Agenda item

The Board considered a report from the Corporate Director of Resources which provided details on the Government’s proposals for further reform of the LGPS following the first phase of the Pensions Review (for copy see file of Minutes).

The Head of Pensions (LGPS) noted the Chancellor’s Mansion House speech on 14 November 2024, where she confirmed that the government will legislate that the 86 LGPS Funds in England and Wales must consolidate their assets into eight “megafunds” supporting change in the UK economy.  He added it was clear now that those “megafunds” were the existing Pools, rather than Pension Funds themselves, and he reminded the Board of the good progress that Durham had in pooling, with BCPP.  He added that consultation appeared to envisage a similar operating model to that followed by BCPP, including regulation by the Financial Conduct Authority (FCA), which BCPP already is.

The Head of Pensions (LGPS) noted the consultation proposed that Pools should take principal advice on their investment strategy from their Pool, with external advice to be by exception, and with a further proposal expanding the role of independent advisors and the possibility of such advisors becoming co-opted Pension Fund Committee members.  He added that feedback from the Committee had been in retaining independent advice, with an external view being complimentary to those from internally and from BCPP.  

He referred the Board to the table at Paragraph 12, setting out roles and responsibilities for the Pool and Pension Fund Committee, reiterating it was very much in alignment with the BCPP 2030 strategy.  He noted the way strategic allocations were set, with consultation noting this could be delegated to the Pool.  The Head of Pensions (LGPS) noted a response from the Fund would include comments on changes to advice and on allocations outside of the pool, with it being proposed that BCCP would carry out due diligence on local investment opportunities, which will require capability development at the pool.

The Head of Pensions (LGPS) noted Appendix B to the report set out the SAB’s ‘Good Governance’ Phase 3 guidance report from February 2021.

Councillor A Hopgood asked if Government would look to ‘clamp down’ on those Funds which had not pooled.  The Head of Pensions (LGPS) noted there were now hard deadlines in terms of pooling criteria and the March 2026 date.  Councillor A Hopgood asked if there were implication for Durham.  The Head of Pensions (LGPS) noted not directly, as Durham had pooled effectively through BCPP with most assets already under management; however all Pools would be required to submit proposals as to how they would meet the aspirations of the consultation.

Councillor A Hopgood noted the Government messaging appeared to be mixed, with many aspects looking at devolved powers, with their proposals in relation to the LGPS being the opposite.  The Head of Pensions (LGPS) reiterated that Government was looking for greater investment in the regions, through the eight “megafund” Pools, rather than 86 individual Pension Funds.  Councillor A Hopgood noted other Government approaches to devolved responsibilities, and for representation by regional Mayors on strategic groups such as Integrated Care Boards, Police and Crime Panels and Fire Authorities.  The Head of Pensions (LGPS) noted Government had stated they expected interaction with Combined Authorities in terms of local investment.

The Head of Pensions (LGPS) noted that a draft response to the consultation would be shared with Members of the Pension Fund Committee and Local Pension Board prior to a finalised version being submitted by the January 2025 deadline.

RESOLVED:

That the report be noted.