First Contracts Awarded Under the Global Custody Services Framework

The first contracts have been awarded under the new National LGPS Framework for Global Custody Services.

 

The Norfolk, Suffolk and Hackney Pension Funds conducted a joint call-off exercise and appointed HSBC Securities to provide custody from October of this year.

 

The 3 LGPS Funds (with combined assets of £5.2bn) chose to work together, using the LGPS Custodian framework for the procurement, to ensure an efficient and effective procurement exercise and also to achieve the greatest overall value for money through leveraging the aggregate size of the Funds.

 

The Funds worked together to define their particular service requirements, to evaluate the responses and agree a single successful provider. Each then contracted separately with HSBC Securities.

 

The National LGPS Framework for Custody Services is fully OJEU compliant, meaning that LGPS Funds using the framework to appoint a provider only have to undertake ‘further competition’ rather than a full OJEU procurement exercise. Timescales are cut from 6-9 months to a matter of weeks as a result. Common Terms and Conditions  were agreed by all parties as part of the framework – no mean feat in this arena -  removing the need for specialist legal advice and negotiation for each separate procurement. Funds using the framework also benefit from ceiling prices (providers mustn’t bid above these in response to tenders) and access to Mercer Sentinel’s technical analysis of capability to help match local requirements. As value of business through the framework increases there is also provision for volume based rebates to Funds, further leveraging the purchasing power of LGPS Funds combined assets.

 

Over the lifetime of the contracts Hackney, Suffolk and Norfolk estimate benefits across the 3 funds to be in the region of £1.25m. Add to this the £.25m savings in procurement costs alone and overall the 3 LGPS Funds will benefit by £1.5m as a result of working together and using the framework.

 

 ‘Working together has delivered a great value for money outcome for each of our Funds, but wider benefits for each of us also as we shared our ideas and experience to help identify the right solution for each of us.’ Jill Davy, Head of Financial Services at the London Borough of Hackney.

 

‘HSBC Securities offers us competitive and transparent pricing together with a comprehensive custody and reporting solution and strong relationship support which will help each of us move forward in terms of efficiency and performance.’ Glenn Cossey, Chief Investment Officer, Norfolk Pension Fund.

 

‘Using the National LGPS Framework for this procurement has saved each Fund significant time and money at a time when both these commodities are extremely precious! Our timescales were cut from months to weeks, Terms and Conditions had already been agreed and we were supported by Mercer Sentinels technical analysis. This meant that we were able to just focus on identifying the right partner for our Funds.’ Sharon Tan, Specialist Accountant (Pensions), Suffolk Pension Fund.

 

The National LGPS Procurement Frameworks offer all LGPS Funds a fast, effective and efficient way of accessing services in line with the OJEU regulations for public procurement, allowing Funds to leverage the LGPS’s combined buying power whilst still supporting local service requirements, decision making and accountability.

National LGPS Frameworks are currently in place for the procurement of Actuarial and Benefit Consultancy, Investment Consultancy as well as Global Custodians and a framework for Legal Advice is due to come on line later in the year.

 

The National LGPS Frameworks - ‘’by the LGPS, for the LGPS’ – are the outcome of a collaborative project between a number of LGPS Funds, with all benefits and savings being retained within the LGPS. They deliver benefits not only for Funds but also for bidders who benefit from a streamlined and consistent procurement process.

 

‘It is hard work to set up and manage these frameworks and requires huge dedication from the Funds and professionals who give their time and expertise to establish and help manage them.  As Lord Hutton envisaged, this is real collaboration in action, already delivering real and significant savings and benefits for the LGPS today. The achieved and potential savings are very significant – based on evidence from the Custody framework alone, as participation matures and grows, the LGPS could collectively benefit by more than £50m. These frameworks are still in their relative infancy and have a lot more to offer, but they’ve already proved the concept and are transforming the marketplace, potentially with implications wider than the LGPS’. Nicola Mark, Head of the Norfolk Pension Fund and Chair of the National LGPS Frameworks collaboration.

 

If you would like any further information on the National LGPS Frameworks please call 01603 495922 or email nationallgpsframeworks@norfolk.gov.uk.