Local government pension funds need to work much closer together to close the estimated £50bn deficit across the 89 funds, a pensions expert has said.
Economist Ros Altmann told the London Pension Fund Authority's annual Fund Member Forum in London that collaboration and partnership could also help address the impact low interest rates and government debt yields are having on deficits.
The Department for Communities and Local Government has already set out plans to expand the use of common investment vehicles between funds.
Altman told the LPFA that such an approach was required.
'There is a real need for more creative investment solutions, for example, smaller funds coming together with larger funds to invest on a collective, active basis,' she said.
'This will bring benefits in diversification and economies of scale, as well as improved governance and greater expertise. It will also allow funds to access asset classes such as infrastructure, which deliver long-term returns that match pensions liabilities.'
Also speaking at the forum, LPFA deputy chair Sir Merrick Cockell said that the fund had urged government to enable LGPS funds to access all asset classes that provide the long-term returns that are the best match for liabilities.
Cockell, a former chair of the Local Government Association, said that the LPFA had 'sent this message very clearly to the government and is encouraging others to embrace this'.
Currently. LGPS funds face some limits on the amount they can invest in different classes of asset.