The Local Pensions Partnership (LPP)

We are delighted to confirm that the formation of the £10bn ALM Partnership with Lancashire County Pension Fund, has been finalised and the Local Pensions Partnership (LPP) was launched on 8 April.

The LPP will cover all aspects of pension fund management and be a fully-fledged pension service organisation, providing both jointly managed administration and pooled asset and liability management activities through newly created corporate structures.

Crucially, both Funds will continue to maintain their local accountability with LCPF Pension Committee and LPFA Board maintaining control of key strategic decisions. The formation of the LPP will result in fee reductions, access to different types and a greater amount of direct investments, cost reductions in administration and more effective liability management. 

We are excited to have taken this unprecedented step of pooling two of the largest pension funds in local government. It is our joint aim to significantly reduce the Funds’ combined costs – we estimate by over £32m within five years – and with the benefit of economies of scale, further reduce our respective deficits. Both the LPFA Board and the LCPF Committee have considered detailed proposals and have agreed that such a partnership would prove beneficial to both organisations, and presents an exciting opportunity that could assist in developing an alternative LGPS model.

The partnership will build on the existing expertise across all locations and increase co-operation and collaboration across all aspects of the pension funds, under a strong governance framework. We aim to provide industry-leading standards of administration and so provide our members and employers with efficient and cost-effective services. 

 

www.localpensionspartnership.org.uk

London Pensions Fund Authority will remain legally responsible under the Data Protection Act 1998 for member and employer data with LPP and LPFA staff processing the data on  behalf of members and employers.

 

LGPS Fund Pooling

On 1 May 2014, the government launched a consultation: Local Government Pension Scheme: Opportunities for collaboration, cost savings and efficiencies.

You can see our full response to the consultation here but in a nutshell.

The consultation rightly identifies the need for change, but wrongly prescribes a narrow solution. We believe that the single asset class CIV proposal would create a new tier of entities and attendant bureaucracy without proper incentives to focus on the underlying liabilities.

LPFA strongly believes an Asset & Liability Management (ALM) Partnership model would be the optimum structure with which to reduce costs and give direct access to classes of investment like infrastructure and housing which better match fund liabilities. 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.

The ALM partnership model, if widely adopted, would 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.

LPFA believe the long term interests of the LGPS will be best met by allowing Authorities to set up multi-asset, collective arrangements with strong internal management capabilities which best meet their investment needs based on their particular aggregate liability profile.

 



Will it affect me?

Why is this happening?

It has long been acknowledged that the two funds have a similar approach to dealing with the pension fund issues that they encounter; both work in similar ways and each will compliment the other with their approach to investment and pension administration issues. The partnership will provide an opportunity to build on existing expertise across both sites and increase co-operation and collaboration across all aspects of the organisation. Within the Local Government Pension Scheme (LGPS) Government is asking more and more funds to find ways of working together to provide efficiency savings and reduce costs where possible, the partnership is one of the ways that this can be done – by two like minded funds combining assets and their common approach to administration.

The LPP’s structure will also provide the benefit of investment scale and ensure that industry-leading standards of administration services and governance will be achieved. Going forward, it is planned that the LPP will significantly reduce the Funds’ combined investment costs by over £32m within five years and further eliminate respective deficits over time. This will mean that long-term employers will have a greater ability to control the cost aspect of the pension fund as it is they who have to ensure that the cost of the scheme are met and that pensions are paid when they become due.

What is happening with the Pension Fund/Scheme?

The Lancashire County Pension Fund (LCPF) and the London Pensions Fund Authority (LPFA) announced that they have now agreed the structure of a £10bn Asset Liability Management Partnership, which will initially be known as the Local Pensions Partnership (LPP).

Does this mean the pension fund is being taken over or being privatised?

Not at all, both funds will continue to maintain their local accountability with LCPF and LPFA maintaining control of key strategic decisions. The new body, LPP will be jointly owned by LCPF and LPFA.

I thought the benefits of the scheme were guaranteed anyway?

They are, but this means that an employer has to guarantee the benefits long in advance of them coming into payment and it can make the management of the pension promise difficult to forecast over time meaning that an employer may have to find additional financial resources at times when cash flows are limited or restricted, better financial forecasting will be achieved by the way in which LPP aims to operate.

So does this affect the benefits that pension scheme members will get?

Not at all, the benefits will remain as they are guaranteed by Statute.  The very nature of the LGPS as a public sector scheme ensures that all benefits are guaranteed and this will not and cannot be changed under the partnership arrangements, the only change will be the way in which the benefits are funded long term. The new arrangements will give more certainty to employers and provide a more efficient and cheaper way of investing the funds held.

Will we be told more about what is going on?

Yes, as the organisation and its structure is developed more information, when it is known will be made available via the usual channels including this website.



On-going Information

The Local Pensions Partnership (LPP) commenced operations on 8 April 2016. 



Actives

What is an active member?
This is someone who is actively contributing to the LGPS by virtue of their monthly or fortnightly contributions, which are deducted from their earnings by their employer. This is also someone who is a member but may be on extended leave of absence for reasons such as maternity/paternity/adoptive leave or extended periods of sickness not covered by sick pay.
 
