In an earlier Bulletin ‘A Landmark Judgement’ I provided some information on the welcome news that the Government had thankfully lost a case in the High Court which would have forced LGPS Funds in England and Wales to invest their assets (£263Bn in 2017) in accordance with UK foreign and defence policy.
Unfortunately my relief that common sense had prevailed on this issue was misplaced as on 6 June the Court of Appeal overturned the High Court ruling forcing schemes to comply with government policy, all this despite numerous warnings from pension experts about the negative impact and increase in pension scheme costs such a decision could have.
This whole saga started back in 2016 with the Government introducing legal guidance as it was concerned pension schemes could be taking actions which might “give mixed messages abroad, undermine community cohesion in the UK, and could negatively impact on the UK defence industry.”
The policy was successfully challenged by the Palestine Solidarity Campaign and an individual scheme member in 2017 when the High Court ruled it unlawful.
The whole approach smacks of state intervention and interferes with the ability of pension schemes to take decisions wholly in the interests of the members of the scheme. The Appeal ruling also seems to contradict proposed policy to require trustees of pension funds with 100 or more members to show how they have considered environmental, social and governance factors in their investment decisions.
The Government has refuted that its objective is to make pension schemes invest in line with government policy and has commented that it is not seeking to direct schemes investment decisions but despite the assurances the legal position seems to contradict this view.
It’s hard to see how the ruling won’t lead to schemes having to review policy resulting in increased complexity and additional costs which will be wholly unwelcome and not adding any value to scheme members.
Watch this space!