The UK pensions minister has said that while changes may not be comfortable for the local government pension schemes (LGPS) they will happen, however, he suggested there is flexibility on how scale will be achieved.
Speaking at the Pensions and Lifetime Savings Investment Conference in Edinburgh on Tuesday, pensions minister Torsten Bell confirmed the government intends to stick to the March 2026 pooling deadline, suggesting, however, there would be flexibility as to what this will look like.
“My test for the final report is: does it give the chancellor the confidence that we will actually be in a very different place in the not-so-distant future?,” he told the PLSA delegates.
He added that he is “pragmatic” about the pools achieving the government’s scale ambitions.
Earlier this month, the ACCESS pool shared its response to the government’s consultation indicating it is not planning to merge and will instead seek Financial Conduct Authority authorisation. Wales Pension Partnership has also said it is developing plans to continue as a standalone pool under FCA authorisation.
However, he warned that “status quo is not ok”. He said: “Change is going to come. I know that won’t be comfortable, but everybody needs to be confident that it will happen.”
He added that he intends to meet with “each and every pool in the next few weeks” to discuss the plans.
Speaking at a panel the following day at the PLSA conference, Rachel Elwell, chief executive officer of Border to Coast Pensions Partnership, said: “We are waiting for our calls [with the pensions minister] to tell us what it is he is wanting.
“I for one would really welcome real clarity about what it is that the government would like us all together to achieve.”
But for the pooling to achieve the government’s desired impact, Elwell said governance will be important.
She said that Border to Coast is “fortunate” to have inherited strong investment teams from South Yorkshire, East Riding and Teesside to form the core of its investment team, which works “really closely” with strategic external partners to “bring the best from our internal team and our external partners”.
She said: “It is a fundamental part of being able to build that strong investment capability over the future.”
She stressed that whatever the direction of travel is “it needs to be a partnership”. “Any system is only as strong as the weakest bit of it.”
She continued: “We need to make sure that we all feel a vested interest in making sure that the system is working, that we’re having the difficult conversations where maybe it isn’t working how we all want it to. Being able to do that is a really important part of making that system work in the long term.”
Paddy Dowdall, assistant executive director of pensions at Greater Manchester Pension Fund, meanwhile, recognised the benefits of the scale, as long as it is done “properly”.
He said that while the LGPS are already part of the journey in pooling, the size of the mandates “appear to be still subscale” and suggested that £10bn with a single manager should be what the pools should be aiming for in order to be able to negotiate prices.
He said that while there are not many success stories, as the pool is still “at the early stage of the journey”, it was able to secure a partnership with NEST in GLIL.
“They’re going to be larger than any local authority pension fund in the coming years. We were able to persuade them of that value proposition with our partners at [Local Pensions Partnership] LPP,” he added.
He said this shows that in targeted asset classes, collaboration or consolidation and moving to direct investment in liquid assets can success can be achieved.
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