Billions ‘squandered’ by council pension funds Think tank vindicates city leader’s call for overhaul of system
THE region’s council workers’ pension fund has been urged to stop wasting money on costly investment managers after a report branded the practice an “expensive folly”.
A report by think tank the Centre for Policy Studies (CPS) has found that 89 UK Local Government Pension Schemes, worth a combined value of £214 billion, have frittered away £9 billion on fees to investment fund managers in a decade. Not only had the schemes spent huge sums on fund management but they had underperformed over the period.
“Active fund management of the Local Government Pension Scheme’s assets has been an expensive folly,” the report concluded. It found passive tracker funds, with no fees applied, would have made better or similar returns.
It gives further weight to repeated calls by Birmingham’s Labour council leader, Councillor John Clancy, for the West Midlands Pension Fund (WMPF) to cut its use of external investment management which cost the fund £74.9 million in 2015/16.
About 300,000 current and former workers from seven metropolitan councils are members of the WMPF.
Cllr Clancy has been battling to cut the top-up fee the authority pays into the fund this year so the money can be better invested in front-line council services like social care.
He has been embroiled in a battle with Wolverhampton City Council, which runs the fund and has vehemently defended the costs.
Wolverhampton’s Labour leader Cllr Roger Lawrence branded his Birmingham counterpart “Mr Pompous” for claiming to be a pensions expert. But Cllr Clancy has now highlighted a report which backs his argument.
He said: “The Centre For Policy Studies report is a vindication of what I have been saying for a long time – local government pension schemes across the country and here in the West Midlands are a dysfunctional mess and not fit for purpose.
“There is no need to hire investment managers at all. But the brutal truth is that funds up and down the country have happily spewed out hundreds of millions of pounds to city advisers for no real return whatsoever.
“This is a national disgrace, which is sucking money from local authorities at a time when public services are under threat as never before.
“If investment managers do not add value to a fund, they should not be paid. The CPS report is suggesting fees paid unnecessarily should be claimed back, in which case Birmingham wants its money back.
“In any case, it is clear there is no need for WMPF to be requiring councils to stump up about £80 million a year to cover management fees.”
This is a national disgrace, which is sucking money from local authorities Birmingham City Council Leader John Clancy, above