Agenda item

This report advises the Committee of the extent to which the Fund is complying with the pooling requirements of Guidance issued by the, then, Department for Communities& Local Government (DCLG) in 2015, the savings made through pooling in 2022/23and the governance structure of the London Collective Investment Vehicle (LCIV).

The Acting Head of Pensions and Treasury introduced the item and explained that the LCIV provided the Council with a savings report every year. The report stated that the London CIV had saved the Fund £564,000 in 2022/23. These savings were in relation to the standard rate charges that investment managers would charge and officers would normally be able to negotiate a discount so the figures quoted in the report were treated with some scepticism.

The Acting Head of Pensions and Treasury informed the Committee that around 50% of the funds assets were invested with the London CIV and over the coming years officers would seek to move more of their listed assets into the London CIV.

In response to questions from members officers informed the Committee that:

• For the assets that officer had proposed to move into the CIV, officers could provide Members with the fees that are currently being paid to the fund managers and the fees that will be saved by investing with the CIV. Any comparison would be difficult however as transfers would not normally be exactly like-for-like.
• In the Chancellors Mansion House speech in July, he championed the pooling of assets, and they were looking to mandate funds to pool more of their assets by March 2025.
• There was a consultation being conducted and the CIV was planning to issue a reply to the statement. The CIV’s response explained that believed it was not appropriate to force Funds and set deadlines.
• The Fund was aligned with the proposals already as it had invested 10% into private equity and 5% into levelling up assets but officers were not comfortable with this being mandatory.
• Mercer had released a briefing note online which detailed their response to the speech. Mercer’s response did not state whether pooling was right but rather what factors would need to be considered if there was more pooling introduced.
• There was a range in the amount that other boroughs had invested with the CIV. Croydon Council was roughly in the middle in terms of the amount invested in the CIV.
• Officers would have to conduct Task Force on Climate-Related Financial Disclosures (TFCD), the CIV would provide a service in which they would analyse the funds listed assets and provide the fund with a starting position.
• TFCD reporting will probably be implemented in 2025 for LGPS Funds.
• There were 86 LGPS funds in England & Wales and the size of the pools was proposed to be around £50 billion, but there was no consensus on what the optimum size a pool should be. If investment returns were not met from the pooled investments, then it was down to employers within the fund to make up the difference. If the investment returns fell, then the contributions would need to be increased. This was a potential issue with mandatory pooling as the Council would have to come up with a solution if investment returns were short.
• If the other employers in the Fund experienced serious financial difficulty and ceased, then their liabilities fall on the other employers Fund of which the Council is by far the largest. If there is a shortfall to the Fund then it could mean increased contributions from employers.
• The way the questions are phrased in the consultation document made it difficult for officers to provide their opinion clearly.

The Committee asked the Acting Head of Pensions and Treasury to decide whether or not to reply to the Consultation on their behalf and to express their concerns with the proposals being too prescriptive regarding pooling. The response to the Consultation would have to be issued by the 2^nd October.

Resolved:

1.1  To note the contents of this report.

1.2  To ask the Acting Head of Pensions and Treasury to look at the question’s in the consultation and to decide whether it was in the Councils best interest to issue a response.