Issue - meetings

The purpose of this report is to update the committee on the outcome of the Government’s Fit for the Future consultation.

The purpose of this report is to update the committee on the outcome of the Government’s Fit for the Future consultation.

Sawan Shah (Head of Finance Pensions and Housing Companies) introduced a report from the Corporate Director Finance & Resources, outlining the outcome of the Government’s Fit for the Future consultation.

In presenting the report, the Sub Committee was advised that in July 2024, the Chancellor had launched the UK Pensions Investment Review, which included proposals to improve the scale and efficiency of the UK’s defined contribution (DC) pension schemes and the LGPS. In November 2024, the Government had published its Fit for the Future consultation which included proposals in three key areas of the LGPS, namely to reform asset pooling, boosting investment in local areas of the UK, and strengthening the governance of administering authorities and LGPS pools.  Following this, the Government had published its final report on the UK Pensions Investment Review and its response to the Fit for the Future consultation and confirmed the decision to move ahead with the core proposals, setting out the final policy measures on pooling, local investment and fund governance with the key areas of focus identified as follows:

·            In terms of pooling arrangements, the London CIV had been set up as the designated pooling entity for the 32 London boroughs.  All pools had been required to submit transition plans to demonstrate how the proposed minimum standards could be met. Of the 8 regional pools originally identified, only 6 pool plans had been accepted with the government having concluded that proposals from the ACCESS and Brunel pools did not align with its vision for the future of the LGPS.  It was confirmed that this would not impact on the London CIV.

In relation to concerns regarding the accommodation of Fund specific requirements on responsible investment, the Government had stated that, to achieve scale, pools would not be expected to create a range of bespoke solutions to fit each fund’s ESG and RI requirements. Instead, funds would be expected to work together to reach a common approach although it had been acknowledged this may not always be possible, in which case more than one option could be offered. Funds would continue to set their individual investment strategy, with implementation being delegated to their respective pools. To facilitate this, members were advised pools would be required to develop in-house investment management and advisory capabilities, with a view to establishing themselves as investment managers (and therefore be authorised and regulated by the FCA).  Despite some opposition to the proposals, it had been agreed that pools would therefore be mandated to provide partner funds with principal advice on their investment strategies and whilst Fund’s would be able to procure advice from other sources, it was expected this would only be under exceptional circumstances.  Whilst the Government had originally proposed that all listed assets should be transferred to pooled vehicles by March 2026, with remaining legacy illiquid assets included, this had now been relaxed with the Government having stated that not all assets would need to be invested through a pool’s own funds (reflecting concern that it  ...  view the full minutes text for item 7