€30bn London fund merger proposed
UK - A new report will suggest merging London pension schemes into one or two funds with a combined value of approximately £20bn (€30bn), according to a newswire report.
Thomson Investment Management News cited a report to be unveiled next week by the Audit Commission, the body that monitors how public money is spent.
The report would highlight the higher costs at London local authority pension schemes compared to their counterparts elsewhere in the country, Thomson cited an unnamed source as saying.
The Audit Commission confirmed that the report was set to be published. The London Pensions Fund Authority (LPFA) said they will only comment after the release.
The idea of merging the more than 30 pension funds of London's local authorities had long been the goal of former LPFA chief executive Peter Scales.
"My unfulfilled aspiration was to achieve a merger of the 34 separate local government pension funds in London," he told IPE on his retirement.
"This would have created a super-fund in local authority terms of around £20bn last time I looked. But size of operation was not the issue, it was the ability to wipe out duplications, maximise expertise and skills and present a strong voice for London on pensions."
Scales handed over his position to Mike Taylor on 5 October.
However, Ken Bumpus, pensions officer of investments in Camden, is not convinced about the idea. "It might be just too big," he told IPE.
"All the boroughs have their own specific benchmarks and the asset allocation is totally different. Furthermore, there is a huge difference in the number of fund managers. Some have 2-3 others have a dozen. It will be a lot of trouble sorting that out."
He is worried that pension funds will lose contact with their members if there is one super-fund. "The problem with having one big fund is that you would not have any contact with your members. You would have to have the fund's offices in one central place. Now each fund has its administrative centres but to keep that wouldn't mean saving money."
"Why not join two or three together. You would end up with 10 funds, each worth more than £1bn, and it'll be much easier," Bumpus suggests.