According to the plan, the Government is pledged to giving local authorities more flexibility to support major infrastructure, to guarantee schemes when investors cannot bear risks and explore new sources of revenue to support investment.
To this end a memorandum of understanding has been signed with the National Association of Pension Funds (NAPF), which represents nearly three quarters of the funds comprising the Local Government Pension Scheme (LGPS), and the Pension Protection Fund.
However, Ministers' plans to use local government pension funds as a ‘back door’ way of funding infrastructure projects risk continued private finance failure, MPs conclude.
There are three main concerns for members of the LGPS and of course the unions currently negotiating reforms to the scheme and funds. They are as follows…
1. Pension funds in the UK and in the EU are required to only invest in the best interests of scheme members…how would this be possible if the investments lead to the privatisation of the members jobs? Furthermore the history of PFI demonstrates that losses are incurred by investors…a collapsing PFI project will not be in the interests of scheme members it will lose money for us...
2. There is virtually no effective scheme member representation on the funds. Decisions are made entirely by councillors sitting on council pension fund committees. They can never be out voted by scheme member representatives if they opposed the projects. Which making investments in the best interests of scheme members impossible anyway.
3. Finally it is also possible that other laws on pension fund ‘self-investment’ may be breached. A pension fund cannot invest more than 5% of its assets in the employers who sponsor the scheme. If councils use the pension fund cash to invest in schools or bridges they may breach these laws….
UNISON must insist before any discussions take place on members' money being used to finance PFI type infrastructure projects the decision making process in council pension committees are changed to allow elected LGPS members to jointly make the investment decisions on behalf of scheme members. Structures need to be set up to do this as the lead party on a council can never be outvoted due to local government law.
The European Directive on pensions – known as IORP (Institutions for Occupational Retirement Provision) must be fully implemented into the LGPS.
The NAPF has no scheme member representatives within its ranks and it does not serve the interests of scheme members.
Scheme members, interests must be paramount – not Osborne and the Treasury