Several years into the pooling experiment, the Local Government Pension Scheme (LGPS) is no stranger to upheaval, nor the political and practical disputes that go along with it.
The experience has been tough for some, and it was wise that the government allowed enough flexibility for different models to emerge reflecting different approaches and circumstances. As we have previously reported, Scottish funds may also go another way entirely and consolidate through mergers or looser co-operation.
Two consultations that have emerged in 2019 reflect ministers’ desire to press on – albeit incrementally. The government is keen that assets be moved from funds into their respective pools, as indicated in its statutory guidance on asset pooling, which also clarifies relations between funds and pools.
In parallel, the Scheme Advisory Board for England and Wales has begun a governance consultation to assess how the interests of different employers are taken account of. It is more conservative than the ‘separation project’ of 2015, but could still lead to more funds being administered by a joint committee featuring several authorities, rather than a lead authority as is normal.
What ties the two is a desire for progress without revolution. As Jeff Houston, secretary to the Scheme Advisory Board, told me, appetite for “radical change” after pooling is likely to be small.
Unfortunately for the sector, not all radical change can be avoided. As for most sectors in the UK, the biggest ‘known unknown’ is the country’s exit from the EU. One question is whether this will proceed with a deal or not. Another question is whether it will happen at all.
The coinciding of the Brexit deadline of 29 March with the LGPS triennial valuations two days later is a complicating factor. The potential shifts in asset and currency values that could accompany the UK’s exit could have an impact on liabilities, investment strategy, and the legal position.
While this will cause headaches in the sector, it at least has the recent experience of coping with radical change in pooling. Some will harken back further to the fallout from the financial crash a decade ago, an anniversary prompting some rethinking on asset allocations.
For the LGPS, the year looks likely to be one of pragmatic reform and strategic repositioning, whatever emerges when the known unknown reveals itself.
Jimmy Nicholls, features editor