Government backstop to encourage Brunel and ACCESS member funds to find a new home
In the government’s Pensions Investment Review published today, it confirmed that in order to ensure that all funds from the Brunel and ACCESS pools will find a home during the process of moving from eight pools to six, it will take a power in the Pension Schemes Bill to direct a fund to participate in a specific pool. While this ultimately means that government can force funds into a pool if they have not already committed to one, this ”Sword of Damocles” will surely be a power that will never need to be used.
Government also reaffirmed its committment to the current LGPS reform programme, stating that it has no current plans to intervene to reduce further the number of pools to fewer than six.
In a move to allow a pool to invest through another pool, which the government hopes will allow for further benefits of scale, the Bill will include procurement exemptions which address a barrier introduced by the Procurement Act 2023. The Act required that a significant majority of a single pool’s activity be in the interest of its own partner funds. This would have prevented pools from accepting allocations from other pools – a restriction that will now be lifted.
Local and regional investment has long been on government’s agenda and within today’s review it rightfully noted the track record of LGPS investment as a success story and one that it says it is keen to build on. To retain the local and regional focus the review confirmed a requirement for partner funds and pools to work with local authorities, regional mayors and their strategic authorities, and with Welsh Authorities to ensure collaboration on local growth plans. The National Wealth Fund will also collaborate with the LGPS to address access to finance gaps and to support strategic objectives on growth and clean energy.
Saying that it recognised the feedback to the recent consultation and the principle of democratic accountability in the LGPS, the government has committed to amending the requirement for an independent member of the pensions committee such that they act only as an independent adviser to the committee, and not as a voting member.
The Pensions Investment Review is a critical component of the government’s plan for growth. The pensions sector, in particular the LGPS, has been awaiting the outcome of the review with a great deal of interest. While the review does provide a certain amount of clarity around government expectations from the LGPS, there are still questions to be answered. One key concern is local investment: while funds may be available to invest, the availability of suitable investment opportunities remains an unresolved issue – the proverbial “elephant in the room”.
