- Pooling can deliver real benefits of scale to our Partner Funds.
- New international research highlights that optimising governance, professional management, and aligning long-term strategic planning with investment implementation, are seen as key factors for long-term success.
New research on pooling in major international markets shows that pooling in the UK can drive still more value for the Local Government Pension Scheme (LGPS) in the future. It also confirms that scale benefits have already been demonstrated as “meaningful” and “realisable”, leading to improved performance after fees, better control over investments, and reduced costs.
The independent research, commissioned by LGPS Central and six UK LGPS pools (Access, Brunel, Border to Coast, LCIV, LPPI and Wales PP), covered eleven comparable investors in seven major international markets where the pooling process is at a more mature stage. The research sought to understand the issues and challenges these pools experienced in their evolution. As a result, it enables each individual UK pool – and its partner funds – to use the insights gained to support their own future development.
While recognising there is no ‘best way’ to pool, only different ways, the research nonetheless identified three characteristics of success:
- Contemporary governance – establishing clear divisions of responsibilities, and simplified, flexible decision-making (including effective delegations to specialists trusted to exercise sound judgement over the long term);
- Professional management – using the opportunity provided by pooling to bring professional teams together in a sustainable way, so that training, development and succession planning can be developed;
- Long-term strategic planning and implementation – developing agreed long-term strategic asset allocations, reviewed annually or less frequently.
The report also highlighted that the clarity of central government objectives and of the pooling framework can both impact the pace at which pooling delivers value.
Mike Weston, LGPS CEO commented:
“This study has identified some important characteristics which have been major contributors to the successes of overseas pooling of public sector pension schemes whose consolidation journeys have been under way for many years longer than ours in the UK.
I hope that all stakeholders in the England and Wales LGPS will recognise the lessons and integrate them into our own journey to help maximise the chances of success and the benefits achievable from all of our joint efforts”