Pension The bosses have attacked Rachel Reeves’ plan. To merge local authority pension funds and invest them in projects such as housing, fearing the government is trying to grab their cash after years of prudent investment.
Dozens of local government pension funds, which Manage a total of around £360bn. For 6.5 million local authority workers and pensioners, they will be asked to merge their assets to make up for the rapid increase in benefits unveiled by Chancellor Rachel Reeves last month.
Wants treasure too. 86 The authorities propose to allocate one per cent of their funds to investment in the local economy, suggesting that a 5 per cent target would mean an investment of around £20 billion for UK communities.
Angus Thompson, a councilor and chair of North Yorkshire’s £4.6bn fund for local authority workers, says he is concerned his fund will be “mortgaged” and used by the government for its own purposes. will
“I think it’s all just an excuse by the government to try to extract money one way or another,” he said.
Its fund size has grown substantially since the financial crisis hit funds, and it now has a huge surplus. It has been allowed to take its investments and has £640m, or 16 per cent, more in assets than it needs to ultimately pay out to its members.
He attributes much of the fund’s success to being able to pick up active funds, companies its executives believe will grow quickly, and buy stakes in them. About a sixth of the capital is in a specific investment fund, which has more than doubled in value over the past five years.
That roaring success means pension funds like his have little to gain by piling on poor performers: “The idea that we should have all our money in the pool right now is, to me, just silly.”
This so-called active management style has been challenged of late by passive funds, which simply mimic stock market indexes and cost little to manage. But picking a good fund can mean better returns for members.
His concerns are mirrored by other industry consultants and managers, who spoke confidentially free And who argue that prudent pension funds should not be locked in with poor actors just to do the government’s bidding. He has also questioned the idea that larger funds are more efficient.
North Yorkshire pools some of its funding with other authorities, “but we still have money outside,” he adds.
Cllr Thompson, a Conservative, is also concerned about being asked to invest in local projects, particularly infrastructure and housing.
Ms Reeves said in a recent speech that merging the funds could “open up around £80 billion for private equity investment, including exciting growth businesses and key infrastructure projects here in the UK, including transport, energy and housing projects.” “
Cllr Thompson said: “Getting pension funds to invest in housing is, in my view, just a non-starter” because there are few builders and local services to build and support them.
At the same time, the huge program Britain needs to build homes – its local authority alone needs to build more than 4,000 a year – means demand for its funding is unlikely to wane. is until it is sold. Very profitable investment for project financing.
This is where many players in local pension funds sing from the same hymn sheet. They will have the best results for investing pension savers’ money in areas known to have a real sense of duty. This is often a stake in companies, and the best results in the last decade have come from overseas, particularly the US.
Cllr Thompson said local investment could mean other projects outside of housing, but he would still be concerned about poor performance.
The North Yorkshire fund is also understood to have invested in property projects decades ago, including a warehouse in Essex and a shopping center in Nottingham, which ended up being a “disaster” for the fund, a source said. According to About direct investment in local infrastructure and property.
It has a duty to get the best returns for its pensioner members, who work for the council, “and I don’t think there’s any evidence that we’re going to get those returns from investing in local infrastructure.” will also be extended in shape or form,”
Labor councilor John Gray, head of Newham Council’s £1.7bn pension fund, says he is also wary of housing investment, as returns will be lower than investing in shares. While Mr Thompson prefers to invest in more expensive so-called active funds, Mr Gray favors passive funds, because they are cheaper.
Pooling is likely to push funds one way or the other, as the choice of mix defeats the point – cheap passive funds look more expensive when added to an active pool, while passive funds look more expensive when added to an active pool. Doing so reduces the returns of active funds.
He’s also more in favor of pools, as they can help keep costs down for members. Lower fees can make a big difference for savers in the long run.
“Rachel said she is not merging individual funds, they are assets, all right, but if the investment risk in asset allocation is taken out of the hands of local authorities, while the responsibility for paying pensions is ours. passes, and we’ve got no control over how that money is invested, then there’s going to be pushback, and that’s going to be a problem.
But he agrees on the fiduciary duty point – his rescuers must come first.
“If the government wants to do something for the government’s own political agenda, no matter how much I sympathize with that agenda, it won’t work. That should be good for the local government pension scheme,” says Cllr Gray. “They have to pay for everything going horribly wrong.”
A Treasury spokesman said: “Mansion house pension reforms will increase investment in infrastructure, boost people’s pension pots and grow the economy.
“We are working with the industry to ensure our pension funds leverage size and scale to deliver more productive investments and better outcomes for savers.”
But Helen Wheatley, the shadow work and pensions secretary, warned: “The Government should heed these warnings and not risk pension returns with their ideological pet plans.
“Pension reform matters – but if Rachel Reeves thinks forcing pension funds to invest locally will make up for her anti-growth budget, she should think again. Pensioners are the last thing. What is needed are ill-conceived reforms on the back of Labour’s broken promises.