ACCESS: READY FOR CHANGE

Response of ACCESS to the government’s consultation:

Local Government Pension Scheme (LGPS): Fit for the future

Monday 3 March 2025

The ACCESS LGPS Pool released a statement following final agreement on its response to the government’s consultation paper Local Government Pension Scheme: Fit for the Future, published in November 2024.

ACCESS welcomes the opportunity from Government to allow pools to explore options that bring forward ambitious proposals for the future.

ACCESS officers and councillors have worked extensively over recent months to exhaust all options to best comply with the spirit and letter of the government’s expectations.

ACCESS undertook a detailed evidence-led exploration of the options, from creating a build model, regulated by the Financial Conduct Authority (FCA), by setting up a new investment company; to seeking detailed responses to an extensive questionnaire from other pools on possible mergers. This analysis was conducted using a range of criteria – including governance and oversight, products and services, costs and value for money, timeline and risk. In carrying out this work we consulted many experts on the LGPS, including companies such as Alpha FMC who advised other pools on their models.

Following this option appraisal, it was the Joint Committee’s unanimous view that the build model was the most appropriate proposal to Government for ACCESS. This option continues the development of ACCESS and enables our future to build upon the strong foundations our pool has already created.

A proposal on this basis avoids the complexities of merging with others and creating pools with even greater numbers of partner funds and maintains ACCESS’ “best in market” investment management approach.

Crucially, it is also the solution that is the least expensive option to meet HMG’s criteria; even after the costs of the scheduled sub-fund review, it avoids the highest transaction costs. Merging with an established pool, for example, could cost nearly double the ACCESS build option in one-off expenses, amounting to multiple tens of millions of pounds.

ACCESS has ambitious plans, including developing “in-house” portfolio management capabilities that will enable the pool to further reduce external costs that already compare strongly with other mega-funds.

All options examined present challenges in relation to timescales.  The build option is demanding but deliverable. By necessity, merge options require the participation of multiple parties and it is noted that private sector mergers and acquisitions (M&A) activity often take over one year to agree terms before shareholders review and vote.

ACCESS is not starting from a blank sheet of paper but will leverage the existing infrastructure we have built up over the past seven years. This enables ACCESS to move at pace, with a credible plan to enable us to meet the timeline set for the new minimum standards and be imaginative in our views for the future. This will involve doing our part for the UK growth, reviewing where internal management could best be used and collaborating with our fellow Pools. The build model delivers the optimum solution    for the 1.2m members that ACCESS represents and has been unanimously approved by the Joint Committee, Chief Finance Officers and Pension Fund officers.

Chair of the ACCESS Joint Committee, Cllr Mark Kemp-Gee said:

“As we said in December, ACCESS notes the Mansion House speech and the chancellor’s proposals for consultation. We are already a “megafund” having recently passed the crucial £50bn AUM mark.

“That said we have thoroughly explored all options available to best meet the government’s priorities. 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. 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.

“The timetable set by the government is challenging; but having taken the best advice, we are convinced the change to an FCA-regulated build model is achievable in the timeframe.

“My fellow Pension Committee Chairs represented on the Joint Committee are encouraged by the work already in progress and look forward to working on a collective basis, towards the next stage of our Pool’s development”.