30.11.17
Transport giant becomes first to consolidate LGPS assets under one £1bn pot
A major transport operator has become the first private sector employers to consolidate its funds within the Local Government Pension Scheme (LGPS) in a landmark £1bn decision.
FirstGroup, which operates bus and train services across the country, has successfully consolidated its pension schemes’ assets within the LGPS, a move which will involve a £700m asset transfer from two English LGPS funds (West Yorkshire and South Yorkshire) into the Greater Manchester Pension Fund to form a major £1bn cash pot.
The decision will bring FirstGroup’s three English LGPS funds under one single administrating authority in an attempt to drive down costs and align the funding and investment strategies across the schemes.
It is also in line with the government’s ambition to spur efficiencies across the pension landscape by merging the country’s many LGPS funds. Former chancellor George Osborne was a major advocate for this, announcing in 2015 that the government would work with councils to create just a dozen ‘wealth funds’ spread across the country instead of keeping 89 different pension funds.
Richard Murray, group head of pensions at FirstGroup, said: “Initially we thought that a consolidation within the LGPS would only be possible for public sector employers, but working together with Hymans Robertson, we made a case for FirstGroup, as a private sector employer to do the same.
“FirstGroup has a longstanding relationship with all three LGPS Funds and worked closely with them and their advisers to achieve this consolidation. Through the process we received support from all our stakeholders and this culminated in approval by the secretary of state.
“The success of this consolidation is in no small part a result of these great working relationships.”
The consolidation will allow the company to better manage risks across its LGPS schemes, Murray added, thus giving it “greater control over investment strategy” and “an improved balance sheet.”
Cllr Kieran Quinn, chair of the Greater Manchester Pension Fund and executive leader of Tameside MBC, who wrote two articles for PSE about the changing landscape of the LGPS in August and December last year, also commented: “Greater Manchester Pension Fund is proud once again to be chosen as the fund of choice for both the workforce and employers.
“We continue to drive forward and innovate with our stakeholders to provide sustainable and affordable pensions for workers who deliver vital public services, such as public transport, which keep the economy of this country moving.”