Merger between Lothian and Falkirk schemes on hold…again

Scotland doesn’t always like to follow where England goes, but when it comes to pension reform it might do so (Simon Dawson/Bloomberg)

The merger between Lothian and Falkirk schemes has been put on ice for a second time. But events may overtake their plans.

The Scottish have never been shy about resisting the example set by the rest of the UK - and who can blame them?

Now, as chancellor Rachel Reeves demands consolidation among UK local government pension schemes, their 11 Scottish counterparts are watching on closely.

The £3.6bn Falkirk scheme, for one, has been enthusiastic about the idea of merging into larger entities. In 2021 it agreed to consolidate with the beefier £10.3bn Edinburgh-based Lothian Pension Fund.

But plans stalled in 2023 when Edinburgh Council, which administers the Lothian fund, hit the brakes over rather opaque “risks and issues”.

The parties agreed to reconsider in 2025. Well, that time has come and last week Lothian decided to postpone once again.

With its triennial actuarial valuation looming, the bigger scheme cites capacity constraints, but it also alluded to potential systematic upheaval.

There’s a “reasonable expectation that [the Scottish government] will consider reform after the elections in 2027”, according to Lothian. Merger discussions will therefore be pushed at least another two years.

In the meantime, Lothian and Falkirk have rustled up a "collaborative relationship”, with around 40 per cent of FCPF assets being managed by Lothian’s subsidiary LPFI, and a further 23 per cent under its advice.

So the “will they, won’t they” saga continues as Lothian and Falkirk continue to flirt.

Of course if Scotland follows England in wanting bigger schemes then they may not have much choice.