Public sector pension funds agree £10bn asset and liability management partnership

The Lancashire County Pension Fund and the London Pensions Fund Authority have agreed to develop an Asset and Liability Management Partnership.

The move would see the pooling of more than £10bn in combined assets in a bid to deliver cost savings and improve performance.

Under the ALM partnership deal, each pension fund will retain its separate identity and local accountability.

However, the agreement could also ultimately cover all areas of activity involved in the running of the pension funds, including pension administration.

The two organisations said: “The central proposal is to create a commonly managed, jointly invested pool of assets overseen by an FCA registered entity created by the two pension funds.

“This will provide the benefits of investment scale and ensure that industry-leading standards of governance will be achieved and maintained through the FCA registered vehicle.”

The Lancashire County Pension Fund manages £5.2bn of pension funds on behalf of 150,000 scheme members working for around 270 organisations across the county. The LPFA administers a £4.9bn fund providing Local Government Pension Scheme benefits to almost 20,000 employees of 200 not-for-profit organisations and around 40,000 pensioners, many of whom used to work for the Greater London Council and the Inner London Education Authority.

Cllr Jennifer Mein, Leader of Lancashire County Council, said: "Taking a more proactive approach to managing the assets and liabilities of the Lancashire County Pension Fund has really paid off in recent years and this new partnership will enable us to build on the expertise we have developed.

"Facing the challenges of supporting an ageing population, the government should be using the good practice of funds like our own and the London Pension Fund Authority to drive up the performance of the Local Government Pension Scheme, rather than dumbing down to the average."

Edi Truell, Chairman of the London Pensions Fund Authority, added: “We are delighted to be working on the development of this partnership and believe, with a greater pool of assets, both pension funds will gain access to a wider range of investments.

“It is especially important to compete for desirable illiquid investments against the enormous international Sovereign Wealth Funds and pension investors.”

He added: “We firmly believe that large scale Asset and Liability Management Partnerships are the best way to deal with the challenges faced by UK pension funds.”