Editorial: On Monday George Osborne announced the creation of six British Wealth Funds, into which our 89 local government pension schemes' assets will be pooled. Quite what this verb entails is still up for debate.
One consultant in our initial coveragesaid the pooling of assets would not necessarily mean all those LGPS funds would cease to exist.
But if the idea behind any sort of tie-up is to save costs, you could struggle to argue that the continued administration of 89 schemes, in addition to the six new wealth funds, would not feature in the government's longer-term plan.
Local authority schemes currently invest half a per cent of their assets in infrastructure, a fraction of the circa 8 per cent seen in some countries, we are told, so a drive to change this seems sensible.
But there are still many points of contention that have yet to be clarified.
First, how will the regions be carved up? The six funds could comprise England's compass points plus Wales and Scotland, but as yet we don't know.
Illustration by Ben Jennings
Would this affect existing partnerships between schemes that aren't next-door neighbours?
And would any new infrastructure projects that span two or more regions be funded by them equally, or would their spend depend on what proportion of, say, a new train line ran through the local manor?
There are also concerns around schemes' hands being forced on investing. Who has the final decision on how schemes invest in the asset class? After all, you can take a horse to a water treatment facility, but you can't make it drink.
Many pension funds have been cautious on infrastructure due to how its risk profile fits in with their wider portfolios. This is perhaps evident from the shortfall on the Pensions Infrastructure Platform's initial fundraising target.
While some of these concerns may be addressed by Osborne's wider infrastructure policy, it must still be trustees' decision as to whether a particular project will harness the right return at an appropriate level of risk.
In Osborne's wider bid to empower the regions, the wealth funds and their local authority schemes could end up being swayed and nudged by other local interests as well as government.
Hopefully schemes will ultimately have the power to say no to projects if they don't feel it's right for their members, but any sort of obligated investing risks the government turning into a kind of puppeteer fiduciary.
Maxine Kelly is editor at Pensions Expert. You can follow her on Twitter @MaxineEK and the team @pensions_expert
