Welcome to my Blog

It mostly covers my work as UNISON Scotland's Head of Policy and Public Affairs although views are my own. For full coverage of UNISON Scotland's policy and campaigns please visit our web site. You can also follow me on Twitter. I hope you find this blog interesting and I would welcome your comments.

Tuesday, 17 December 2013

Breaking the LGPS out of its pre-Maxwell time warp

I was speaking in a panel debate on governance at a well-attended Scottish Local Government Pension Scheme (LGPS) conference in Edinburgh today. The LGPS is facing some major changes to governance structures and pension funds are focused on what this means for the existing funds.

The essence of my argument was that the LGPS is stuck in a pre-Maxwell time warp. For those not familiar with the history of pensions governance, Robert Maxwell committed a massive fraud by plundering his employees' pension funds in order to shore up his companies.  As a result, pensions law changed to include better member representation on pension funds and a legal separation from the employer. This has been followed through in European law through the provisions of the IORP Directive.

The LGPS is probably the last pension fund to operate with limited member representation and there is no separation from the administering authority. The pensions committee of Scotland's eleven funds are simply council sub-committees with councillors making the decisions. UNISON believes the current structures are unlawful, but they have to change anyway to comply with the UK Public Service Pensions Act. A consultation paper that sets out the issues will be published this week.

Even more challenging for the current funds is the concept of scheme merger or at least shared services. UNISON has commissioned expert evidence that leads us to believe that larger funds perform better and reduce investment costs. Paying £millions to the same 'masters of the universe' who created the financial crash, is a particular concern to our members who are suffering the consequences with pay and job cuts. Interestingly, another presentation at the conference came to a similar conclusion on external fund management costs.

In the current financial environment, paying too much to fund managers means even bigger cuts in services. The same applies to poor investment performance. In addition, we could use the £24bn of assets in the Scottish funds for useful local investment, rather than investing almost half of it abroad.

Strengthening LGPS scheme governance is long overdue and members have a right to have a meaningful say in the decision making process.

No comments:

Post a Comment