Clifford Sims, Chair of SPP Public Sector, said: “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.”
The SPP supports the efficient exercise of statutory powers given to Administering Authorities to deliver on the obligation to pay the promised pensions to members of LGPS and the proper discharge of their fiduciary duties. However, the consultation document appears to ignore the importance of these duties, particularly in the “Levelling Up and Private Equity” proposals and the integration of investment and funding risk management. The Government should be mindful of the fact that the Supreme Court clearly ruled (in the Palestine Solidarity Campaign Limited judgment of 2020) that assets owned by LGPS authorities are “not public money”. The proposed 'targeted interventions' could be contrary to the fiduciary duty of LGPS funds to make investment decisions to fulfil pension obligations.
Another concerning aspect is the proposed transition of listed assets to LGPS pools by March 2025. The SPP is worried about the tight timescales, as authorities must ensure the suitability of pool operators before any transactions occur, all while facing competing priorities like the implementation of the McCloud judgment and pensions dashboard preparation.
The SPP is also concerned about the proposal to classify passively managed assets as being not “properly” pooled simply because of the legal model used to hold them (e.g. insurance contracts). This could create an artificial rationale for driving further pooling and would involve unwarranted costs (e.g. due to stamp duty and transition costs) and defeat the economic case for pooling. Moreover, the SPP highlights the absence of a cost-benefit analysis, particularly concerning the proposed move of significant passive portfolios to the pools. Such an analysis would be crucial in justifying the benefits of such policy proposals.
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