(May 19, 2014) — Pension funds for Norfolk, Suffolk, and Hackney in the UK have appointed HSBC Securities as their custodian, the first contracts awarded through the National Local Government Pension Scheme (LGPS) global custody services framework.
The three funds, together representing £5.2 billion ($8.7 billion), are expected to save up to £1.5 million ($2.5 million) over the lifetime of the contracts by using the LGPS framework to collectivize due diligence and reduce search costs
“Working together has delivered a great value-for money-outcome for each of our funds, but wider benefits for each of us also as we shared our ideas and experience to help identify the right solution” for each fund, said Jill Davy, head of financial services at the London Borough of Hackney.
The national LGPS custody program, launched in November last year, provides a “fast, effective, and efficient way of accessing services in line with the Official Journal of the European Union (OJEU) regulations for public procurement,” according to the industry body. The “multi-user, multi-provider” framework is open to all funds that are part of the LGPS in England, Scotland, Wales, and Northern Ireland.
The system offers a range of providers that have already undergone the full due diligence process by the founding members of the LGPS. Member funds can then select the firm best meeting its requirements, based on preset and uniform contract terms. Currently, BNY Mellon, BNP Paribas, HSBC Securities, JP Morgan, Northern Trust, and State Street are on the framework from which pension funds can choose.
“It is hard work to set up and manage these frameworks and requires huge dedication from the funds and professionals who give their time and expertise to establish and help manage them,” said Nicola Mark, head of the Norfolk Pension Fund and chair of the National LGPS frameworks collaboration. “The achieved and potential savings are very significant—based on evidence from the custody framework alone, as participation matures and grows, the LGPS could collectively benefit by more than £50 million ($84 million).”
In addition, the funds using the framework would benefit from a major cut in timescales, down from six to nine months to a matter of weeks, the LGPS said. Participating providers and pension funds have agreed on a common terms and conditions, “removing the need for specialist legal advice and negotiation for each separate procurement.”
“Using the national LGPS framework for this procurement has saved each fund significant time and money at a time when both these commodities are extremely precious!” said Sharon Tan, specialist pensions accountant of the Suffolk Pension Fund. “This meant that we were able to just focus on identifying the right partner for our funds.”
By leveraging the aggregate size of the three funds, Norfolk, Suffolk, and Hackney pension funds worked together within the framework and contracted separately with HSBC Securities to provide custody services for five years starting October 2014.
“HSBC Securities offers us competitive and transparent pricing together with a comprehensive custody and reporting solution and strong relationship support which will help each of us move forward in terms of efficiency and performance,” said Glenn Cossey, CIO of the Norfolk Pension Fund.
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