their resource-sharing arrangement.
The London borough of Hammersmith and Fulham (H&F), which in May’s local elections went from being run by the Conservative Party to being a Labour Party borough, said a review of all its joint services with two neighbouring councils would look to improve performance.
The borough currently jointly administers a number of its services with Westminister and Kensington and Chelsea councils, which have local authority pension schemes (LGPS) worth £880m and £630m, respectively.
Hammersmith and Fulham’s own £763m LGPS currently shares a treasury department with the two other councils, with the officers conducting the required due diligence for all asset management and other mandate awards.
However, decisions on where each individual fund should invest remains with the local council, although all three have a number of providers in common.
The review will be led by Andrew Adonis, a transport secretary under former Labour prime minister Gordon Brown.
A spokesman for H&F confirmed that all areas of cooperation would be reviewed, including the tri-borough treasury set-up, but said it was too early to provide details.
In a statement on the review, the council said it would examine the potential for widening its model of cooperation beyond the three local authorities.
Adonis stressed the need for value-for-money arrangements due to the restricted budgets facing councils.
“The tri-borough arrangements are innovative but it is right that, after more than two years of operation, there is an independent review,” he said.
“I hope we will be able to compare and contrast with other effective organisations and offer some useful insights and proposed ways forward.”
In a report presented at H&F’s most recent pensions committee, the council noted it was happy with the “benefits of resilience and sharing of ideas” since the tri-borough treasury team had been in place since 2012.
“It is also leading to more competitive fees from external providers through joint procurement and common mandates where they are appropriate for each fund,” it said.
In addition to cooperating on investment management matters, two of the boroughs are undertaking a joint tendering exercise to appoint a new custodian, while all three are advising London Councils on the proposed launch of a London-wide common investment vehicle (CIV) for the capital’s LGPS.
A move away from the cooperative approach on pension matters is unlikely despite the review, as the three councils have often been championed as an example of how cooperation can lower costs for the LGPS.
Additionally, the Department for Communities and Local Government recently concluded a consultation that looked at greater efficiencies within the LGPS, with one of the suggestions being the launch of a limited number of LGPS-wide CIVs.