London councils are currently in discussion for the implementation of a single 'super' fund model that would pool together the 34 separate pension schemes in the city in order to reduce admin costs and boost investment in local infrastructure, it has been revealed today.

According to an article in the Financial Times, the merger could potentially divert more than £2bn towards infrastructure projects and would reduce costs as there would not be a vast array of fund managers to pay for in scheme fees like under the current scenario.

Reaction to this proposition is mixed however. CBI chief policy director Katja Hall said: “These discussions are a welcome move, as pooling local government pension funds would not just reduce administrative costs, it would also inject some much-needed investment into Britain’s ageing infrastructure, which is crying out for capital.

“Pension funds are natural investors in infrastructure and will want to invest in projects that are designed to give returns, so we now need to see other public sector funds coming forward in this way.”

DLA Piper’s pensions partner Tamara Calvert expressed some concerns surrounding the move, especially within the funding sphere.

“There will be some difficult governance and investment issues to overcome before this could ever become a reality. In particular some funds are better funded than others and this would somehow need to be addressed before the funds could merge to prevent dilution of the stronger funds by the weaker funds.

“Investment is also a big issue as each fund will have potentially very different investment strategies, all of which would have to be aligned within the newly created single fund,” she added.

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