Northumberland County Council Pension Fund and Tyne and Wear Pension Fund, both based in South Shields, England, will begin to merge April 1 in an effort to save costs, under a proposal by the U.K. government.
Combining the two local government pension scheme funds would save between 10% and 12% per year in administrative and governance costs in total. The costs associated with the merger are expected to be offset by savings in up to three years.
The Northumberland and Tyne and Wear pension funds are members of the £45 billion Border to Coast Pensions Partnership pool, Leeds, England, but have yet to pool their assets.
The proposed merger is also expected to enable the Northumberland fund – one of the smallest of the U.K. local authority pension funds with £1.4 billion ($1.8 billion) as of March 31 – to transfer a greater proportion of its assets to Border to Coast Pensions Partnership, Leeds, England, than would have been the case without the merger, the government's document said.
The costs of moving assets to the pool will be minimized by the merger, according to Mercer, the investment consultant to Northumberland. The Northumberland fund's member employers could collectively save £500,000 per year.
The Tyne and Wear fund's assets were £8.8 billion as of March 31. As of the same date, Tyne and Wear had a funding ratio of 106%, while Northumberland was 99% funded.
The funds expect to move half of the newly merged assets under the Border to Coast's management by March 31, 2023, and 60% by March 31, 2025. Details on the type of assets to move could not be learned.
The government is seeking feedback on the proposal from employers that participate in the local authority pension funds until May 1.