Protections must be included in the local government pension scheme (LGPS) reforms to prevent the Treasury from influencing the pools' investment decisions, according to a Lords' debate.
On 3 May Labour peers called on the government to ensure the pooled funds will conduct their investment strategies only in the interests of their members.
It comes on the back of concerns over plans to pool the 90 LGPS funds into at least six investment vehicles, which critics have warned could be influenced by the government. Unison is worried the pools could be expected to invest in infrastructure projects that could put members at risk.
Lord Whitty said despite the merits of pooling, "there is anxiety because of the way that the government have designated them as ‘British wealth assets'. Also, there is fear they may be advised to move in directions which reflect the priorities of the Treasury rather than those of members.
He said the government should introduce safeguards in the revised investment regulations to prevent this from happening, and added:
"In particular, why do she and the government not accept the advice of the Local Government Association and the Law Commission that this provision should be written specifically into the new regulations covering the combined schemes, particularly the reference to Article 18 of the IORP directive, which underlines the need to manage these schemes, and their investments, in the interests of their members and nobody else?"
In response Department for Communities and Local Government parliamentary under-secretary of state Baroness Williams of Trafford pointed out the pension funds will still be responsible for determining their own investment strategy.
"My Lords, the funds have a duty to manage the schemes for their scheme beneficiaries-that is their first duty. I understand why the noble Lord has concerns at the pool level. However, the strategic direction will be set at the funding level and carried out at the pool level."
Lord Watts urged her to categorically deny the Treasury would try to influence the pools' decisions.
Trafford said: "I can categorically say that the investment strategy will be made at the fund level, which is the local level. As far as I know, the Treasury has no will to start meddling in local decisions as regards directing at pool level. However, the Secretary of State may intervene-that was one of the concerns-where funds have been managed poorly."
The consultation period for the proposed changes to the LGPS investment regulations ended in February, and the government is set to publish the final rules later this year.
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