Agenda item

The purpose of this report is to inform the Committee’s in-principle decision in respect of which investment pool Avon Pension Fund (APF) should partner with.

The Head of Pensions introduced the report to the Committee and highlighted the following areas.

·  The purpose of this report is to inform the Committee’s in-principle decision in respect of which investment pool Avon Pension Fund (APF) should partner with.

·  The recommendation is to adopt Local Pension Partnership Investments (LPPI) as APF’s new pool partner to replace Brunel.

·  Delegate to the Chair of the APF Committee the authority to sign non- binding agreements with LPPI, or with its client or shareholder funds, which are recommended by officers, such as Heads of Terms or a Memorandum of Understanding.

·  The decision is required, as the government decided in April 2025 that Brunel must close and APF assets should transfer to an alternative pool.

·  There will be material one-off costs incurred in closing down Brunel and moving the Fund’s assets into the new joint pool, which should be mitigated over time by lower ongoing costs.

·  There are two key future dates: 30th September 2025, by when APF needs to confirm with MHCLG its in-principle decision on which new pool to join, and 31st March 2026, by when such decision needs to be legally binding, e.g. through a new shareholder agreement.

·  APF’s practical choice was between either Central or LPPI. The ten Brunel funds undertook a review of the two options, advised by KPMG, which were assessed versus critical decision factors.

·  Both Central and LPPI would be excellent pool partners. Both pools score very similarly on the majority of criteria.

·  A material number of Brunel funds are likely to join LPPI. Furthermore, LPPI is likely, on the basis of initial discussions, though not guaranteed, to integrate the Brunel business. Hence APF is hopefully able to join LPPI with peer funds from Brunel. LPPI is recommended as APF’s new pool partner.

Councillor George Leach said that he was concerned about the potential increase in costs to members and that he hoped that costs would be able to fall in due course.

Councillor Chris Dando referred to section 1.19 of the report and whether Brunel’s business could be integrated with LPPI. He asked whether this would mitigate costs in any way.

The Chair replied that the Brunel Oversight Board had discussed this matter and said that they had a preference for a company style merger between Brunel and LPPI and to syphon off the funds that don’t join. He said that he felt that, if possible, this would minimise disruption.

The Head of Pensions added that the reason we are keen to integrate Brunel into LPPI is to retain their capabilities in terms of Private Markets, the Climate Strategy and Responsible Investments.

He said that it was also important for the Funds to depart simultaneously, regardless of their pool destination, to share the burden of exiting Brunel in an orderly way. He stated that in total it would be an 18 – 24 month journey of change.

Councillor Mike Drew commented that he was concerned about the impact this decision will have on staff within Brunel and the APF.

Councillor Robert Payne said that he found this a frustrating position to be in and would be happy to remain in Brunel if not being forced to find a new pool partner.

Edmund Cannon stated that he did not agree with the statement that future lower ongoing costs would offset the one-off costs incurred by moving the assets as it is difficult to predict future performance. He added that he was also concerned about fund governance and whether it would still be able to achieve its ESG (Environmental, Social, and Governance) objectives.

The Chair said that a degree of effort will be required to drive costs down and that it was important to protect the ESG expertise from Brunel. 

The Head of Pensions that there are two considerations that can drive unit costs lower; the scale of funds that you can procure with 3^rd party asset managers and making investment propositions more streamlined and consistent.

John Finch said that he was disappointed that three of the funds within Brunel were considering joining a different pool and that no preferential treatment should be given to them in terms of exit costs.

The Head of Pensions replied that all funds would pay the same fee in exit costs.

The Committee RESOLVED to:

i)  Note the background to pooling changes and the limited choice faced by the Avon Pension Fund.

ii)  Approve in principle the recommendation to adopt Local Pension Partnership Investments (LPPI) as APF’s new pool partner to replace Brunel.

iii)  Delegate to the Chair of the APF Committee the authority to sign non-binding agreements with LPPI, or with its client or shareholder funds, which are recommended by officers, such as Heads of Terms or a Memorandum of Understanding.