‘Forced’ pooling of pensions goes down badly in England and Wales
UK local government pension schemes are being ‘essentially forced’ to pool their management ahead of the April 1 deadline - but not everyone is happy about it (Reuters/Guglielmo Mangiapane)
UK local government pension schemes have less than three months left to transfer their investments to pool management ahead of chancellor Rachel Reeves’ April 1 deadline - but amid the flurry of consolidation activity, a note of discontent is clearly audible.
While the $1.1bn Isle of Wight scheme has resisted falling in line, having yet to pick a new pooling partner, others feel a sense of resignation.
“We are making this change not necessarily of our own volition, but because our hand has been essentially forced,” Alasdair Ibbotson said at a November committee meeting of the $3.5bn Clwyd Pension Fund, which is a member of the Wales Pension Partnership.
“I have repeatedly raised concerns about [pooling],” he tells AOX, citing issues over accountability, transparency and the implications of fund failure.
The most important benefits of scale, such as cost reductions, are already available to funds via voluntary pooling, while individual funds’ agency over their assets, particularly in the areas of responsible and local investment, risk being eroded, he argues.
“Funds which are leading the pack on responsible investment, such as those who have divested themselves of fossil fuel holdings before stranded assets lead to a decline in their value, will see those gains reversed.”
And local investing, which sounds so constructive in theory, is less than fair in practice. “When investment anywhere in Wales is classed as ‘local’, our area gets less than its share,” according to Ibbotson.
Rob Lamb, chief executive of WPP’s new investment management company, told AOX “increasing the positive impact that that capital can have on the local economy, but also society and the environment, in Wales and in the UK, is clearly part of the mandate”.
But whether a consolidated pool is really able to adequately address fund-level concerns remains to be seen.