Access, one of eight Local Government Pension Scheme investment pools, has identified building a vehicle authorised by the Financial Conduct Authority as the best option moving forward. Merging with another pool would be almost twice as expensive, it found.

Responding to the government’s ‘Fit for the future’ consultation on further LGPS consolidation, the pool said that Access undertook “a detailed evidence-led exploration of the options” which included a build model by setting up a new investment company regulated by the Financial Conduct Authority, as well as seeking detailed responses from other pools on possible mergers.

The consultation issued last November proposed that all LGPS pools would be required to be an FCA-authorised company.

“There is no doubt that converting Access to a build model, setting up a new investment company as the basis of continuing the Access journey, is by far the best option,” said Cllr Mark Kemp-Gee, who represents Hampshire and chairs the Access Joint Committee. “This approach works culturally and is easily the most financially prudent and least expensive option. It also delivers additional benefits such as capacity to assess and manage local investment opportunities.”

Kemp-Gee added that “having taken the best advice, we are convinced the change to an FCA-regulated build model is achievable in the timeframe”.

The option has been unanimously approved by the Joint Committee, chief finance officers and pension fund officers, the £50bn pool said. The decision was based on criteria of governance and oversight, products and services, costs and value for money, timeline, and risk.

Building an FCA-authorised firm avoids the complexities of merging with others and creating pools with even greater numbers of partner funds, Access said, arguing that it will allow the pool to keep its investment management approach.

The pool said that even after the costs of the scheduled sub-fund review, building a new company avoids the highest transaction costs, while merging with an established pool could cost “nearly double” the build option in one-off expenses, amounting to “multiple tens of millions of pounds”.

To further reduce costs, Access plans to develop in-house asset management capabilities. Director of the Access Support Unit Kevin McDonald said the pool intends to have this but stressed that in-house management is “not a day one requirement” and will not be in place by March 2026. The pool plans also to be able to provide principal investment advice to its partner funds and appropriately source this, he said.

In terms of timescales, “the build option is demanding but deliverable” according to Access. McDonald said the pool had started the process of creating an FCA company early because the government’s timeline would otherwise be too tight to implement this option.

The pool suggested mergers would take even longer than building a new company, noting that private sector M&A activity can take a year or more to agree terms before they come to a shareholder vote.

Access was one of the LGPS pools that were not already operating through an FCA-authorised investment vehicle, along with the Northern LGPS and Wales Pension Partnership. Access and Wales have so far used Waystone as their outsourced ACS operator. Access tendered its contract in March 2024 but has not said if anyone was appointed, while Wales reappointed Waystone last summer. The ACS operator is responsible for the selection and monitoring of asset managers, with the LGPS funds providing input around their needs.   
   

   

   

The funds participating in Access are from the councils of Cambridge, East Sussex, Essex, Hampshire, Hertfordshire, Isle of Wight, Kent, Norfolk, Suffolk, West Northamptonshire and West Sussex.
 

 

 

Will Northern and Wales end up falling in line or do you expect there to be exceptions to the government’s requirements?