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UK roundup: Merseyside, Mercer, L&G, UBS, defined ambition

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  • UK roundup: Merseyside, Mercer, L&G, UBS, defined ambition

UK - The £5.1bn (€6.1bn) Merseyside Pension Fund has appointed Mercer to oversee the re-tendering of more than a quarter of its portfolio.

Mercer's appointment comes as part of a three-year framework agreement put out to tender last year, with the local authority fund considering naming as many as eight consultants - although the tender only attracted interest from five companies.

Deloitte, Xafinity Consulting, bfinance and JLT Benefits Solutions were all successful, with Mercer assuming responsibility for a delayed £1.3bn passive mandate tender from Aon Hewitt.

The three portfolios, currently managed by Legal & General and UBS, were put out to tender in February last year, with an administrative error forcing Wirral Council to relaunch the procedure.

As a result, Legal & General's management of a £433m UK equity portfolio and a £585m UK index-linked gilt portfolio has been extended, with UBS also retaining responsibility for a £367m US equity mandate until the end of the year.

According to minutes from a recent council meeting, Wirral - the local government fund's administering authority - hopes to re-launch the tender process by the end of the month, with new asset manager contracts agreed by October.

The minutes said the December extension of the current contracts was to allow for any "slippage" in the timetable, as well as allowing for adequate time to complete any required asset transfers.

The minutes spoke positively of both UBS and L&G's work, indicating the council would consider a reappointment.

"The present managers have controlled tracking error against benchmark accurately, and there are no operational issues that have arisen during their tenure," the minutes continued.

"There is no significant additional risk in extending their contracts."

In other news, Mercer has given lukewarm support to proposals by pensions minister Steve Webb to establish of a reasonable balance of risk in private pension provision through the introduction of defined ambition schemes.

However, the consultancy said it would support Webb's initiative if it came with guarantees that future politicians could not subsequently tighten the bonds of pension provision.

Under the current regulatory system, companies can already establish a wide range of risk-sharing schemes but are deterred by endless political rule-changing, according to the consultancy.

"Companies interested in starting a risk-sharing scheme need to know that the element of a risk-sharing scheme for which they are responsible is not going to be loaded with incremental costs when politicians find it politically expedient," Mercer said.

If companies could have this reassurance, the consultancy predicted that moves to set up risk-sharing schemes would gather pace.

Deborah Cooper, head of Mercer's regulatory group, said: "The government must accept that some private sector outcomes will be more disappointing than others, without this necessarily being a failure, or that it needs to pass new legislation.

"Overall, our retirement system will be much better served by less interference rather than endless new initiatives."

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