The government has launched an open consultation on the proposed merger of the Northumberland Pension Fund and the Tyne and Wear Pension Fund.

The six-week consultation will end on 1 May and is open to parties that may be affected by changes to the scheme regulations, such as employers that participate in the schemes.

Having worked closely in the past few years, the two local government pension schemes (LGPS) applied to the Secretary of State to merge in order to make further efficiency savings.

The proposal has the support of the pensions committees for Northumberland and Tyne and Wear Pension Funds, both local pension boards and the six principal local authorities that make up most of the membership of both funds.

According to documents from the Ministry of Housing, Communities & Local Government, it is estimated that merging the funds could generate savings of between 10 and 12 per cent per year.

Costs associated with the implementation and transition of combining the funds are likely to be offset within 1-3 years, while savings generated will mainly benefit the employers in the Northumberland fund, which is one of the smallest LGPS funds in England and Wales.

The documents added that these benefits could include “a 0.3 per cent reduction in the expense loading element of the contribution rate”, with “the saving for these employers is estimated to be around £0.5m per annum”.

As such, the implementation and transitional costs would be covered by the Northumberland fund.

Consultation documents from the Ministry of Housing, Communities & Local Government said: “Changes affecting the LGPS in the last decade have significantly increased the complexity of the LGPS, and therefore the specialisation, skills and volume of work required to administer it and provide a good service.

“It is a major challenge for LGPS funds, especially smaller ones, to provide a value for money service for their participating employers.”

The proposed date from which the merger will have effect is from 1 April 2020, which was chosen to tie in with the scheme year end, the actuarial valuation cycle and to avoid potential disruption which could be caused by local elections and changes to decision making bodies.

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