LGPS GOVERNANCE REPORT AUGUST 2017

Investment Strategy in the best interests of Scheme Members

A Judicial Review brought by the Palestine Solidarity Campaign and a Unison Scheme member against the DCLG investment guidance has now removed the requirement to invest in the interests of UK government foreign and defence policy.

Furthermore the guidance was originally prescriptive in which asset classes and how much to be invested where. A particular insidious element was a direction not to invest or divest against national government interests, with powers given to the Secretary of State to intervene in investment decisions where those investments ran contrary to government policy.

Revised statutory guidance now issued  is more flexible allowing Funds to consider ‘social investments’ in addition to the financial return so long as there is no significant risk of detriment to pension benefits. The requirement to invest in government infra structure projects now reverts all investment decisions to being in the best interests of scheme member pension benefits and scheme sustainability, as opposed to having to allocate set proportions of their funds to government roads and transport projects.

 ‘Wealth Pools’ or Common Investment Vehicles

Our five Funds are now part of four of the seven nationally constructed investment pools: Northern Power House, Border to Coast, Lancashire and London Partnership, Central.

We have strived to obtained Scheme Member representation on each Pool Governing Panel. All bar Northern Powerhouse have rejected representation at this level, maintaining that it is sufficient that Scheme members are represented at Fund Pension Committee and Fund Board levels.

Whilst  democracy and overall governance at all levels should be automatic, for my own view, given that each of our five Funds will continue to maintain their own individual investment strategies (which the Pools will adopt), then our representational influence will remain in each Fund protecting our members pensions benefits. It is crucial therefore that within the region our Scheme representatives and region work closely to ensure consistency of approach on Unison policies.

We will be arranging ad hoc collective discussions with our representatives to seek to generate member interests in pensions, social investment policies, and a general education in where their pension benefits come from, and importantly how investments generate their future pension benefits.

It’s interesting that we have two different sorts of public pension schemes. The Scheme members in the NHS get their pension benefits paid out directly by central government at point of retirement, there is no investment or fund building, it just come out of the Treasury funds. In the LGPS, these are investment funds generating additional income from member/employer contributions to be paid out from each Fund to retirees. I don’t think we or our members fully appreciate how important investment strategies are in the LGPS and this is why we need to generate more interest and understanding.

Fossil Fuel Divestment

Unison national policy on pensions and climate change was agreed at this year’s NDC, and creates a definite direction for change in our policy on Fund investment strategies away from fossil extraction.

Our policy is to persuade Funds to invest safely for pension holders well being, by divesting fossil fuels over five years and reinvesting in renewable, housing and public transport as a feasible alternative to Fund income generation.

We are working with the campaigning Fossil Free Greater Manchester, an alliance that includes both environmental campaigners and trade unionists focussed on persuading the Great Manchester Fund to divest from fossil fuel companies.

We have been in liaison with the Fund who have confirmed they are pleased to engage with us on their divestment planning whilst reminding us that “the first duty of the LGPS is to pay the staff their pension benefits when they retire. Divestment without having found adequate renewable investment returns would create huge economic uncertainty. It would be irresponsible to begin any programme of disinvestment in fossil fuels that threaten in any way the ability of the Fund to pay peoples pensions”.GMPF Fund has indeed in recent years invested to make positive social impacts, making returns and supporting the local economy, such as investing £1.3 million in direct infrastructures and renewable power generation.

FFGM reminds us though that the gap between what the Fund has achieved to date and our Unison policy objectives is wide. At 9.81%, GMPF has the largest proportional holdings of the UK’s authority pension Funds. That is billions invested in fuel and extraction companies including BP, Shell, Rio Tinto, Anglo American and Glencore.

Compare GMPF with Lancashire Fund, which only has 1.8% of its investments in fossil fuels.

Our region will be seeking discussions with the Fund outside of the formal committee processes, to commence engagement and seek an incremental approach to divestment and achieving a fossil free portfolio of investments.

State Pension Age Increase

The Government quite out of the blue announced they are planning to increase the State Pension age from 67 to 68 for people between the ages of 39 and 46.

There is likely to be a direct impact on the LGPS and all other public sector Schemes which we need to urgently campaign and lobby Government on. To this end the region has found several members who are prepared be national case studies. We have focused on members with ill health or disability as these conditions make it more difficult to work up to an extended state pension age, and manual workers having to carry out demanding physical or emotionally demanding work for longer.

Michael Booth

Regional Organiser Lead Pensions

 

 

 

 

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