Ministers have called for a merger of local government pension funds to be investigated “in the next six months”, according to official papers just published.
The call for amalgamation of different local government pension pots is set to be made despite opposition to the move with London pension holdings likely to be first in ministers’ sights.
A recent meeting of Local Government Pension Scheme managers heard that “ministers believed that the case for amalgamation should be properly examined”.
Members of the LGPS policy review group were told by Department for Communities & Local Government officials that “there would be a call for evidence in the next six months”.
Minutes of the January meeting, published last week, continued: “Funds were not generally supportive of full merger [as it] would necessitate increased borrowing.
“There would also be a need to legislate and ministers were reluctant to do this.”
London Councils are currently examining proposals for closer working between the 34 pension funds in London, a move which has been championed by the London Pension Fund Authority for several years, and the policy review group minutes reveal “there was a view that London would be a target area for mergers”.
There have been long-standing concerns about the performance of London pension funds, which are small compared to many other local government pension funds, and a recent report from the Pensions Institute describing them as a “ticking time bomb”.
However, there is some resistance to the move to a London merger within the capitals’ funds and the policy review group documents said “the performance of a number of London authorities had improved from below the average to considerably above in recent years.
“It was felt that the end result of such considerations was likely to be increased collaboration, particularly regarding investment.”
London Councils’ executive has established a working group to examine the options for closer working between the boroughs, such as the creation of a collective investment fund of framework fund as suggested in a recent PricewaterhouseCoopers report. The working group is due to report back this summer.