Ministers have been accused of ‘favouritism’ and ‘an appalling lack of transparency’ after forcing two town hall pension funds covering the Tory shires of southern England to merge, while leaving Labour-dominated ones in the North and Wales as they are.
The Government wants to boost growth by creating a series of pension ‘mega-funds’ in the biggest overhaul of the £400 billion Local Government Pension Scheme (LGPS) in a decade.
The sprawling LGPS is divided into eight ‘pools’ but the Government wants them to consolidate so they have the economies of scale to invest, like public sector funds in Canada and Australia.
It has insisted all pools are regulated by the Financial Conduct Authority, the City watchdog.
But in a surprise move, ministers recently ordered two of them – Access, formed of 11 councils in South-East England, and Brunel, which covers South-West England – to merge with other funds.
Critics accused the Government of bulldozing through a decision without regard to merger costs, which Access told the Treasury could hit £150 million.
Planning ahead: The Government wants to boost growth by creating a series of pension ‘mega-funds’
They pointed out that Brunel is already FCA-authorised, but has been told to merge anyway.
And while Access isn’t regulated by the watchdog, neither is Northern LGPS, which covers Greater Manchester, West Yorkshire and Merseyside, nor the £25billion Wales Pension Partnership.
Both these pools, which have large Labour representation, escaped Government interference and can continue to set up their own authorised structures.
‘The complete lack of objectivity and transparency is appalling. It is bound to fuel suspicion of favouritism,’ said Kevin Hollinrake, shadow local government secretary. ‘What have they got to hide?’
Access said it was ‘extremely disappointed’ with the decision.
It would be ‘highly regrettable’ if ‘political considerations had influenced the Government’s thinking’, Mark Kemp-Gee, chairman of Access, told The Mail on Sunday.
Brunel said it would ‘take some time to consider next steps’.
The LGPS – which is one of the biggest pension funds of its kind in the world – is spread across 86 councils. It manages investments in shares, bonds, property and other assets that pay the pensions of 6.7 million workers.
The scheme is estimated to have a surplus of £65 billion, according to pensions consultant Isio.
Ministers want to use some of that surplus to invest in infrastructure and other pet projects.
A government spokesperson said it completely rejected claims of favouritism and had assessed every pool by the same criteria.
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