LGPS | Call for evidence on asset pooling and investment

The government has invited feedback on a number of questions to inform the first phase of its pensions review (discussed in our August newsletter).The questions include several relating to the LGPS, and the call for evidence confirms that the answers the government receives to them will guide "stakeholder engagement with more targeted questions [then] being considered with particular stakeholder groups."

The call for evidence (which closed on 25 September 2024) sought feedback on the following questions in relation to the LGPS:

• "To what extent has LGPS asset pooling been successful, including specific models of pooling, with respect to delivering improved long-term risk-adjusted returns and capacity to invest in a wider range of asset classes?"
• "What is the potential for a more consolidated LGPS and workplace DC market, combined with an increased focus on net investment returns (rather than costs), to increase net investment in UK asset classes such as unlisted and listed equity and infrastructure, and the potential impacts of such an increase on UK growth?"
• "What are the main factors behind changing patterns of UK pension fund investment in UK asset classes (including UK-listed equities), such as past and predicted asset price performance and cost factors?"
• "Is there a case for establishing additional incentives or requirements aimed at raising the portfolio allocations of … LGPS funds to UK assets or particular UK asset classes, taking into account the priorities of the review to improve saver outcomes and boost UK growth? In addition, for the LGPS, there are options to support and incentivise investment in local communities contributing to local and regional growth. What are the options for those incentives and requirements and what are their relative merits and predicted effectiveness?"

The document notes that asset pooling policy in the LGPS in England and Wales was consulted on in 2023 and confirms that, as part of the current review, the government "will engage extensively on next steps with regard to LGPS consolidation, with funds, pools and representative groups including the LGA and trade unions."