Merger of Lothian and Falkirk Pension Funds

How does the proposed merge impact pension fund members?

The Lothian Pension Fund (LPF) and Falkirk Pension Fund (FPF) are set to merge. In May 2022, the funds announced that they were exploring the possibility of merging. The local authorities are set to discuss the plans over the next few months, with the proposed merger touted for late 2023 or early 2024.

We asked LPF about the implications of the merger for our members. The full questions and answers are below.

In short, the merger does not change your pension contribution, nor will it change how much you will receive. There is no impact—positive or negative—on pension members. The reported benefit is a small reduction in employers’ contribution costs, efficiencies and the ability to access further investments. Whether these modest benefits—none of which benefit members—warrant the merger, rather than the likes of an joint working agreement, we will continue to explore.

If you have any questions or concerns please contact a branch official.

Questions and answers

1. How will the merger improve member benefits?

The potential merger will have no impact on a member’s pension benefits as they are protected by a statutory guarantee

Members are expected to benefit from improvements in service through greater investment in our colleagues and systems

Larger funds are generally more financially successful. This is one of the key drivers for our proposals, along with improved governance and operational resilience.

2. What will the effect of the merger be to member contributions (e.g. go up/down/stay same)?

3. As per the response to question 2, how long will this effect endure?

4. As per the response to question 2 (if increase or decrease), what will the outcome be in terms of percentage of pay/salary actually contributed (e.g. increase from 6.5% of pay to 7% of pay)?

For question 2,3 & 4 about the effect of on member of contributions, the response is the same for all.

There will no impact on member contribution as this is set out in legislation.

5. What will the effect be on pension fund staff terms and conditions?

For LPFE employees (being the employing entity of Lothian Pension Fund on behalf of CEC as the Administering Authority), there will no change to terms and conditions. If the merger goes ahead, colleagues may benefit from greater career development opportunities.

The proposed merger does include a TUPE process for affected employees at Falkirk Council. Both FC and LPFE Ltd have and will keep the relevant trade unions informed about the merger and TUPE. We have continued engagement with colleagues and affected staff will be consulted as per legal requirements.

6. Will there be any job losses (permanent, temporary, or other staff)?

There will be no job losses as a result of the merger.

7. Please explain the benefits of the merger to:

  1. a female part-time Cleaner aged 50 with 14 years’ service and wage of £12k pa;
  2. a male full-time Refuse Collector aged 36 with 10 years’ service and wage of £21k pa;
  3. a female full-time Early Years Assistant aged 23 with 2 years’ service and wage of £19k pa;
  4. a male full-time Vehicle Mechanic aged 59 with 42 years’ service and wage of £33k pa (rule of 85 applicable).

There will be no change to member’s pension benefits or contributions as these are protected by a statutory guarantee.

7. Will the merger make members’ pensions safer, put them more at risk or achieve the same level of risk as currently exists? (Please explain the thinking behind the response to this question and provide any evidence used to come to the conclusion.)

Substantially there will be no change. Members accrued benefits are protected in legislation. If an employer decided to leave the Fund, this would impact future benefits. However, we are not expecting the merger to have any effect on these decisions

The proposed merged fund will be more financially efficient, and all else equal, will result in a small saving to employer contributions. There will be no change in members contributions and this small impact is not expected to change any decisions that employers make about the Fund.

8. What consultation exercises have been undertaken with fund members (please provide details and outputs of these)?

There has been no formal consultation with members, but we have informed them about the proposed merger and will continue to provide updates at the appropriate times.

The proposals have been considered by both Pension Committees and Pension Boards who have a formal duty to act in the interests of all members and employers.

We announced the proposal to merge in May 2022 to members, employers, and the wider stakeholder community, asking for comments and questions. To date, we have not received any queries from individual scheme members.

9. What impact (e.g., equalities, environmental, economic) have been carried out to inform the merger (please provide details and reports)?

There will be no equality, environmental or economic impacts as a result of the merger, other than the direct operational financial savings. The financial savings arise primarily from a reduction in operating expenditure with third party suppliers. LPFE as the proposed employing entity has clear policies on equality. The proposed merged fund is expected to mirror the strong credentials and practices of FCPF and LPF as responsible investors.

10. What are the timescales for the merger?

Final approval for the merger is expected to be considered by the two administering authorities, City of Edinburgh Council and Falkirk Council, in quarter two of 2023. If agreed, the merger would be completed later in 2023 or early 2024.

11. The pension fund is currently governed by a Council Committee supported by a board made up of employer and employee representatives.  What type of governance is proposed in the merger and how will that improve on the status quo?

The details of the governance model are still being worked through; however, we currently intend and anticipate that:

  • a statutory LGPS Pension Board will continue, and will continue to have both union and employer representatives
  • the composition of the merged Fund’s governance body will be more representative of the breadth of members and employers than is currently permissible within the existing LPF
  • the appointment process will involve a skill and competence-based assessment and be for a specific term.

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