John Bannister, professional trustee at Capital Cranfield Trustees (speaking in a personal capacity): There are so many to pick from – government elections across the world; new TPR guidance (including DB Funding Code and ESOG); pensions dashboards; Mansion House speech; proposed inheritance tax on pensions; CDC; new entrants into buy-in market, and a further deal by Clara. If I had to pick one, though, I’d go with the developing run-on strategies which could be used to enhance DB members benefits and/or benefit the next generation DC/CDC members. 

 

Neil Mason, LGPS senior officer, Surrey Pension Fund: The election and the new government’s pension review. 

 

Matt Jones, professional trustee at Capital Cranfield Trustees (speaking in a personal capacity): Much has been heard and said about the UK government's push to consolidate the Local Government Pension Scheme megafunds. But in reality, there isn’t any actual consolidation at the fund level. A missed opportunity or just a recognition that this was a bridge too far? The whole concept of pooling has been a bit of a rollercoaster. It's taken on various forms, with mixed success. For years, funds and pools have been practically begging the government for clarity on what pooling should achieve and to shift the focus away from just cost-cutting. Well, the government's finally put their foot down and clarified what a successful pooling company should look like and how it should work with its partners. Now, it's on the funds to rally behind this vision and let their pools deliver the goods. It's like being handed a clear game plan – now it's time to execute it. 

 

  

 

Bannister: While I would like to give a strategic answer, for most schemes it will be managing the increased governance burden, data work and adviser/insurer resource constraints. The practical wind-down of illiquid assets will also be a very real challenge for those schemes seeking to transact with an insurer. 

 

Mason: How to align strategic objectives with the drive to support UK plc. 

 

Jones: Execution is definitely not going to be a walk in the park. The world of LGPS moves at its own pace and isn't exactly built for rapid, dramatic changes. For those pools that didn't set up as FCA-regulated pool companies, it's pretty much back to the drawing board – their current approach will need to be thrown away and reimagined from scratch. Now, the big question is: should these pools start from square one, or should they team up with other pools that already have the FCA-regulated infrastructure in place? These discussions are already in full swing, and some pools are crystal clear about their growth ambitions and are ready to forge ahead. 

  

 

 

Bannister: Changing government macro and pensions policies and fall-out from conflicts. For example, delays in environmental policies, protectionism, supply trade/natural resource shocks or the government deciding the UK pensions industry has broad shoulders to support current public spending financing needs. Most DB pension schemes are protected from many of the market implications due to diversification of investments and largely derisked portfolios. Scenario planning is likely to be more prevalent as a risk-mitigation tool rather than simply considering VAR analysis. 

 

Mason: The impact of the Trump administration on the global economic system; inflation, climate change policy, international contagion. 

 

Jones: Now that the LGPS surplus is part of the government's measure of the nation's finances, it's going to be under a lot more scrutiny than ever before. The government's using this surplus to create greater fiscal headroom, but they need to recognise this can go both ways. Suddenly, there's a huge stake for the government in keeping the LGPS in surplus. What does this mean? Well, there's likely to be more pressure on funds to derisk, which runs counter to the broader goals of stimulating growth in the UK economy and maintaining a long-term investment strategy suitable for open funds. It's a bit of a tightrope walk – another issue for hard-pressed officers and committees to consider. 

 

  

 

Bannister: The rise of the professional trustee will continue, with increased regulatory oversight. AI will continue to support the administration resource challenges. 

 

Mason: The LGPS will change fundamentally, with the role of Local Authority pension funds focusing on high level strategy, with a possibility asset pool providers implementing this. 

 

Jones: When it comes to LGPS investment, there are a lot of stakeholders in the mix. With £1.7bn in annual investment management fees in 2022-23 according to the LGPS’s latest report, you get a sense of the scale and the interests at play. Each stakeholder has their own perspective and wants to influence the direction of the consultation to serve their ends.  

But if the government stays the course – which seems likely – we'll see a significant shift in how funds operate, right from the committee level down through every single layer of operation. The real challenge for each fund and pool will be to set out clear objectives on how they're going to deliver the government's vision, without getting bogged down in their current state. It's all about having clear and aligned objectives – that's the key to success, and something that's been missing in pooling so far. This alignment will be crucial to navigating the changes and making sure everyone is on the same page. 

 

  

 

Bannister: My hope is that pensions and savings are encouraged rather than raided by the UK government and that cross-party consensus is reached on how to fund the state 

pension and auto-enrolment of the future. Closer to the real world: a focus on members. 

 

Mason: Continued improvement in governance, a digital transformation to improve member outcomes, the continuation of government focus on the pension industry. 

 

Jones: With significant changes on the horizon for LGPS funds, it makes sense that the government is focusing on the governance of pension committees. In local government, high turnover of committee members leads to a loss of ‘corporate memory' and a constant need for training and upskilling. Many funds have independent advisers who support committees in various capacities.  

In the new world of pooling, where pools have more discretion on implementation, the big question becomes: who oversees the overseers? It’s crucial to understand that pool companies, being client-owned, are different from external managers but still require oversight. This oversight should not create additional layers of governance. Private sector pension schemes have set an example with the move to fiduciary management and outsourced chief investment officer in the past decade, from which the LGPS can learn. Appointing qualified and accredited professional trustees to funds could bring valuable experience and help address these governance challenges.