Agenda item

The Board considered a report setting out an update on the Lancashire and London Pensions Partnership (LLPP) and the proposed response to the Government's proposals to pool Local Government Pension Scheme (LGPS) assets into Wealth Funds.

Abbi Leech, Interim Head of Fund, reported on the work streams which made up the Government's reform agenda in respect of the LGPS. These were:

-  Replacement of the existing Investment Regulations;

-  Publication of criteria for evaluating pooling proposals;

-  A requirement to provide pooling proposals.

It was reported that, in respect of the consultation on the replacement of the Investment Regulations, a proposed detailed response would be considered by the Pension Fund Committee at its meeting on 29 January 2016. Whilst the proposed changes to existing regulations were to be welcomed, it was felt that the reserve powers were too broad and would benefit from some additional clarity.

In respect of the requirement to provide pooling proposals, whereby initial submissions were due by 19 February 2016, reference would be made to the current partnership discussions with the London Pensions Fund Authority (LPFA) to create the LLPP from 1 April 2016.

It was reported that the preparations for the LLPP were on schedule and that PricewaterhouseCoopers (PwC) continued to act as advisors to the Fund on the proposals and that this work included consideration of the risks. The Board considered that the main risk was that the Government would not approve the creation of the LLPP given that pools should achieve a scale of around £25bn and the LLPP would achieve in the region of £10bn. It might be the case that the Government would direct other funds to join the LLPP or for the LLPP to become part of another pooled arrangement.

The Chair reported that there were currently eight pools being proposed with at least five meeting the £25bn criteria. A number of funds were involved in discussions in respect of more than one pool. It was felt that there should be a contingency plan should the Government not approve the LLPP proposals, although it seemed that outcome would be unlikely.

It was noted that the operating model for the LLPP was deemed to be appropriate by PwC. The Lancashire County Pension Fund (LCPF) and LPFA had a similar direction of travel and philosophy, i.e. active management, although the LPFA Fund had a higher funding level than that of the LCPF. Not all of each Fund's assets would necessarily be in a pool which meant that investment strategies could be peculiar to each Fund.

It was recognised that this was the start of a process for future integration and should pooled funds evidence good performance in the next few years, it was likely to be a catalyst for change.

Resolved: - That:

(i)  The report, now presented, be noted;

(ii)  The proposed responses to the Government proposals, as set out in the report, now presented, be supported;

(iii)  The Board gives its explicit support to the approach being taken by the Lancashire County Pension Fund and the London Pensions Fund Authority in creating the Lancashire and London Pensions Partnership.