The Society of Pension Professionals (SPP) has raised concerns about fiduciary duties and the lack of a cost-benefit analysis in its response to the Department for Levelling Up, Housing and Communities (DLUHC’s) consultation on Local Government Pension Scheme (LGPS) asset pooling and investment.
According to SPP, the consultation document seems to overlook the significance of these duties, especially in the “Levelling Up and Private Equity” proposals and the integration of investment and risk management.
The SPP highlight that the Supreme Court’s ruling in 2020 Palestine Solidarity Campaign Limited, which clearly declared that LGPS authority assets are not deemed public funds, should be taken into account by the government. Additionally, the ‘targeted interventions’ that are being proposed might be in conflict with the LGPS funds’ fiduciary duty to choose investments that will allow them to meet their pension commitments.
The SPP is also concerned about the anticipated transfer of listed assets to LGPS pools by March 2025 due to the short timescales and the requirement to evaluate the fitness of the pool operator in light of competing priorities like the McCloud judgement implementation and pensions dashboard development.
The SPP also noted that passively managed assets might be mistakenly labelled as non-pooled based solely on their legal structure, such as insurance contracts, which could result in needless expenses like stamp duty and transition costs and undermine the business case for pooling. The lack of a cost-benefit analysis is also cited as a key factor in defending the policy suggestions, particularly in light of the considerable change from passive to active portfolios.
SPP Public Sector chair Clifford Sims says: “The proposals would fundamentally disrupt the good work that has been achieved since 2015, to achieve a balance between administering authorities and pool operators. The sovereignty of funds is paramount. Whatever merits there may be in supporting local investments or investing in private equity (which many LGPS funds have already shown they are willing to do), the idea that funds should be directed to help with levelling up and the Government’s own ambitions for UK-centric private equity, represents an attempt to usurp the power of investment for non-pensions purposes.”
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