‘Local Government Pension Schemes: Fit for the Future’ Consultation

Commenting on the consultation ‘Local Government Pension Schemes: Fit for the Future’, Iain Campbell, Head of LGPS Investment, Hymans Robertson says:

“The consultation released last night addresses three key areas for the LGPS.

“Firstly, in regard to pooling. We believe this should be completed as quickly and extensively as possible, where it’s achieving clear benefits for LGPS funds but with sensible exceptions where moving assets would incur unnecessary cost or waste. There is then the expectation that the pools will then have complete control over the implementation of those strategies, and management of all assets, with funds only able to set very high-level investment objectives, and maybe a strategic asset allocation if they want. This is a monumental change for the funds and likely unpopular. Requiring the Administering Authorities to take advice on setting investment strategy from the pools, who will then implement the strategy, we believe introduces a potential conflict of interest and may lead to sub-optimal strategies that ultimately cost the LGPS.   

“Secondly, the consultation considered local investment. As we set out in our call for evidence response, we believe the LGPS’s greatest potential for additive UK economic growth is leveraging its regional expertise to support smaller, local investment – including using the credibility of the LGPS money to crowd-in further private investment and the ability to catalyse further new local projects. We welcome the opportunity for broader consultation with CAs, MCAs, CCAs or the GLA, or local authorities in other areas to identify potential investments but recognise that not all areas have the same structures in place. We recognise that implementing local investment through the pools introduces an opportunity for professional due diligence of investment opportunities but may also create a layer of disconnect between funds and their local areas. The benefits of funds being able to do this directly should also be explored.

We would also encourage realistic timeline for the LGPS to increase local investments to allow for a flow of newly originated local project opportunities to be created. This will avoid forcing capital into a small set of opportunities, ‘bidding up’ prices and pushing down returns. 

“Finally, after Hymans Robertson involvement in the Good Governance review in 2019 -20, we’re excited to see the inclusion of the outcomes of the Good Governance work in the consultation. These proposals have good support across the LGPS and would see the introduction of the LGPS senior officer role, clarity in managing conflicts of interest and formalisation of training requirements for committees and other key decision-making roles in the LGPS – all positives for standards in the LGPS.”