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Autumn statement: Guidance published for pooling LGPS into wealth funds

26 November 2015

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The government has published criteria and guidance for pooling the Local Government Pension Scheme (LGPS) into six 'British Wealth Funds' worth at least £25bn each.

Announced in the Autumn statement, the Investment Reform Criteria and Guidance paper reveals the government wants the scheme's separate 89 funds to pool.

The idea behind it is to 'match' the infrastructure investment levels of the top global pension funds and significantly reduce costs.

It follows the announcement at the Conservative Party conference in the summer that councils will pool their funds into six British wealth funds worth GBP 25bn-GBP 30bn to boost UK infrastructure.

The government is now inviting administering authorities to come forward with their initial proposals for pooling by 19 February 2016 which will then be assessed against four key criteria.

They should include a commitment to pooling and a description of progress towards formalising arrangements with other authorities.

Independent consultancy Hymans Robertson said allowing LGPS to suggest how pooling arrangements will operate is the right thing.

John Wright, head of public sector at Hymans Robertson, said: 'The LGPS community is vigorously engaged in a process of investigating ideas and the best ways forward for pooling, looking at how to make substantial savings without compromising performance.'

The Pension and Lifetime Savings Association welcomed the guidance.

'We support the development of pooled investment vehicles that generate economies of scale and enable smaller LGPS funds to access new and novel investments,' said PLSA chief executive Joanne Segars.

'It is critical that the proposals for pooling help in the ultimate aim of the Scheme, securing members benefits, and they can only do so if these proposals improve the governance of the Scheme as a whole, and its investment in particular, so we welcome the specific inclusion of a 'strong governance' criterion.'

First published 26.11.2015

Lindsay.Sharman@wilmingtonplc.com