The secretary of state's powers to intervene in the local government pension scheme (LGPS) will only be used where justified, according to the local government minister.
Speaking this morning at the Pensions and Lifetime Savings Association's local authority conference, MP Marcus Jones tried to give funds some reassurance after the powers have "been paraded as attack on local democracy".
Under current proposals consulted on earlier this year, the secretary of state will be able to intervene where there is clear evidence an administering authority is not acting reasonably and lawfully.
In response to concerns over these powers, Jones said: "I think it is important today to set the record straight on this. Under our proposals local authorities will be less constrained by central prescription and have greater responsibility for the way they invest. They must however act lawfully and act in the best long-term interests of the funds and scheme members and taxpayers.
"Where there's evidence to suggest an administering authority is acting unreasonably, it may be appropriate for secretary of state to intervene. But I can assure you that will only be the case where it's justified and where all the relevant parties have been fully consulted. I would only expect powers to be used sparingly and where it's justified."
These changes are part of the wider pooling proposals in the LGPS which will also face changes to the investment regulations to enable it to increase infrastructure investment.
Jones said the government has received 23,000 responses to the consultation on draft investment regulations that ended in February - changes that "represent a landmark shift in policy". It is still working through its draft response, and "hopes to bring through the regulations shortly", he added.
The various deadlines set out in the draft regulations will be amended to reflect the delay in the government's response to the consultation.
Having received preliminary pooling proposals from the funds at the end of February, Jones said he has "significant concerns" about certain structures. For example, structures that will not be regulated by the Financial Conduct Authority, and any structures "unwittingly operating as an authorised collective investment scheme - which is a criminal offence".
"I'm sure you will understand I'm very unlikely to approve an approach that does not provide assurances to members, investors and beneficiaries," he added.
"I've also made it clear we expect funds to be ambitious in looking at infrastructure investment proposals."
While the government does not plan to set targets for infrastructure, he did point out other countries are well ahead in their progressive thinking and it is time for UK to step up.
While the LGPS has less than 1% invested in infrastructure, some other large pension funds around the globe have around 10%-15%.
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