Agenda item

A report on Pooling was presented to the Committee, the purpose of which was to advise Members of developments made and planned by Border to Coast Pension Partnership in response to the Government’s Fit for the Future consultation.

Teesside Pension Fund were one of eleven members of Border to Coast Pension Partnership which was formed in 2017 following the government requirement for LGPS Pension Funds to form pooled structure manage Pension Fund assets.

The Government was taking forward a series of changes to the way investment pooling in the LGPS worked through its “Fit for the Future” consultation. Changes included Administration Authorities delegating implementation of investment strategy to the pool and taking their principal investment advice from them. Management of all assets would also be transferred to the pool.

The “Fit for the Future” consultation had introduced a further change in the relationship between Partner Funds and the pooling companies. Pooling companies were to become the principal source of strategic investment advice to Partner Funds. Pools would determine most of the investments made by the Fund based on the Strategic Asset Allocation set by the Partner Funds.

The changes to the LGPS would be brought in through the Pensions Schemes Bill currently making its way through parliament with many of the detailed measures being subject to regulation and guidance which MHCLG had been consulting upon.

The Fund would have to be clear in its Investment Strategy Statement incorporating its Strategic Asset Allocation and including Investment Beliefs and its approach to local investments. The Investment Strategy Statement would inform Border to Coast of the preferred investments of the Fund. Border to Coast would then implement the Investment Strategy deciding the investments to make.

It was highlighted that Teesside Pension Fund would need to consider its own approach to local investment after consultation with local authorities and Tees Valley Combined Authority on their local Growth Plans. Teesside Pension Fund would need to consider its own definition of “local”, and consider whether it wanted to work with other Partner Funds on a regional approach to investment.

The current proposal for a pilot project was for a regional investment covering the Tyne and Wear, Durham and potentially the Teesside Pension Fund area. It had been identified that real estate was the most likely asset class to achieve a quick deployment of capital to test Border to Coast’s frameworks and capabilities. A Local Investment Pilot would involve Border to Coast working with the selected Partner Fund(s) through an iterative process to define investment objectives and local investment requirements ahead of the launch of their local investment strategy in April 2026. This iterative process would also play an important role in enabling the Alternatives team to refine the frameworks and processes necessary to roll out a Local Investment capability to all Partner Funds.

It was not expected that all of the developments would be in place for 1st April 2026 but Border to Coast were building up their capabilities to be able to meet the new requirements. Many of the changes would be implemented in an incremental way building upon existing arrangements.

It was noted in the report that Teesside Pension Fund was likely to be required to align its Local Investment Plan to the Tees Valley Combined Authority Local Growth Plan to meet the requirements of legislation and guidance currently making progress through the parliamentary processes.

At this point in the meeting Councillors J Beall, D Branson and D McCabe declared a disclosable personal interest as Members of the Tees Valley Combined Authority Overview and Scrutiny Committee. They confirmed that good governance arrangements were a priority for the Overview and Scrutiny Committee.

Members noted the importance of having strong governance in place and the Head of Pensions Governance and Investments added that the Pilot would test whether the correct governance was in place.

Members also queried how the Teesside Pension Fund Committee would have influence on local investment and how the level of investment would be shared between the three areas in the Pilot.

It was confirmed that the Committee would influence through the Strategic Asset Allocation and Funding Strategy Statement. The Pilot was a regional proposition, mainly led to test capabilities for Border to Coast. Border to Coast Investment managers would inform where investment opportunities were and it would be dependent on what was available upon market testing.

ORDERED that the information provided was received and noted.