A senior civil servant has blamed “tensions” within the UK government for a lack of progress on structural reforms that could see local government pension schemes (LGPS) in England and Wales pool assets.
Bob Holloway, who heads the Department for Communities and Local Government (DCLG) pensions unit, said a response to a 2014 consultation – which recommended requiring all scheme assets to be invested in passive mandates, or launching a limited number of collective investment vehicles to pool investments – was “way, way overdue”.
He added that it was an “open secret” the delay was down to disagreements between his department and the Cabinet Office on how to proceed but did not elaborate.
He instead outlined the issues incoming ministers would need to address after the upcoming general election.
“The question for us all to consider is whether there will be an announcement post-election,” he said.
“I can’t anticipate that, but what I can guarantee you is that this [structural reform] will be on the shopping list of incoming ministers both within DCLG and Cabinet Office.”
He added: “I’m pretty certain that, even if ministers don’t have a great appetite for this, there may well be officials within Whitehall who may want to drive the cost and efficiency agenda further forward and pick up where things were left before the election.”
Even without action from central government, a number of local authorities have begun collaborating on investment matters, with the majority of London LGPS working together on a collective investment vehicle.
Speaking at the recent Local Government Pension Risk & Liabilities conference in London, Holloway said Brandon Lewis, the minister responsible for LGPS reform until last year, appeared to be supportive of radical structural reform to the system and in favour of reducing the number of funds to just five.
“It took us some time, but we managed to move Brandon away from that idea,” Holloway said.
He acknowledged, however, that the current 89 LGPS in England and Wales was not a “perfect number”.
Holloway also signalled that a previously discussed review of LGPS investment regulation would be a matter for any future minister to consider, with revisions needed in light of John Kay’s 2012 review on long-term decision-making in equity markets.
A future minister would also be required to consider greater flexibility in investment regulation, most recently amended to allow increased exposure to infrastructure.
Holloway did not indicate any preference but said a future government would need to weigh up the benefits of increased flexibility at the local level “and perhaps even allow them to decide their own investment limits”.
In the past, the Camden Pension Fund has called for an end to “prescriptive” investment guidelines.
The London Pensions Fund Authority has also called for changes, suggesting regulations be brought in line with private sector schemes – a proposal recently echoed by the Greater Manchester Pension Fund.
Holloway also discussed the recently concluded recruitment process for the chair of the LGPS Advisory Board, launched in 2013 as the Shadow Scheme Advisory Board and chaired by Joanne Segars, also the chief executive of the National Association of Pension Funds.
He said the recruitment process was limited by taking place so close to the general election, and that the department was thus unable to advertise a paid role.
Instead, he left the door open to a paid position being advertised again after the election, hopefully attracting a “better range of choice” of candidates.