Nigel Farage’s Reform UK party secured a significant victory in the recent local elections, gaining control of key roles overseeing more than £100 billion of local government pension assets. The Local Government Pension Scheme (LGPS) of England and Wales is the largest funded pension scheme in the UK, with assets subdivided into 87 distinct pots across England and Wales and another 11 in Scotland. Reform UK’s deputy leader, Richard Tice, has expressed concerns about “woke net-zero-obsessed investments” that he claims have underperformed.
Tice suggested this campaign as a blueprint for the party’s approach to funded pension assets, stating that the MP’s pension fund is “riddled with net zero investments that are underperforming” and has 32 percent of its assets invested in illiquids that are probably overvalued. However, not all sustainable funds have underperformed as suggested. For instance, the BlackRock Low Carbon Fund’s returns were above the benchmark for the past two years.
Reform UK’s pension investment strategy
Despite this, Tice’s skepticism towards LGPS investment performance remains. With the triennial valuation of LGPS approaching, it is anticipated that most LGPS funds will not show deficits, potentially easing some of Tice’s concerns.
However, the focus remains on whether these funds invest in assets that Reform UK considers “woke.”
Certain pension funds, like Staffordshire, Nottingham, Kent, and Derbyshire, have climate change strategies aimed at achieving net zero carbon emissions by 2050. Given these investments and the political composition of the new pensions committees, there may be significant changes ahead. As Reform UK councillors settle into their new roles on these pensions committees, the investment strategies of local government pension funds could see pronounced shifts, reflecting the party’s stance on ESG investments.
The outcome of the Ministry of Housing, Communities, and Local Government’s consultation on the governance of LGPS pensions, including potential new legislation, is yet to be seen.
Image Credits: Photo by Aron Van de Pol on Unsplash
