Losing the right to decide where your pension is invested


Sue Phillips is interested in where stuff comes from. In particular, she wants to understand if the choices she makes matter, and why they matter. For more from Sue visit Where Stuff Comes From


 
“But I don’t want to invest my pension in the arms trade . . . “

“But I don’t want to invest my pension in the arms trade . . . “

 

Hopefully your pension plan gives you control over whether or not to invest your pension contributions in an ethical fund. The bad news is that, if you’re a teacher, a nurse, a police officer, a librarian, or one of countless other roles in the public sector, any meaningful choice whether or not to invest in the British arms trade, or companies operating within oppressive overseas regimes, may have just been taken away from you.

I’m an ordinary person, and I’m certainly not an expert on pensions. But, ever since I started making contributions into a pension fund, I made a personal commitment not to invest in the arms trade. I appreciate that not everyone will make the same choices as me. Regardless, I believe that I should have the right to act on my own conscience when it comes to how I invest my own earnings in my own pension scheme. And I believe the same right should extend to everyone else in the UK, whichever sector they work in; public, private, not-for-profit or self-employed.

Until now local authorities could ‘divest’ from specific companies or industries. For example, they could decide not to invest in tobacco companies, or gambling, or pornography, or other industries whose impact is judged to be more adverse than the benefit of profits generated for pension funds. (A significant historical example is divestment from companies operating in South Africa in the 1970s and 1980s, which helped to inform and shift public opinion on apartheid, and increased political pressure for change. A more recent example is divestment from fossil fuels in response to climate change; with the London Borough of Waltham Forest being the first of the UK’s Local Government Pension Schemes (LGPS) to decide to divest from all fossil fuels.)

As democratically elected bodies, local authorities have historically been accountable to their local communities for such strategic pension investment decisions. This is what the charity War on Want say about how the scheme has worked up until now:

“The Local Government Pension Scheme has 4.6 million members across the UK such as teachers, librarians, social workers and other employees in local government jobs. It has been a decentralised scheme with decisions made locally about how pensions are invested.

Until now, local residents could call on their local pension fund to divest from a company whose practices they regard as unethical. Local pension scheme members would be consulted on the issue and, if they agreed, the fund administrators would then authorise the divestment. This process gave all the stakeholders a say, and it allowed for public debate and discussion resulting in practical changes that keep local government representative of the values of the local community. It’s called democracy!”

But new amendments to the Local Government Pension Scheme Regulations 2009 come into force on 1 November 2016. And these give the Secretary of State for Communities and Local Government the power to intervene if the Secretary is “satisfied that an administering authority is failing to act in accordance with this guidance”. Intervention could include requiring a local authority to “make such changes to its investment strategy under regulation 7 as the Secretary of State considers appropriate, within such period of time as is specified in the direction”.

On a positive note, the new guidance specifies that schemes can “take purely non-financial considerations into account provided that doing so would not involve significant risk of financial detriment to the scheme and where they have good reason to think that scheme members would support their decision”. However, there is a significant exception to this power:

” . . . the Government has made clear that using pension policies to pursue boycotts, divestment and sanctions against foreign nations and UK defence industries are inappropriate, other than where formal legal sanctions, embargoes and restrictions have been put in place by the Government”.

It seems to me that this is an issue of enormous significance, not least because it sets a precedent. Who’s to say the degree to which which central government can determine how individuals are allowed to invest their pension contributions won’t be extended over time? So I’m surprised that so few people are aware of the new regulations, and I’m not at all sure why there has been so little coverage and analysis in the media.

So I’m publishing this blog post as a ‘work in progress’ and, hopefully, an exercise in collaboration to encourage people to find out what this means for them.

This is what I’ll do:

  • I’ll record who I’ve contacted for further information at the end of this post, and continue to update the post if if I make further enquiries of other individuals and organisations.
  • I’ll update the post as and when I receive relevant responses (applying principles of anonymity and confidentiality as appropriate).

This is what I’d like you to do:

  • Forward this post via email, on Facebook, or Twitter to friends, family, colleagues and other people you know who may be affected by the new regulations. (You can also find this post via:  http://www.facebook.com/wherestuffcomesfrom and on Twitter – @wherestufffrom).
  • Forward the post to individuals or organisations you know who may have more information. and ask them to contact me with their comments and opinions. They can do this using the Comments field at the very bottom of this page, or emailing me at: info@wherestuffcomesfrom.org.
  • If you have concerns about how your own pension contributions are invested, please do ask your employer for more information.
  • If you have concerns or questions about the new regulations and guidance, please contact your local MP for more information.

Additional sources of information

IMPORTANT UPDATES 19 OCTOBER 2016

There’s a Parliamentary debate on the new Local Government Pension Scheme regulations, and associated guidance, between 4.30 and 7.30pm on Monday 24 October 2016. The charity War on Want have created a template letter and online tool you can use to contact your own MP to ask them to discuss key concerns, including the issues I’ve discussed below.

Link to War on Want online tool to contact your MP

There’s a lot more information on the petition (and the background to it) at the end of this post, under the UNISON heading.

If you want to watch the Parliamentary debate on 24 October 2016 you can use this link.