UK ministers deliver verdicts on local authority pension pools’ ‘fit-for-future’ pitches

UK ministers have given the green light to six out of eight UK local authority pension investment pools’ proposals for meeting new minimum standards set out by the government, rejecting plans put forward by Brunel Pension Partnership and ACCESS.  

In November the government put forward a package of ambitious “megafund” proposals to reform the structure, investment and governance of the local government pension scheme in England and Wales, saying it wanted all individual pension funds’ assets to be transferred to pools and for these to have internal management capabilities, regulated by the Financial Conduct Authority (FCA).

Border to Coast, Brunel, LGPS Central, Local Pensions Partnership, London CIV are already regulated by the FCA. The only pools not currently authorised by the FCA are ACCESS, Northern LGPS and Wales Pension Partnership.

Pools and the rest of industry had until mid-January to respond to the government’s consultation. By the beginning of March the pools, working with their partner pension funds, had to deliver a report setting out how they intend to meet the government’s proposed requirements. 

Ministers have since then met with their pools to discuss their proposals. Six out of eight LGPS pools have been given the go-ahead for their proposals. ACCESS and Brunel were told their proposals did not make the cut and that they would need to merge with another pool instead of pursuing their individual transition plans.

LGPS Central chief executive Richard Law-Deeks welcomed the ministerial support.

“We are pleased that our proposal has been recognised as detailed, comprehensive, and meeting the overall ambition set out in the consultation,” he said.

“It is also encouraging to see the positive reference to deepening collaboration between the company and partner funds and focus on local investment.”

A spokesperson for Northern LGPS pool said it “appreciates the government’s confirmation that it is supportive of our business plan to develop the pool”.

“We now look forward to the government’s response to the consultation, which we expect will provide much-needed clarity on the future regulatory and operational requirements for LGPS pools. A clear framework will be essential in ensuring that pooling continues to deliver strong governance, efficiency, and value, and allow us to move forward with confidence.”

Cost concerns

Brunel said it would now be taking some time to consider next steps with its partner funds.

“We will continue to coordinate our approach as we consider the latest feedback from the government,” said its CEO in a blog post on its website.

“Our partnership has succeeded across multiple agendas since inception: transition of assets, governance, asset class range, responsible investment, and UK impact. Across these criteria, Brunel has been a pooling success, and we are determined to ensure that success continues.”

ACCESS pool has now said that, following the meetings with minister, it has been blocked from establishing its own FCA-regulated investment management company, which it found “disappointing”, especially as other pools have received the green light for similar proposals.

It expects that a merger with Local Pension Partnership or Border to Coast is most likely but warned that significant costs and risks could be associated with such merger.

ACCESS said the forced merger could cost between 28bps and 36bps of the value of active listed assets in pools alone, equivalent to over £100m. 

It claimed the government’s rejection of its proposal attempted to “downplay significant cost consideration” without supplying its own analysis or counter actual evidence.

ACCESS said the treasury has also not proposed a framework for how costs will be compensated in the event of undesirable pool or fund-level mergers.

A government spokesperson said: “This government is determined to drive growth through our plan for change, including by taking advantage of scale and consolidation in our pensions system to unlock more investment, leading by example in the public sector.

“By 2040, the Local Government Pension Scheme is projected to reach £1trn in size – we must ensure the scheme is fit for the future. […] We will continue to engage closely with administering authorities and pools on how they will meet this ask.”

The government has not clarified whether a March 2026 deadline will be adjusted for the pools that were told to merge.