LPPI total net cost savings hit £113m

23 November 2022

• LPPI annual net cost savings through pooling increased from £28.2m to £39.1m (in the year to 31 March 2022), while total savings since launch hit £113m
• LPPI also leads the sector on performance with an average annual return of 8% over five years
• LPPI has demonstrated that pooling works, achieving strong investment performance alongside these significant cost savings

Local Pensions Partnership Investments (“LPPI”) has increased its annual net cost savings by more than £10m per annum to £39.1m (in the year to 31 March 2022), as CEO Chris Rule calls on all parties to work together to achieve the goal of full pooling of assets.

The net costs LPPI has saved through pooling, and a focus on direct investments and internally-managed portfolios, increased from £28.2m to £39.1m, bringing cumulative savings up to £113m since its inception in 2016. The increase means LPPI has revised up projections and is now expecting to deliver net cost savings of more than £200m by 2025, more than £350m by 2030 and more than £500m by 2035.

The savings figures come as LPPI continues to deliver sector leading investment performance with an average annual return of 8% over five years to 31 March 2022, the highest of any pool according to the LAPPA report published by the PIRC.

The cost savings figures are reported to the Department for Levelling Up, Housing and Communities (DLUHC) annually. LPPI was the first LGPS pool to publicise its net cost savings. LPPI has pooled 100% of client fund assets, enabling access to attractive investments in a cost-effective manner, particularly in private markets, and increasing buying power to negotiate fund manager discounts.

Key drivers for the improvement in net cost savings include:

• Growing assets under management
• Lower fees negotiated with external managers
• A growing portfolio of direct investment to compliment allocations to external managers

LPPI is the FCA authorised and regulated investment management subsidiary of Local Pensions Partnership. LPPI invests the assets of Lancashire County Council, London Pensions Fund Authority and Royal County of Berkshire. LPPI operates pooled investment vehicles across seven asset classes and is increasingly bringing more investment management in-house to manage assets directly.

Chris Rule, CEO at LPPI and LPP Group, said:

“LGPS pension pooling was sparked by the belief that public pension funds working together can achieve greater scale to access improved opportunities for investment and create costs savings, whilst at the same time ensuring the future pensions for millions of workers across the country are secure and affordable. LPPI’s cost savings and performance demonstrate that pooling can and is working.”

“Understanding the impact that pools are having on LGPS pension portfolios is crucial in keeping the original pooling objectives alive and enabling further innovation and an acceleration to fully realise the benefits for which pooling was intended.

“We have successfully blended dedicated in-house specialist expertise, delegated implementation, and co-operation with like-minded investors to fully exploit the benefits of pooling. Our model has enabled our partner funds to continue to control their strategic investment activity, including determining their asset allocation, whilst also creating access to an aligned expert adviser with in-house implementation expertise at scale.”

“Across the LGPS there is much more to do, and I encourage all in the sector to work together to achieve the goal of full pooling of assets within the respective pools”

Source: Local Pensions Partnership