09.10.14
Mixed reaction to Boris Johnson’s pension ‘pooling’ proposal
Proposals to ‘pool’ public sector pensions into one pot by London mayor Boris Johnson, which he claims would allow government to cut taxes as well as finance major building projects, have received mixed industry reaction.
Johnson says there are more than 39,000 public sector pension funds in England – each with its own trustees, managers, advisers and accountants. With every branch of the public sector having its own fund, “the waste is extraordinary”, he said.
Johnson wrote in the Telegraph: “Think of all those advisers and investment managers taking their fees – their little jaws wrapped blissfully around the giant polymammous udder of the state. Think of the duplication.
“If we amalgamated our local authority pension funds, we would have a war chest of £180bn; and if we added in all the public sector pension funds, we would be talking hundreds of billions – and suddenly we would be able to direct those vast UK assets to the support of projects that are both socially useful and vital for the economy.”
The 39,000 public sector pension fund figure comes from a 2007 House of Commons briefing note on Public Sector Pensions, which said the Government Actuary’s Department estimates that, including single-member schemes, there may be as many as 30,000 to 40,000 pension schemes in the public sector, although these include many single-member schemes.
In response to Johnson’s proposals, the Local Authority Pension Fund Forum (LAPFF) told PSE: “We don’t agree with the broad characterisation of all pension fund trustees in the article. We thought that was a little bit dismissive of many people who are qualified and skilled at what they do at managing money on members’ behalves.”
LAPFF, which brings together 61 local authority pension funds from across the country with combined assets of over £125bn, added that reform in public sector pensions is a “much-wider” and more “complex issue” than a simple ‘merge it into one pot’ solution.
Pension expert Dr Ros Altmann CBE added that many local authority funds are too small to be able to make individual investments in alternative assets or to have a bespoke liability-driven risk management strategy. She said she would prefer to see a “number of larger funds, not just one or two”.
But the London Pensions Fund Authority (LPFA), which works with 23 local authorities in total, backed Johnson’s proposal.
Edmund Truell, chairman of the LPFA, said: “The overhead costs of running a large number of pension funds can run into billions of pounds.
“We have been trying to go direct with our investments and cut the layers of costs. I would consider it ‘job done’ if we were absorbed into a sovereign wealth fund.”
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