Lancashire County Pension Fund Committee (LCPF) and the London Pensions Fund Authority Board (LPFA) have formed a £10bn ($15.5bn) asset liability management partnership.

The partnership, which will be known as the Lancashire and London Pensions Partnership (LLPP) initially, will cover all aspects of pension fund management and be a "fully-fledged pension service organisation".

“We are excited to have taken this unprecedented step of pooling two of the largest pension funds in local government. It is our joint aim to significantly reduce the funds’ combined costs," said Susan Martin, chief executive of the LPFA.

The LLPP will provide both jointly managed administration and pooled asset and liability management activities through newly created corporate structures. 

The funds estimate that this could cut costs by over £32m within five years, which it is hoped will help reduce respective deficits.

The formation of the LLPP will also result in access to different types and a greater amount of direct investments and more effective liability management.

George Graham, director of the Lancashire County Pension Fund, said that the partnership was the result of careful consideration by both the LPFA board and the LCPF committee.

" presents an exciting opportunity that could assist in developing an alternative LGPS model," he said. 

"The partnership will build on the existing expertise across all locations and increase co-operation and collaboration across all aspects of the pension funds, under a strong governance framework. We aim to provide industry-leading standards of administration and so provide our members and employers with efficient and cost effective services.”

Both funds will continue to maintain their local accountability with LCPF pension committee and LPFA board maintaining control of key strategic decisions.