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Northern Trust and London Councils pioneer tax-transparent pooled fund for pension schemes

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London’s boroughs and the City of London, collaborating through London Councils, have worked with Northern Trust (Nasdaq: NTRS) to ensure that London’s local government pensions funds are the first of 101 local government schemes in the United Kingdom to establish a tax-transparent pooled fund.

The collective investment vehicle, an Authorised Contractual Scheme structured as a co-ownership arrangement (ACS) and the first of its kind for the UK pensions industry, will enable London boroughs to achieve economies of scale, provide a platform for significant cost savings, and enable access to opportunities for investment in alternative asset classes that may not have previously been easily achievable for individual funds.

Mayor Jules Pipe, Chair of London Councils, says: “We are excited to be at the forefront of evolution in the local government pension scheme (LGPS) landscape. The collective investment vehicle demonstrates London local government’s commitment to efficiency and value for money. Appointing Northern Trust to support us in this venture is a key milestone and their proven expertise in asset pooling and significant experience across the sector will be very valuable.”

Penelope Biggs, head of the Institutional Investor Group for Europe, Middle East and Africa at Northern Trust, says: “We are extremely proud to support London Councils as they embark on this exciting journey, raising the bar for innovation in LGPS. As market leaders in the LGPS, providing services to over a third of the UK market, we recognise the commercial pressure our clients are facing and are leading the way to help them become more efficient and cost effective. We have extensive experience providing asset pooling solutions and offered London Councils insights and guidance on how to unlock the financial and administrative potential of the ACS.”

An ACS is a Financial Conduct Authority regulated tax-transparent fund domiciled in the UK. Enacted into UK regulation in June 2013, the ACS aligns the UK investment funds regime with other European jurisdictions offering tax-transparent pooling vehicles. The ACS provides tax efficiency by allowing investors to preserve their own withholding tax status in relation to the investments made by the fund. This can offer withholding tax benefits for tax treaty advantaged investors when comparing equivalent investments through traditional funds. In addition to supporting this innovative fund structure for London Councils, Northern Trust will also provide global custody, fund administration, depositary services, transfer agency and financial reporting services for the ACS.

Northern Trust offers an extensive range of services to more than 150 UK pension schemes, including over 37 percent of the total LGPS market and 30 percent of the top 100 UK funds. Northern Trust is a pioneer in cross-border pooling and was the first custodian to fully support tax-transparent funds created to pool the assets of institutional investors with multiple tax rates, investing in multiple jurisdictions.

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