What happens next after UK’s pension pooling deadline?
Since April 1, all fund assets in the UK’s $533bn Local Government Pension Scheme should - in theory - be managed at the pool level, with the pools becoming the primary providers of investment advice. But has this happened in practice?
If you spent March 31 in relative quietude this year, more fool you. After all, there were plenty of reasons to celebrate. Not only was it National Crayon Day (I can almost hear the parents among you scream in horror) National Bunsen Burner Day and National Tater Day, it was also – courtesy of the British government – the deadline for all funds in the $533bn Local Government Pension Scheme to be pooled.
Since April 1, all pension fund assets should - in theory - be managed at the pool level. The pools will also become the primary providers of investment advice. There are also rules relating to local investment.
For the LGPS at least, it had the potential to be a momentous day. But since the deadline was set in 2023, most schemes have said it was unrealistic to expect any fund to be 100 per cent pooled by March 2026. Unless, of course, you are the Avon Pension Fund which last month told AOX it was “confident” it would complete pooling by the deadline.
At the Pensions UK conference in Edinburgh Jo Kempton, head of the Lincolnshire Pension Fund, said it was “incredibly naive” of the government to expect schemes to meet the deadline. Speaking on the sidelines of the conference to AOX she added that, in her view, no LGPS fund would be 100 per cent pooled by March 31.
So what, you might ask, has actually changed come April 1?
The answer is as lacklustre as the day itself: not much.
Max Townshend, head of investment strategy at pension pool LPPI, said at the same conference the passing of the government’s deadline would herald the arrival of a "grey space" for the LGPS. Building an in-house investment advisory capability for each pool remains a work-in-progress, with external investment advisers likely to remain in their roles in the meantime.
Meanwhile much remains unclear about the future role of pensions committees in investment decisions. Is it only a matter of time before these are scrapped completely and pools take full control? Maintaining some form of independent oversight remains a “real concern” for LGPS committees, according to Lincolnshire’s Kempton.
This, however, is small fry for LGPS veterans such as Townshend and Kempton, who noted: “We’ve always dealt with politics – now we’re having to deal with poolitics as well.”