Lancashire County Pension Fund and the London Pensions Fund Authority have announced the first stage in the development of an asset and liability management partnership that would pool combined assets in excess of £10bn.

The partnership (under which each pension fund retains its separate identity and local accountability) could also ultimately cover all areas of activity involved in the running of the funds - including pension administration - and will put into practice the views expressed by both funds in their responses to central government on the reform of the Local Government Pension Scheme.

The central proposal is to create a commonly managed, jointly invested pool of assets overseen by an FCA-registered entity created by the two funds, which will provide the benefits of investment scale and ensure that industry-leading standards of governance are achieved and maintained.

Cllr Jennifer Mein, leader of Lancashire County Council said, “Taking a more proactive approach to managing the assets and liabilities of the Lancashire County Pension Fund has really paid off in recent years and this new partnership will enable us to build on the expertise we have developed. The government should be using the good practice of funds like our own and the London Pension Fund Authority to drive up the performance of the Local Government Pension Scheme, rather than dumbing down to the average.”

Edi Truell, chairman of the London Pensions Fund Authority added, “It is especially important to compete for desirable illiquid investments against the enormous international sovereign wealth funds and pension investors. We firmly believe that large scale asset and liability management partnerships are the best way to deal with the challenges faced by UK pension funds.”