Agenda item

The Head of Business, Finance and Pensions presented the report.

He said that the Government was encouraging LGPS funds to merge or pool their assets in order to reduce fees. In his budget speech the Chancellor indicated the direction of travel that he wanted, and set out some suggested criteria for the size of funds. The Chancellor wanted there to be six very large pooled funds. If funds did not pool investments voluntarily, there would be backstop legislation to force them to do so. The London Pensions Fund had established a partnership with the Lancashire County Fund. Several LGPS funds in the South West, including the Avon Fund, had established a joint project to examine options for pooled investment. Options were being subjected to cost-benefit analysis. A pooled fund would not be created overnight; there were, for example, issues relating the pooling of liquid and illiquid funds. The Funds also had different strategies and funding levels. A Government statement is expected in November setting out criteria and a timetable, to which Funds will have to respond. Any proposed pooling arrangements would have to be approved by the individual governing bodies of each Fund.

A Member asked whether only investments would be merged or whether administration would be merged as well. The Head of Business, Finance and Pensions replied that it seemed likely that when a substantial portion of investments had been merged, there would questions raised about merging administration. The Government had in fact looked at the possibility of merging all Funds into one in 2008. His expectation was that pooling investments would be a sufficient challenge for the next four–five years and that Government would not wish to change too much all at once.

The Chair reminded the Board that it should keep its terms of reference constantly in mind. There were no LGPS or TPR compliance issues involved in the pooling of Funds, because currently there were no specific regulations or legislation about it, but the Board did have interest in it because of its duty to ensure effective and efficient governance. The Board would be assisted in this by comparing how other funds were implementing pooling arrangements. He suggested that one positive action the Board could take would be to ask “what would governance look like in the future?” if there was a full pooling of assets.

The Head of Business, Finance and Pensions said that a move towards greater integration between Funds would raise governance issues about the role of the Council, the Committee and officers in relation to delegations.

A Member suggested that it was possible that participation in pooling arrangements might increase investment risks for the Avon Fund.

The Head of Business, Finance and Pensions commented on a table he had distributed, which summarised other changes affecting the LGPS. This is attached as Appendix 1. The Chair said that the presentation of this information in tabular form was extremely helpful and that he would welcome the presentation of appropriate information in this format at future meetings.

RESOLVED to note the report and latest developments and that Members should receive training about governance so that they had a clear understanding of the roles of the Council, the Committee, the Panel and the Board.