Home ListingFebruary 19, 2016

Leading UK Pension Pool to Hit £45B

A trio of the country’s biggest public pensions plan to team up with a pioneering partnership to create a major pool of assets.

Reported by Featured Author

Three major UK pension funds are in discussions to collaborate with an existing partnership which could create an investment pool worth £45 billion ($64.5 billion).

“We are in discussion with these funds around how to best work together using the very significant in-house expertise of all the participants.”The public pensions for the regions of Greater Manchester, Merseyside, and West Yorkshire—with roughly £35.8 billion in assets between them—have all been revealed as potential pooling partners with the London and Lancashire Pensions Partnership. The project was formally established last year as a pooled investment vehicle between the London Pension Fund Authority (LPFA) and the Lancashire County Pension Fund.

In addition, the £1.7 billion Berkshire Pension Fund is in early-stage discussions regarding joining the partnership. The LPFA said it hoped the pension would join the wider partnership in the future.

The details were revealed in the LPFA’s response to a UK government consultation on public pension pooling projects, published yesterday.

The additional partners are a significant coup for the project—which is to be renamed as the Local Pensions Partnership—as all three have internal investment teams, a rarity in UK local government pensions.

“We have exchanged letters of intent and are in discussion with these funds around how to best work together using the very significant in-house expertise of all the participants,” said Sir Merrick Cockell, chair of the LPFA, in the response to government. “Given the timescale, discussions are at an early stage, but the next steps between now and July are for all participants to develop a proposal around how the pooling arrangement will work and meet government’s criteria. All parties anticipate the discussions reaching a successful conclusion.”

The Local Pension Partnership aims to open its first pooled funds in April, the LPFA said, using a similar structure to that employed by the London CIV. This is subject to obtaining regulatory approval by the end of next month.

“We consider there are a number of elements that have contributed to success in this endeavour,” Sir Merrick added.

These elements included commonality between partners, in-house teams around which to build further expertise, strong governance, and “an understanding that the structure… is not designed to make profits, instead distributing any surplus back to participating funds.”

The partnership between the LPFA and Lancashire is expected to save roughly £30 million a year in investment and operating costs once it is up and running. The LPFA said a full analysis would be published later this year detailing additional savings from the new partners.