What we now know, and have known for some time at UNISON, is that the fund managers are extracting vast fees for terrible performance, due in part to the poor governance of the LGPS.
Scheme members still have no say over the management of their money resulting in a failure to oversee the process of investment and of challenging the charges being made, both up front and hidden. http://www.telegraph.co.uk/news/politics/10082527/Councils-paying-hundreds-of-millions-to-City-fund-managers-for-staff-pension-funds.html#disqus_thread
Public sector workers already facing cuts to their pension contributions from the Government and a freeze or cap on wages may also be paying over the odds to the fund managers employed to help grow their retirement funds, research revealed this week. http://www.ft.com/cms/s/0/63540008-c483-11e2-9ac0-00144feab7de.html#axzz2UbDhYbGE
Investor Data Services found huge disparities in the amount councils are paying investment managers to run their staff pension funds with some councils paying out three times as much in fees than other local authorities with similar assets.
Fees paid to fund managers are often difficult to determine and there have been calls for years for greater transparency in how, -and how much - fund managers are paid and the various fees they charge both individual pension savers and large pension fund schemes.
Taken over the last nine years, Staffordshire council has paid £35.1million more in fund manager fees than Devon council and that will ultimately have an impact on the amount its staff receive in their individual pensions when they retire. That's before the performance of the pension fund has been taken into account as well.
The research conducted for the Financial Times also found the quarter of funds with the most expensive fund manager fees paid more than four times as much as the quarter of funds that paid the least. For an average sized fund, that represented a difference of £5.5million each year.
The FT commented “The findings will amplify calls for greater transparency. Even after freedom of information requests, many funds only supplied details of how much they had spent in brokerage commissions with the names of fund managers and brokers redacted”.
Public sector workers have faced pay freezes since the 2010 general election, while the Chancellor said in his recent Budget that pay rises would remained frozen or would be capped at one per cent until at least 2015. The measures mean that state workers are facing a squeeze comparable to many in the private sector who saw wages frozen as soon as the financial crisis and recession hit.
Additionally, some public sector workers have been told they face higher contributions to their pensions as part of the Government's proposed single tier national pension.
The research comes after local government minister Brandon Lewis launched a review into whether the 89 separate bodies across England and Wales, which manage some £180billion on behalf of 4.6million people, are looking after their investments effectively.
‘There is compelling evidence from around the world to suggest that the [local government pension] scheme could benefit from a smaller number of optimal funds,’ Mr Lewis told the FT. This is exactly the evidence submitted by UNISON to the Public Sector Pensions Commission, Chaired by Lord Hutton. But this was ignored in his final report.
Until the funds are merged and the governance process substantially improved the fat cats in the City of London and New York will continue to gorge on our pension contributions.