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LPFA proposes partnership model for local government pensions

The London Pensions Fund Authority (LPFA) has proposed a ‘wider’ Asset & Liability Management (ALM) Partnership solution to deal with the issues raised by the government’s recent consultation on Local Government Pension Schemes (LGPS).

Sir Merrick Cockell, deputy chairman of the LPFA, has stated that the DCLG’s consultation – opportunities for collaboration, cost savings and efficiencies – rightly identifies the need for change, “but wrongly prescribes a narrow solution”.

It has been suggested that the single asset class proposal would create a new tier of entities and attendant bureaucracy without proper incentives to focus on the underlying liabilities.

LPFA has suggested that an ALM Partnership model should be adopted to reduce costs and give direct access to classes of investment like infrastructure and housing, which better match fund liabilities.

Cockell said: “This would increase the chance of maintaining stable contributions and eliminate deficits over time. Our model can happen within existing legislation and we are already working with like-minded funds to develop a partnership.”

LPFA’s ALM partnership model, if widely adopted, is expected to deliver the same economies of scale while ensuring the assets selected (listed and alternative) were chosen precisely for the consolidated liability set of the partners.

“This integrated approach to asset and liability management would retain local accountability and give scope to enhance and rationalise governance under new Pension Board arrangements,” Cockell added.


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