Labour calls for greater member control over LGPS investments

27 Sep 16

Labour’s shadow chief secretary to the Treasury Rebecca Long Bailey has called for pension scheme members across local government to be given a greater say in where investments are made.

Speaking at a fringe event at the Labour party conference, Long Bailey said that people who were members of pensions schemes had very little control over the decisions made by trustees. This leads to investment decisions being made by institutional investment funds, she stated.

“I hear stories time and time again of local authorities and public pension schemes investing in industry that isn’t good for the green economy. We need to have greater transparency because a lot of people wouldn’t want to see their pensions invested in certain things. I think they need to have more of a say on where their money goes.”

This also hinders efforts to get UK pension funds invested in UK infrastructure, she stated.

“The effect for our society is an overly cautious investment culture in which it is difficult to invest in the infrastructure our country needs.

“So I want more transparency in our pensions law, I want our pensions law to protect beneficiaries, I want them to be able to have say in where their pensions are invested, and I want there to be a real drive by this government to ensure that the investment from UK pension funds in particular is directed for the benefit of the whole country and industry at large. There needs to be real incentives and encouragement from government on that front.”

Asked by PF about her view on the government’s plan to create British Wealth Funds in order to boost investment in UK infrastructure, Long Bailey said pension funds can be used to invest in infrastructure, but individual funds were varied.

There was a wider Labour Party review ongoing into pension policy that would consider the specifics, she said.

“I know from my own workplace pensions there are different strata – high risk investment, medium investments and low risk investments. And the low risk investments are the government bonds, and government things to do with infrastructure. And we need to push those, because if we get our pension funds to invest in government it invests in our future, and it is beneficial for everybody.”

Also speaking at the event – British investment for British jobs: what role for pension funds held by the Smith Institute and the Local Authority Pension Fund Forum – LAPFF chair Kieran Quinn said pension funds must ensure that promised pensions are paid.

“Anything else other than that then you are tinkering with the future incomes of, in truth from the areas I oversee in local government, relatively low paid pensioners,” said Quinn, who is also chair of Greater Manchester Pension Fund.

“A lot of what Rebecca talked about was sensible – I think it is right that we start to look at how we can improve some of the legislative structure around UK pensions, and not just UK public pensions, as long as it is an evidence-based approach.”

There are a range of good initiatives around infrastructure investment in the LGPS, but coordination across the sector was missing, he added.

“That’s why I think the regulations need to change to actually free trustees to make these decisions rather than holding them back. We need to find a way forward.

“There was an [former chancellor George] Osborne push to make it clearer about how and where and what level they [LGPS funds] invest in infrastructure and it is absolutely, vitally required. There is a huge amount where pension funds could work together and invest in. We want the opportunities and we need the opportunities, but we must always remember that the purpose of a pension fund is to pay a pension promised today and tomorrow. If we don’t move away from that, then fundamentally we are on firm ground, and we can be adventurous in how we invest.”

He also backed Long Bailey’s call for greater democratisation around pension trustees, but added that most of these challenges were in the private sector.

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