Agenda item

The Head of Pensions will provide the Board with a verbal update on this item.

The Head of Pensions addressed the Board, a summary of his presentation slides are set out below.

Summary

•  We need to transition assets to our new pool LPPI by 1 April 2026

?  This requires assets to be under LPPI’s ownership or under their oversight & management

?  Legal title over some ‘difficult to shift’ assets may remain with APF / B&NES

•  We seek to transition assets safely and at minimum frictional costs

?  Hence, we use re-registration, in-specie transfer, and novation of assets instead of “sell & buy back”

•  Setting up ‘New LPPI’ with 9 LGPS shareholders requires new arrangements and legal agreements

?  The core principle is equal shareholdings and voting rights for all 9 LGPS shareholders

•  LPPI requires a £2.8m injection of regulatory capital on 1 April 2026 from each of its 9 LGPS shareholders, i.e.  9 * £2.8m = c. £25m¹ 

(Notes:  1) less capital already supplied by LPPI’s two current shareholders)

•  Brunel will wind down over 9-12 months 2026-27, after which APF will receive its share of residual capital.

James Young asked if there were to be any redundancies from Brunel as part of the transition process.

The Head of Pensions replied that there was likely to be around 15 – 20 redundancies, with 12 staff due to transfer to LPPI. He added that LPPI were also planning to open an office in Bristol.

The Chair asked if the timescales within the Transition Plan were achievable.

The Head of Pensions replied that he had a high level of confidence that they were.

LPPI – High level structure & Governance

·  9 LGPS shareholders – with equal shares and one vote each

·  LPPI Holdings Ltd

o  Non-regulated holding company

o  1 non-exec director per LGPS shareholder  +  Independent Chair

o  Strategy, Annual business plan, Exec Remuneration

·  LPPI Ltd

o  FCA regulated asset manager

o  Management & oversight of LPPI operations & strategy implementation

o  Independent Chair, 6 NEDs, CEO, CFO

Ongoing Costs: Initial rise followed by material reductions

·  Higher fixed pool costs as LPPI provide additional services to Brunel (asset servicing, private market performance, risk management, Alternative Investment Fund Manager (AIFM) authorisation, balance sheet oversight, treasury / liquidity management).

·  Reduction in aggregate advisory costs as LPPI becomes sole provider of investment advice and investment consultant costs reduce significantly.

·  Ad valorum investment manager costs reduce significantly in LPPI steady state as LPPI transition to target model over time - including use of direct internal LPPI management

Overall One Off Costs: Dominated by regulatory capital and transition costs post initial asset transfer

·  Provision for wind up of Brunel: £1.6m

·  Ongoing Brunel salary and oncosts into 26/27: £480,000

·  One off capital injection to LPPI as part of becoming new shareholder: £2.8m

·  Expected Return of Brunel regulated capital: £840,000

Stuart Pearson asked if the levels of control or risk would change as a result of the transition to LPPI.

The Head of Pensions replied that they were likely to be broadly the same as they were 1 of 9 funds with Brunel and now due to be 1 of 10 with LPPI.

Alison Wyatt asked if officers were confident that LPPI were in a position to cope with an increase in membership and their new role.

The Head of Pensions replied that they were and said that their interactions had been positive so far in terms of values, capacity and technical skills.

The Chair, on behalf of the Board, thanked the Head of Pensions for the update.