David Piltz, CEO, Gallagher’s Benefits & HR Consulting Division in the UK: “While the potential benefits of consolidation are widely acknowledged—such as the ability to negotiate lower fees and access more sophisticated investment strategies—we must consider the other side of the equation, too. The key challenge here is balancing consolidation with the risk of creating concentration. While pooling assets can certainly lead to efficiencies, too much consolidation could leave us vulnerable, with pension funds overly concentrated in just a few large investments. Do we want our pension system placing all its eggs in just a few baskets?
“Once schemes reach a critical size, the benefits of consolidation can taper off. A framework should be created in which investments have to fight for their place across a wide range of independent pension portfolios. This ensures price competition, better due diligence, and reduces the risk of overexposure to underperforming investments. The move towards Canadian-style pension reform - merging Britain’s local authority pension schemes into a consolidated pension fund - could drive down administrative costs and streamline operations. However, it's worth noting that local authority schemes provide flexibility to match unique regional needs and risk tolerances. Centralising everything under a national fund could impose a one-size-fits-all model, which may not align with the goals of all local authorities or meet the needs of all beneficiaries. Overall, it does present an opportunity for greater returns, but it requires careful implementation to navigate the inherent challenges in such a major structural shift. “
Steve Simkins, Partner and Public Sector Leader at Isio, comments: “We support scaling up the LGPS to achieve greater impact, but it’s essential that this is done thoughtfully. While current proposals focus on a top-down structure, a bottom-up approach is equally critical to meet the diverse needs of numerous employers and their employees past and present . As it stands, valuable insights from initiatives like Maple 8—such as professional leadership, clear risk management, and enhanced member services—are not yet being fully implemented across the board. “Nine years after George Osborne's initial plan for "British wealth funds,"
Rachel Reeves has reintroduced and rebranded them as "Megafunds." However, with her focus on assets, a more accurate term might be "Megapools"— a grand description for a large investment entity devoted exclusively to managing LGPS (Local Government Pension Scheme) assets. Reeves outlined the first step: to improve and fully capitalise the current pools, which are currently only half-filled. Moving to "Megafunds" would require LGPS fund mergers—a time-consuming process that likely won’t impact this Parliament. Additionally, with mandated investment classes off the table, questions remain about if and how the government might mandate all assets to be directed through these new megapools.
“Under current regulations, local LGPS funds have control over asset class decisions, with the megapools simply serving to manage these assets. Without regulatory change, the megapools won’t dictate the asset allocation, putting the government's £80bn UK investment target for companies and infrastructure at risk. Balancing the government’s national investment ambitions with the autonomy of local councils is, therefore, a "wait and see" situation. The emphasis on supporting regional economies through a commitment of £20bn in local investments is encouraging, aligning the LGPS with the broader local government ecosystem. However, given the LGPS’s robust funding status, this same sum could be mobilised directly without delay, rather than waiting for these new investments to materialise. In its ongoing review, we urge the government, alongside the new Office of Value for Money, to review the distribution of funds across the LGPS and it many employers who are serving our communities.”
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