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Government ‘may have gone too far’ in pension regulation changes

Proposed pensions regulations in the public sector have been broadly welcomed by the body responsible for public sector pensions’ schemes, but the Pensions and Lifetime Savings Association (PLSA) has expressed concern that the government is going too far in terms of deregulation.

In a letter to the DCLG, written as the consultation on proposals to revoke and replace the Local Government Pension Scheme (Management and Investment of Funds) Regulations 2009 with new regulations closed on Friday, Helen Forrest Hall, defined benefit policy lead at PLSA, said the association welcomes the new regulations, but is concerned that they include no actual reference to the fiduciary duty of investments to pay members benefits.

She also says that the regulations could give too much power to the government to direct how funds invest without regard for the cost to employers and members, and that the six month timescale the regulations allow for funds to publish an Investment Strategy Statement could be challenging.

The letter also says that the new guidance that funds’ policies on environmental, social and government factors should reflect UK government foreign policy, which critics say could limit the power of pensions’ funds to divest from investment areas viewed as unethical, seems “unhelpful, unnecessary… and undemocratic”.

Joanne Segars, CEO of the PLSA, said: “The Pensions and Lifetime Savings Association has argued for almost a decade that arbitrary limits on the amount LGPS funds can invest in certain types of legal structure are prescriptive, out-of-date, and do not best meet the needs of funds or beneficiaries.

“So we fully welcome the removal of these limitations and the move towards the prudent person approach. But there is a danger that government may have gone too far in a number of areas.”

In a statement submitted to the consultation, Sir Merrick Cockell, chair of the London Pensions Authority (LPFA), said that the LPFA welcomed another key part of the proposals – increased pooling of funds between pensions authorities.

He said LPFA pooling with the Lancashire County Pension Fund (LCPF) was expected to save around £30m in the next five years and lead to enhanced outcomes of around £20-£30m.

Last year the Centre for Policy Studies called the LGPS “a national embarrassment” in a report saying it was poorly governed and at risk of running out of money.

The proposed changes may be viewed here, and the full PLSA letter here.


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