Agenda item

The Committee considered a report of the Corporate Director of Resources which updated Members on the LGPS Consultation: Next Steps on Investments (for copy see file of Minutes).

The Head of Pensions (LGPS) reminded Members that Durham, along with 10 other Local Authorities, had come together to pool their Pension Funds within the Border to Coast Pension Partnership (BCPP).  He noted that it contained around £60 Billion worth of assets and pooling had helped in terms of savings of working at scale, as well as having provided capacity and opportunity for investment, noting it had been the right thing to do for Durham.

In respect of the rest of the UK, there were eight pension pools, with eight models of how to organise and invest.  He noted that some pools, whilst set up, had been very slow to actually pool assets, noting two Pension Funds having zero funds transferred to their pool and one Fund threatening to leave their pool.  The Head of Pensions (LGPS) noted that following those issues, Government had issued a consultation on pooling with a view to complete the pooling of assets by 31 March 2025.  He explained that it was not an issue for Durham and BCPP as we had now moved most of the funds over to the pool.  He noted that Government envisaged three stages, namely: 2025 deadline to pool; then greater collaboration between pools; and consolidation of pools, leading to fewer larger pools.

The Chair noted that the consultation appeared to vindicate all the work Durham had carried out so far in terms of pooling and were at an advanced state when looking at the consultation. 

Councillor J Atkinson asked for more information in terms of requirements for consolidation in future.  The Head of Pensions (LGPS) noted that individual Local Authorities are being challenged to pool assets and then there is an ambition for Pools to look to consolidate, with Government wanting fewer, larger Pools which could be through whole pool mergers or where Local Authorities leave one pool to join another.  He added that BCPP had been ‘Pool of the Year’ several times and that some other Pools were not as large as BCPP.  He noted while many Local Authorities did not support pooling, both Durham and Darlington, via the Committee, had gotten on with the task, with some Administering Authorities having zero percent of their assets pooled.  Councillor J Atkinson noted he felt therefore our Fund Managers, at BCPP were very valuable.  The Head of Pensions (LGPS) noted that if fewer Pools in future, there may be less chance to go elsewhere.

Councillor C Fletcher asked as regards the tight timescales and asked as regards the ability of smaller pools to be able to move more quickly in terms of their being flexible to take advantages of any opportunities that arise.  The Head of Pensions (LGPS) noted the timescales for pooling assets were not an issue for this Fund specifically as Durham had gotten on with the process of pooling and was at an advanced stage.  Councillor C Fletcher noted that if other Funds, that were not so advanced, then came to BCPP would that not impact upon Durham.  The Head of Pensions (LGPS) noted that was an issue that would be picked up under Part B of the agenda.  He added that in terms of the direction of travel, there was cross-party support for pooling consolidation.

Councillor B Kellett noted reference to a ‘smaller number of larger pools’ and while he understood economies of scale, if they were too large could they miss opportunities or be more prone to any potential ‘larger mistake’.  The Head of Pensions (LGPS) noted that he had paraphrased the consultation and noted that that is indeed an issue, with governance arrangements to avoid such mistakes more challenging with greater numbers of stakeholders.

He added that it was felt the current size of 11 Local Authorities in our pool was felt to be working.

Councillor C Fletcher asked as regards the sizes of other Pools.  The Independent Adviser, Sandy Dickson noted ranges of sizes participants in the pools noting that within London CIV there were 32 Local Authorities.  He added some Pools of larger Local Authorities only contained three Local Authorities, however, he would say BCPP with 11 was an average sized Pool.

Councillor M Porter noted paragraph 25 referred to a ‘danger that returns were taken out of context’.  The Head of Pensions (LGPS) noted that proposed standard benchmarking for all asset classes would not take into account each Pool’s or Pension Fund’s purpose in terms of risks versus returns, and therefore was a blunt tool that would not lead to fair comparisons.

Resolved:

That the information contained in the report be noted.