Welsh pension funds plan to pool assets

10 Mar 17

Eight pension funds in Wales with a combined £15bn of assets are likely to pool investments by April next year.

Administrators of the funds must now sign a legally binding agreement setting out the governance arrangements for the pool, a report published by Flintshire Council states.

The move – already approved by the UK government – would mean the fund manager appointments would be delegated to a joint working arrangement.

“An advantage of this is that it will result in consolidation – with a smaller number of fund managers being required to meet the total requirements of all the individual strategies, therefore reducing investment management costs,” said the report released last week .

Flintshire Council is the administering authority of the Clwyd Pension Fund – one of the funds involved in the major exercise. It provides pension services to more than 40,000 people and manages assets of about £1.6bn.

The other funds are: Cardiff & the Vale; City and County of Swansea; Dyfed; Greater Gwent; Gwynedd; Powys; and Rhondda Cynon Taff.

A Welsh Local Government Association spokesman said: “There is broad agreement across councils in Wales with the proposals for the eight local government pension schemes funds to pool their investments.”

As well as reducing costs through joint governance arrangements, the arrangement will also allow the schemes’ administrators to share knowledge and best practice. 

“This will improve the management of investment risks and ultimately improve fund returns,” the WLGA stated.  

In developing the proposals, the pension funds have been working under a ‘memorandum of understanding’, which is not legally binding. To engage with an ‘Authorised Contractual Scheme Operator’ – which will invest the combined assets of the eight pension funds – they need to enter a legally binding Inter Authority Agreement (IAA).

This will set out the rights and obligations of the eight participating authorities as well as the powers and the responsibilities of a joint governance committee.

The fund administrators hope to appoint an ‘operator’ by the summer of this year and for it to hold assets from April next year.

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