As you may be aware or have read in the press recently, the pension fund to which you belong is exploring the possibility of forming a partnership with another Local Government Pension Scheme (LGPS) pension fund. The idea is that two funds could work more efficiently than one individual fund. Also where a common approach may exist, as it does with the two funds of Lancashire County and the London Pensions Fund Authority, it makes financial sense to combine assets in respect of potential investment returns and thus reduce the charges investment managers would charge for investing one single investment rather than two separate investments.
 
The LPP is a joint partnership owned 50:50 by Lancashire County Pension Fund and the London Pensions Fund Authority –The innovative £10bn Asset Liability Management Partnership, which will initially be known as the Local Pensions Partnership (LPP) is the first of its kind within the UK.
 
The LPP will cover all aspects of pension fund management and as such your pension will not be affected in any way, the benefits will still be guaranteed by the government and the way in which we calculate any benefits due to you or your dependents will still be covered by the rules and regulation of the LGPS.
 
Crucially, both Funds will continue to maintain their local accountability with Lancashire County Pension Committee and LPFA Board maintaining control of key strategic decisions, each with an even foothold.
 
The formation of the LPP will result in fee reductions, access to different types and a greater amount of direct investments for the funds which in turn will lead to cost reductions in administration and more effective liability management, which should hopefully bring down the deficit of the pension fund and help reduce the burden on employers long term.
 

We hope you will agree with us that this is a unique opportunity for your pension fund to set a new standard in the way in which the LGPS is run.

If you do have any questions that you would like us to answer these can be sent to us at our usual address, or by emailing the fund using communications@lpfa.org.uk

 
 
 

 

 



Deferreds

What is a Deferred Benefit/Member

This is when a member has a benefit relating to past service of a Local Government Pension Scheme (LGPS). The member is no longer a contributing member to the scheme, but a deferred member. The benefits are in respect of the earlier employment/membership of the LGPS and benefits have been calculated at the point the member left the scheme, but have not yet been put into payment due to the members age when they left the scheme.
 
This type of benefit is payable at retirement or earlier if the member dies.
 
Will my pension/benefit values be affected?
 
We will continue to look after your pension rights as we do currently.
The value of your basic pension will remain at the rate that it is and it will continue to attract the yearly increases as notified to you every April.
 
Will the date from which my pension/benefit is payable change because of the partnership?
 
The date/age at which your pension will become payable will not be affected by the formation of the Partnership.
 
 
Will I still have the same options and facilities that I do currently in relation to my benefits?
 
Yes - Nothing will change in relation to the make up and facilities offered to you as a deferred member.
 
Will I need to do anything?
 
Nothing is going to change in terms of the administration of your pension rights – We may, when the new organisation is fully formed, change logos or even the name of the organisation to more reflect the wider scope of The Local Pensions Partnership (LPP), but your pension will remain unaffected and will continue to be looked after by us.
 
Will I still have all the legal safeguards that are in place now?

Yes- the same rules and regulations will still apply, and the fact that the Local Pensions Partnership (LPP) will be carrying out investment business on behalf of LPFA and Lancashire, means we are putting in place ever more stringent controls and reporting requirements to ensure the highest standards are maintained and that full and proper accountability is in place.
 
Where do I find out more about this?
 
If you have any questions that are not answered here we’ll be providing further information as it becomes available but you can also write to us or ring us if you have any concerns or need any questions answered. You can ask us specific questions about the partnership by emailing us at communications@lpfa.org.uk


Pensioners

Pensioners
 
As a pensioner member of the Lancashire County Pension Fund or the London Pensions Fund Authority you may have seen that the Funds are due to enter into a formal partnership. The partnership will operate under a new organisation that will be called the Local Pensions Partnership (LPP). Your pension will not be affected by this partnership.
 
The Local Pensions Partnership (LPP) will cover all aspects of pension fund management and be a fully-fledged pension service organisation, providing both jointly managed administration and pooled asset and liability management activities through newly created corporate structures.
 
The aim of the partnership is to reduce investment fees, provide access to different types and a greater amount of direct investments, reduce cost for administration and provide greater asset/liability management.
 
It is important to note that both funds will continue to maintain their local accountability with Lancashire County Pension Fund Pension Committee and London Pensions Fund Authority Board maintaining control of key strategic decisions.
 
Will my pension be affected?
 
No not at all we will continue to pay your pension on the same date as we do currently, the value of your pension will remain at the rate that it is currently paid at and will continued to attract the yearly increases as notified to you every April.
 
Will my pay date change?
 
No - See the answer above for more information
 
Will I need to do anything?
 
No – nothing is going to change in terms of the pension that you receive – We may, when the new organisation is formed, change logos or even the name of the organisation to more reflect the wider scope of the Local Pensions Partnership (LPP), but your pension will remain unaffected.
 
Will I still have all the legal safeguards that are in place now?
 
Yes- the same rules and regulations will still apply, and the fact that the Local Pensions Partnership (LPP) will be carrying out investment business on behalf of LPFA and Lancashire, means we are putting in place ever more stringent controls and reporting requirements to ensure the highest standards are maintained and that full and proper accountability is in place.

Where do I find out more about this?
 
If you have any questions that are not answered here we’ll be providing further information as it becomes available but you can also write to us or ring us if you have any concerns or need any questions answered. You can also email us at communications@lpfa.org.uk