Six Custodians Awarded Contracts Under Local Govt. Pension Scheme Framework

Six custodians have been awarded contracts to provide services under a local government pension scheme framework for these services in the U.K.

The contracts were awarded to BNP Paribas Securities Services, BNY Mellon, HSBC Securities Services, J.P. Morgan, Northern Trust and State Street.

The soon to be launched custody procurement framework is one of several frameworks being run by the National Local Government Pension Scheme (LGPS) Frameworks, a group of LGPS Funds collaborating to jointly undertake the procurement and due diligence to establish frameworks. The schemes under the National LGPS Frameworks banner include Buckinghamshire, Cambridgeshire, Lincolnshire, Northamptonshire, Norfolk, Suffolk and the London Boroughs of Croydon and Hackney.

The National LGPS Frameworks are a result of collaboration between a number of LGPS Funds, which has already produced National LGPS Frameworks for the procurement of Actuarial and Benefit Consultancy Services and Investment Consultancy Services.

The new National LGPS Framework for Global Custody Services will be open for business by mid November.

Any LGPS Fund can use the framework to procure global custody services matched to their own specific requirements. A press release from the National LGPS Frameworks says all participating funds will benefit from the pre-agreed Terms and Conditions and ceiling prices established under the framework, along with a collaborative rebate. Following on from the success of previous National LGPS Frameworks, this framework has been eagerly awaited across the LGPS, with a number of Funds expected to call-off in the first few months.

The multi-user, multi-provider frameworks are open to all LGPS Funds nationally for the procurement of services from a range of qualified providers. The frameworks allow quicker and more efficient access to services by removing the need for each LGPS Fund to independently undertake a full European Union (OJEU) procurement, says National LGPS Frameworks. “They enable LGPS Funds to leverage better prices while crucially still supporting local decision making and service requirements.”

Procurement, legal and project management support has been provided by specialists from Norfolk County Council and the Norfolk Pension Fund.

Mercer Sentinel has provided technical advice for the National LGPS Framework for Global Custody Services.

The UK LGPS market has 102 funds and a collective £180bn in assets under management. In addition to the several schemes that are currently part of the framework, about 30 have expressed an interest already.

“We think this is an excellent development for the UK LGPS industry. We anticipate a number of funds will call-off the framework benefiting from the commercial, legal and service terms already agreed with the six selected custodians whilst still being able to agree upon individual requirements,” says Annalisa Winge Bicknell, head of sales and relationship management for institutional investors at BNP Paribas Securities Services UK.

This new framework allows BNP Paribas to accelerate its progress in an industry that has been dominated so far by a few players. Last month, BNP Paribas Securities Services announced that it had won a mandate to provide global custody and valuation reporting services to Oxfordshire County Council’s pension fund. “There is significant momentum building behind our business and we feel that we offer UK pension funds a strong proposition based on asset safety, a wide range of custody and fund services and superior client service. In recent months, we have on-boarded two major LGPS pension funds,” says Bicknell.

Bicknell adds that the fee criteria are not going to change as a result of the framework. “We will abide by delivering value to our clients for a fee agreed between us and our clients,” she says.

The agreement also provides Northern Trust an opportunity to expand its market share, currently about 43%, of providing services to UK Local Government Pension Schemes.

“We are confident in our ability to continue to provide valuable services in support of LGPS under the new Framework Agreement,” says Douglas Gee, head of sales for UK pension funds.